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Winning in retail - how a differentiated value proposition can drive retail success

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An outline of my theories around different retail formats and the value proposition that leads some retailers to success and others to failure. Includes a hypothesis of how physical retailers can successfully differentiate themselves from the competition of other retailers and the ever-growing challenge of online retail.

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Winning in retail - how a differentiated value proposition can drive retail success

  1. 1. Physical Retail Formats Format Proposition Aim Competitive Advantage Critical Success Factors Example Lifestyle Curator Edited by experts – trust the we know you and your style/lifestyle Provide a carefully edited selection of products and/or services to a specific consumer group • Provide products, brands and/or services that others cannot • Stay ahead of the competition – faster to market with new trends or essential items • Credible and trusted reputation • Seen as ‘one of the tribe’ • Product and environment must make shoppers feel like they belong • Price competitiveness is not the main driving factor for sales • Complementary channels (digital, social etc.) optimised to nurture, inform and inspire shoppers JD Sports Specialist Curator One-stop-shop for a particular need, hobby or purpose Deliver everything that the shopper needs under one roof, combining products and services • Comprehensive and carefully selected combination of products and services that cater to the chosen category, interest or hobby • Deep knowledge of the hobby, category or need • All staff are experts and ‘live the proposition’ • Carefully selected range of relevant products and services, ideally including hard to find and/or obscure items • Complementary channels optimised to provide greater service, deeper knowledge/information, community building and quick access to hard to find items REI Eclectic Curator A place of discovery Combine an eclectic mix of products/ categories to attract shoppers and inspire a trend focused shopper • Provides inspiration for the shopper, enabling them to discover new ‘finds’ that relate to their world/preferences • Clear understanding of the target shopper • A store environment that is able to successfully bring together an eclectic mix of products under one roof • Highly trend led – must be absolutely up to date with the latest trends • Newness vitally important for fickle shoppers Urban Outfitters
  2. 2. Physical Retail Formats Format Proposition Aim Competitive Advantage Critical Success Factors Example Experience Centre Try before you buy – no obligation! Build a close bond between product/service and the shopper so that they can buy with confidence • Be the only/best place where shoppers can experience the brand/products/services to the deepest level of detail • Be both educational and entertaining • Service focused around expert product/service knowledge • Deliver a personalised service experience – how this product/service fits into your life/can help you Apple Brand Showcase Get to know the brand like never before A showcase for the brand to let shoppers discover its world and products/services • Outstanding presentation and storytelling • Interactively brings the brand, its products and services to life • Staffed with passionate brand advocates • Ensure that the same experience is not widely available elsewhere • Provides a far reaching halo effect that positively impacts all other sales channels • Communicates brand first • Gets shoppers talking and drives high levels of word of mouth • Powerful, compelling and emotional experience that resonates well with shoppers and makes them feel connected to the brand Nike House of Innovation Portal Physical connection to a digital world Bring the best of what physical retail offers to a predominantly digital or virtual product/service • Seamlessly connects to and works with the online proposition, feeling like one joined up journey from start to finish • Brings more people to the online platform, growing online traffic numbers and frequency of visit • Enhances the shopper’s experience of the online proposition • Creates greater awareness of the online products/services • Helps to expose lesser known aspects of the business that are harder to communicate effectively in the online world • Puts a human face on a digital business and builds on the advantages of having real people to deliver a service Pro-Direct Soccer, London
  3. 3. Physical Retail Formats Format Proposition Aim Competitive Advantage Critical Success Factors Example Atelier Showcase for the artisan Showcase the artisan’s skills and sell their ‘made on the premises’ products • Unique products/services that cannot be replicated elsewhere • Reputation for and clear demonstration of the skills and craftmanship required to make the products • Exclusive, high quality products • Limited range • Made on the premises/locally sourced 3x1 NYC Atelier Reproduction Welcome to the world of the original artisan Experience the products/services in the same way that the artist originally intended • Retains the essence and quality of the original • Provides the same unique products/services that the original Atelier does • The ‘reproduction’ must retain the same qualities as the original Atelier • Products must be sourced/produced in the same way as the original Atelier • Staff working in the Atelier Reproduction must be trained to the same high standards – they are effectively apprentices of the original artist Daylesford Workshop Shopper participation Get shoppers actively involved in the brand’s activities, products and/or services to co- create, learn, have fun and purchase • Personalised/customised products and/or services, tailored to the shopper • Fun experiences that almost guarantee a sale • Is a ‘rite of passage’ or an absolute ‘must experience’ for the target audience • Activities must be part and parcel of the brand’s core offer or integral to how the product is used • End product must be genuinely useful and/or better than what could have been bought off the shelf • The proposition/experience and the end product become talking points for the shopper American Girl Place
  4. 4. Physical Retail Formats Format Proposition Aim Competitive Advantage Critical Success Factors Example Fulfilment Centre Value, breadth of range and convenience Provide a broad and deep product range to the mass market at highly competitive prices • Never out of stock on key items • Highly price competitive • High levels of convenience • Offers plenty of ‘no frills basics’ to provide supreme value • Strong reputation for ‘right product, right price, right place’ • All channels optimised to offer supreme service, value and convenience • Careful but thorough trimming of operating costs to drive greater consumer value • Not obsessed with latest trends Primark Marketplace A platform that sells directly and/or offers others the opportunity to sell from its space/platform By offering others the opportunity to use its space, the marketplace is able to extend its offering, provide greater choice, competitiveness or experience to the shopper • The right choice of partners, helping to provide a more comprehensive offer or greater value, while driving down costs for the business • Other brands/retailers are able to utilise the marketplace’s infrastructure and services, enabling them to offer something or access a shopper that they otherwise cannot • A well integrated back end infrastructure that creates a seamless shopper experience All partners together create cost synergies and an overall saving to the operating costs of the business • A proposition that is greater than the ‘sum of its parts’, offering something that the individual businesses could otherwise not achieve alone Farfetch Store of the Future Service Centre Top class face to face service Provide instant service to the shopper, solving their problems immediately • Provides education as well as service • Provides a level of service that cannot be obtained elsewhere • Faster, more convenient and/or cheaper than other solutions • Fast and friendly • Staff empowered to solve problems • One-stop destination – requirements are solved there and then rather than at a later date • Easily accessible – convenient locations Warby Parker
  5. 5. Physical Retail Formats – The Differentiator Grid Product Specialist Range built around a selected category/ product type Lifestyle/Eclectic Curator Range built around a shopper lifestyle Generalist/ Marketplace Focus on breadth and depth of selection Levelofproductcuration/specialisation Level of experience/interactivity The product specialist curates a carefully selected range based on the technical nature of the products and the specific requirements they fulfil, ideally combining wants and needs. Range generally changes in-line with product development. The lifestyle/eclectic curator understands their shoppers’ desires and creates a collection of products to match, often based on a deep understanding of latest trends. Range generally changes frequently, in-line with [fashion] trends. The generalist understands their shoppers’ needs and creates a broad range based on choice and selection. Range generally changes infrequently. Service levels and the amount of space given to non-product areas generally increase along this axis. At the same time, the focus on price being the competitive advantage generally decreases. The formats on this scale often include some or all of the aspects of the formats preceding them (i.e. a Workshop is also a service centre, an experience centre and a showcase). Experience Centre Product Interaction Showcase Presentation & Storytelling Fulfilment Centre Price & Convenience Workshop Engagement & Fun Factor Service Centre Problem solving
  6. 6. Physical Retail Formats – The Differentiator Grid High levels of product differentiation, low levels of experience differentiation Medium risk of proposition losing sales to online/other retailers Low level of product and experience differentiation High Risk of non-differentiated proposition losing sales to online/other retailers High levels of product and experience differentiation Highly differentiated proposition with lowest risk of losing sales to online/other retailers Low level of product differentiation, high levels of experience differentiation Medium risk of proposition losing sales to online/other retailers Level of risk that online can replicate the value proposition, meaning that an increasing amount of shoppers convert online. High Low Product Specialist Range built around a selected category/ product type Lifestyle/Eclectic Curator Range built around a shopper lifestyle Generalist/ Marketplace Focus on breadth and depth of selection Levelofproductcuration/specialisation Level of experience/interactivity Experience Centre Product Interaction Showcase Presentation & Storytelling Fulfilment Centre Price & Convenience Workshop Engagement & Fun Factor Service Centre Problem solving
  7. 7. Physical Retail Formats – Identifying the Key Battlegrounds Key Battleground: Price Key Battleground: Make shoppers feel part of the ‘tribe’ (and be prepared to make others feel that they are not) Key Battleground: Staff: Product knowledge, passion for the product and ability to fully demonstrate the product in detail Key Battleground: Quality of service & shopper’s trust in your capability to solve their problems Key Battleground: Enjoyment / fun Product Specialist Range built around a selected category/ product type Lifestyle/Eclectic Curator Range built around a shopper lifestyle Generalist/ Marketplace Focus on breadth and depth of selection Levelofproductcuration/specialisation Level of experience/interactivity Experience Centre Product Interaction Showcase Presentation & Storytelling Fulfilment Centre Price & Convenience Workshop Engagement & Fun Factor Service Centre Problem solving Level of risk that online can replicate the value proposition, meaning that an increasing amount of shoppers convert online. High Low
  8. 8. Physical Retail Formats – Example Retailers Product Specialist Range built around a selected category/ product type Lifestyle/Eclectic Curator Range built around a shopper lifestyle Generalist/ Marketplace Focus on breadth and depth of selection Levelofproductcuration/specialisation Level of experience/interactivity Experience Centre Product Interaction Showcase Presentation & Storytelling Fulfilment Centre Price & Convenience Workshop Engagement & Fun Factor Service Centre Problem solving Level of risk that online can replicate the value proposition, meaning that an increasing amount of shoppers convert online. High Low

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