RSM McGladrey Director of Retail and Consumer Products Advisory Services, and former industry analyst, Jeffrey B. Edelman, suggests ways that retailers and vendors can continue to ride an uptrend. He offers thoughts on the importance of unique products and engaging both new and loyal customers.
Sales for some retailers are in an uptrend. Comparisons are easy; thus one has to question the consumer’s strength within this still-fragile environment. Additionally, the Easter shift and warm temperatures throughout most of the country were contributing factors. Nevertheless, both strong brands and retailers on the offensive have been gaining market share. One cannot wait for the rising tide to raise all ships—post-recessionary periods usually provide the opportunity to benefit from poorly positioned competitors as well as those remaining in a defensive position.
Value and uniqueness are key. Mickey Drexler, chief executive of J. Crew, notes that the key to his organization’s success has been to “sell items that cannot be sold anyplace else. The consumer either shops value, or they shop emotionally, or it’s both. The Internet has made competition more fierce because consumers research prices and know a product’s true value.” A recent study by brand and customer loyalty research firm Brand Keys reinforced his thoughts, noting that emotional factors account for as much as 70 percent of the decision to purchase, whereas 30 percent was based on rational factors, such as category attributes or benefits.
Remain focused on your target customer. Successful retailers have a track record of providing the right product, at the right price, at the right time. This reflects ongoing consumer research and market analysis—knowing what your consumer is looking for now rather than what they were interested in last year. Building brand credibility is crucial in impacting perceived value.
Leverage your loyal customer. Successful brands and retailers are sufficiently differentiated; this drives traffic, excitement, conversion and profits. Customer loyalty is rapidly becoming an important part of the value equation, and potentially a more profitable one. A satisfied and loyal consumer will tend to purchase more often and in larger quantities than a new customer. Furthermore, the cost to generate a new customer is significantly greater than that of keeping an existing one. Increased attention should be placed on transforming the new customer into a loyal customer.
It takes a different, forward-thinking mindset. Management needs to have an insightful vision, but will often fail because of poor execution. The game plan needs to be watched continuously, as you need to be ready to react to any deviation from plan. There is no crystal ball—as such, reassessment and redirection should be done on a regular basis to maintain share growth and widen the spread from your closest competitors. iBi