MARKETING

Marketing and selling in favourable economic conditions:

Rules for creating retail innovation

Prasanna Perera, Marketing and Management Consultant, Chartered Marketeer, CIM U.K.

In a previous article, I highlighted the fact that Retail is the world’s largest industry. In this brief article, my endeavour is to highlight inputs for creating innovation in the retail industry.

Look for consumer trends

There are several key demographic and behavioural changes that are happening among consumers. Putting the customer first, is the foundation for success in retailing. It is important to keep in mind, that it is easier to launch a new idea that is in tune with future consumer demand, than one that fights its.

In a Sri Lankan context, we have observed trends such as an ageing population, a hybrid of values (modern and traditional) and western lifestyles. There is also a larger percentage of women in the workforce. Sri Lankan retailers would do well to understand these trends and formulate future strategies accordingly.

Understand the competitive environment

It almost goes without saying that retailers and suppliers must pay very close attention to their direct competitors. But it is amazing to note how many direct competitors are missed or not considered seriously. My advice to retailers is also to monitor indirect competitors. For example, supermarkets can be indirect competitors for clothing chains, since they both compete for the disposable income of the consumer.

Retailers should also keep their eyes and ears open for potential competitors. In a Sri Lankan context, this is now very important, given the opportunities that exist in the market. There are powerful retail players in India, Thailand and Vietnam eyeing Sri Lanka.

Location, location, location

I cannot keep out the importance of location, for retail success. Countless retail concepts have failed because they are put in the wrong place.

Spend a lot of time and energy in researching retail locations, before setting up shop. Demographics, infrastructure, accessibility, neighbourhood characteristics etc., are very important factors to consider.

It is better to pay a higher rent for the right location, than trying to save some rent money and ending up in the wrong location. (Penny wise pound foolish).

The concept of “Store Positioning”

Positioning makes you declare who you want to serve, against what set of competitors, and what unique benefits you will deliver.

As much as product brands need to be positioned, retailer brands (store brands) needs to be positioned as well.

By positioning a store cleverly, significant competitive advantages can be achieved. Take the example of Walmart and the position of “Everyday low prices.”

Since customers perceive Walmart as offering the best prices, the store too is under pressure to live up to the positioning theme.

In Sri Lanka, Cargills Food City came up with the positioning theme - “on your way home.” This has worked for them, as people remember Food City when they think of returning home.

You cannot simply succeed in retailing without positioning. My advice to retailers is to be creative and innovative in positioning and have the courage to reposition if the market situation demands it.

Understand your key competencies

Every retailer possesses certain competencies, some which are equal to others and others unique and significant. To create an innovation in retail, focus on the unique competencies you have as a retailer.

This may be in supply chain efficiencies, in-store merchandising, marketing and selling skills or in customer service, to name a few.

My advice to retailers is to understand their strengths and weaknesses. Do not focus too much on weaknesses and trying to correct them. Instead, focus on your strengths and capitalize on them and reinforce them.

Take the example of Walmart. Walmart has several key competencies. A key competence would be world class supply efficiencies, which they have leveraged to live up to their motto of “Everyday low prices.”

Expand the store network “rationally”

Retailing is a capital intensive industry. Expansion should be done with caution and based on objectivity and not subjectivity. (Competitors have 20 outlets, so we must have 20!). As each location comes in, a new skill set and new resources come into play.

The dynamics of running an urban outlet versus a suburban outlet are quite different. In my view, getting the business right is always more important than going fast (and crashing!)

All retail outlets should be continuously evaluated for profitability, revenue growth and operational efficiencies. Loss making locations should be rectified or closed down. You cannot be sentimental in this regard.

Conclusion

Retailing is a dynamic and evolving industry. To remain healthy and relevant, retailers have to keep innovating but also keep the basics in mind. Retail is also detail. Do not forget to go into the operational details at all times.