Shopping around for success

10th January 2012

Blacks Leisure Group went into administration late last week and seems likely to be incorporated into JD Sports, lingerie group La Senza is "preparing for adminstration" while HMV sales were substantially down over Christmas leading to shares worth under 3p.  Thorntons has seen an 80% share price slump to 17p over the past year and will shut many of its outlets.

The managements of all failing stores unfailingly blame the recession, fear of unemployment, the internet and out of town shopping for their corporate woes.

However how often do they blame themselves or the retail environments they have created?  How often do they admit that what they sell and the way in which they sell it does not chime with customers? And how often do they concede that they are constrained by stock market reporting with its short-termism, the seemingly insatiable need for quarter on quarter growth?

For while the retail sector is not a great place for investors – even market leader Tesco has reported figures less than sparkling by its own standards – there are clear winners, with the stamina to last the whole ninety minutes (and extra time as well). Among nationally known names, the John Lewis/Waitrose group – more later – stands out.

It should be obvious to anyone in retail that success ought to be an easy equation – the product of the right consumer service plus goods which customers want, and the correct company culture. 

That means shoppers want the best of the online experience – choosing from a vast stock at their own pace, comparing prices and specifications before buying – with the tops in personal service and availability.

It's not rocket science. In fact as US online clothing retailer Zappos, it can be almost corny. Zappos calls its staff  "family" and promises to "deliver wow through service" on its corporate website.

It has actually developed a presumably profitable sideline in teaching others its own formula for success with "culture training". 

But to save hard pressed retail executives a trip to the United States (and to help investors sort the wheat from the chaff,) Mindful Money can offer some condensed  Zappo company culture.  Here's some ideas.

·       Make workers part of the whole – descriptions such as colleague, partner or family member work better than employee. Tell them why the firm is great.

·       Have a vision for the next three to five years – not next three to five months. Make this challenging but achievable.

·       Focus on serving the customer – different from "customer service". The former is about treating consumers as the firm's managers would wish to be treated elsewhere – the latter is management jargon. Give customers what they want to buy – it's hard to persuade a disappointed consumer into giving a second chance.

·       Have rules but not too many. There is no point in a dress code for employees working in a call centre – every need for those facing the consumer in-store.

·       Brand values should be everyone's values. Staff are the essential part of the brand – they are the interaction with customers.

If this all sounds obvious, then investors in failing retailers need to ask why their executives fail to put them into practice. 

John Lewis is the national name which comes top in almost every consumer survey. While others are retrenching, it is expanding. It created 1,000 jobs late last year with store openings including Westfield Stratford City, in east London. It plans to add the same number of new posts in 2012 with four "At Home" electrical, home and technology outlets in Newbury, Chichester, Ashford and one other location still to be announced. This coming year will see a new department stores in Exeter, followed by York in 2013 and Birmingham in 2014, as part of a 10-year expansion plan to increase from 35 stores to 60.  Supermarket Waitrose, part of John Lewis, is expanding outside of the south-east with new stores planned in the north west and elsewhere.

How many other retailers talk of 2014 plans let alone the next 10 years? It might help that John Lewis is owned by its staff, not by shareholders so it can afford to take a long view.

Virgin Money can also take a longer view. It has taken space in national newspapers to promise that its recent purchase of the Northern Rock business from the government is "a big step forward in our ambition to build a better kind of bank."  It says: "By genuinely caring about you and your money, and not rushing in to sell to you" it will be different. It talks about a "fair profit", not "an excessive one".

Again, Virgin's recipe is far from revolutionary. It's simply treating people in the way the bank's owners would wish to be treated elsewhere. But if it works, then shareholders in other retail banks may need to ask questions. Their managers may have to decide between continuing to profit from a shrinking, possibly apathetic, customer base (the UK tobacco model) or adopting something new and better.


from Mindful Money:

The future of brands

Bankruptcy, default and debt

Kodak's fading moment – A lesson for business innovation?

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