Lack of understanding of the target market
I visited Harrods to do research for my books on store design and visual merchandise display. Harrods, to anyone reading this White Paper who doesn’t know it, is the Mecca of retail. Royalties, A-list celebrities and the ‘who’s who’ from around the world flock to London just to shop at Harrods.
Now you can imagine my anticipation when I visited Harrods. In my mind, everything at Harrods was made of gold. I was disappointed when I realized that a toy bus I had bought for my son at ASDA was also being sold at Harrods. It was the exact same toy bus, in the exact same packaging that is sold at ASDA.
A question came to my mind, why is the exact same bus, probably made in the exact same factory in China, selling at Harrods for twice the price it does at ASDA?
The answer is decidedly simple: ASDA sells a ‘toy bus’, however Harrods sells a ‘classy toy bus’. There is a difference. This is marketing 101: people buy emotionally but justify their decision logically.
Customers who shop at Harrods do not shop there to buy Harrods products; they shop at Harrods to buy ‘elegance and class’. Harrods sells them class even if it’s ‘Made in China’.
How does Harrods achieve this? They achieve this by combining elegant store design and attractive visual merchandising displays. When you go from one department to another at Harrods it’s like going from one store to another. His ability to use his store design to create the illusion of differentiation is one of the keys to Harrods’ success. Harrods understands its customers; They know what their customers want, so they design their store and display their products to meet their customer’s desire.
Marcus Buckingham, in his book “The First Thing You Need to Know”, said that when he interviewed Sir Terry Leahy, who turned Tesco into a global brand, he asked what was the key to Tesco’s successful transformation. Sir Terry Leahy responded that he was asking and answering the simple question: Whom do we serve?
When Tesco figured out who they were going to serve, they changed their store design and products to cater to their target market. As a result of this change; Tesco increased the number of checkout counters, which reduced the amount of time customers spent queuing at checkouts, ultimately resulting in a dramatic increase in Tesco traffic.
Wal-Mart serves the person who lives: paycheck to paycheck.
Body Shop serves the ethical consumer.
Waitrose and Holland & Barrett cater to the consumer who wants to live longer.
Ann Summers took merchandise that was hidden in secret “adult” stores; she made them fashionable and brought them to the High Street. They made a taboo subject acceptable to the mainstream.
If I were to take my partner shopping for clothes at John Lewis, I’d probably call my mom to let her know I was having a nervous breakdown. She wouldn’t want to be caught dead in a John Lewis suit. She describes John Lewis’ clothing department as a Bridget Jones museum where they store a collection of Bridget Jones costumes.
However, John Lewis continues to increase profits year after year because John Lewis understands his target market. Someone like my partner might not want to be caught dead in John Lewis garb, but there are people in the UK who love Bridget Jones memorabilia, these people are the target market for John Lewis, so that John Lewis takes care of them.
The most successful retailers understand their target market and display their understanding of their target market through their store design and visual merchandising displays.
Failing retailers don’t understand this basic marketing concept.
Most book retailers are struggling because they are still using the 1960s business model in the Amazon era. Borders failed because it failed to properly develop its Internet business and invested heavily in compact discs when music was going digital. WH Smith only makes money by selling him at airports and train stations. The rest of his stores are fighting. Waterstone is also in a downtrend. Sales are down and customer traffic is in sharp decline.
Why are bookstores threatened? Amazon! They will all scream. Of course Amazon is the cause because Amazon understands their market better than they do. Since it looks like Amazon isn’t going away anytime soon, will all bookstores close?
Will WH Smith and Waterstone close? Or will they rise to the challenge and modernize their stores? Instead of complaining about Amazon, they need to redefine their target market and redesign their stores to appeal to their target customers.
On Christmas Eve, I hadn’t done my grocery shopping and dreaded the prospect of walking into a supermarket, knowing how crowded it was going to be. But when I walked past my local Lidl store, I noticed that it was empty. I ran and completed my purchases. As I was driving back home, a question came to mind; Why, even on this day when most supermarkets are usually packed to capacity, was Lidl empty?
The answer, in my opinion, is that Lidl does not have a target market. One of his biggest sins was making the decision to force customers to pay for carrier bags. Marks & Spencer can afford to do that because they attract a different class of customers.
At Tesco and ASDA, environmentally conscious customers have the option of paying for shopping bags. However, those who do not want to pay for transport bags also have the option of getting free ones.
This is because Tesco and ASDA understand their customers. Lidl’s top management, on the other hand, believes that having implemented a similar strategy in Europe, it can introduce the same in the UK. If the British don’t like it, hard! Well, the British are showing their discontent with their feet.
I have tried to show with the above examples that success or failure in retail is the result of the strategies each retailer adopts. Those retailers who understand their target market and serve it will continue to move from success to success, while those who roll the dice and wait for customers to show up are the ones who will struggle or go into administration.
I hate being the one to break this kind of news to the retail industry. I guess someone will have to do it: the Internet is not going away. This means that retailers are not only competing with each other, but also with factory owners in China whose name they have never heard of. Buyers now order directly from warehouses and distributors, for example, a person can log into eBay and order a palette of products.
Here’s the good news: Most people still prefer to shop at physical outlets. The question is how does an individual retailer ensure that shoppers are drawn to their store? It can be done by adopting the concept of the “Blue Ocean” strategy.
Embracing the “Blue Ocean” strategy is the only salvation for book, DVD, music and furniture retailers. What is the “Blue Ocean” strategy? The “Blue Ocean” strategy “is the simultaneous pursuit of differentiation and low cost” which results in the creation of a new market space that makes competition irrelevant.
The “Blue Ocean” concept is practiced by the most successful business organizations, while struggling businesses follow what is described as the “Red Ocean” strategy. The “Red Ocean” strategy is struggling to compete in the existing market.
The “Red Ocean” strategy is adopted by many book, DVD, music and furniture retailers. They’re trying to compete against the internet and it’s just not possible. A physical store can never compete head to head with the Internet and win. It can never be cheaper than the Internet.
However, what they need to do to drive customer traffic to their stores is to become innovative and creative. For example, a bookstore might hold regular book signings; Of course, authors want to sell their books, so it’s a win-win situation for all parties involved.
In order for book signings to be a successful marketing platform for bookstores, it would be advisable for retailers to work collaboratively with publishers early on so that book signings are better promoted.
Promotion for book signings could take a number of formats, including making effective use of social networking sites, local press, and engaging signage inside and outside the store.
Another idea could be to organize book clubs for various genres of books, this would attract a variety of customers to the store, these book clubs would also need to be promoted in a similar way as described for book signing promotion.
The trick is to be innovative.
Richer Sounds is a classic case of a retailer adopting the “Blue Ocean” strategy. They understand that people still prefer to interact with other people. So while other e-retailers focus on price, they focus on great customer service and product knowledge from staff. Their “Blue Ocean” is excellent customer service and superior product knowledge.
For book, DVD or music retailers to compete in Amazon country, they need a “blue ocean” strategy that goes beyond price discounting. They need soul. They need to understand the perception of their target market.
• What they want?
• What are your hopes and fears?
• What is your perception?
I can order a book or DVD from Amazon and have it delivered the next day. I can instantly download music from iTunes. There are millions of me in the world. What kind of “blue ocean” strategy can WH Smith or HMV use to get me away from my laptop? It takes me half an hour to drive downtown, pay for parking, spend another half hour at WH Smith or HMV, and another half hour to drive home.
The $64 million question is: What can WH Smith or HMV do to make it worthwhile?
Let me give you a hint, I could order my groceries online, however I choose to go to the supermarket. What is the difference? That’s for book, DVD, electronics and furniture retailers to figure out. They probably need to visit Starbucks as it might hold the keys to unlocking their creativity.
The one point of differentiation that most retailers are aware of is price reduction. Price cutting is not a business strategy, it’s a death wish.