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White Paper: Added Value Retail Services

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Increasing the Value of the Retail Store Channel;
• In an increasingly complex omni-channel retail environment, the retail store still plays an important role through offering an in-person brand experience.
• Offering added-value retail services is one strategy that can emphasize the value of visiting a store.
• These added-value services must be strategically tailored to specific customer needs in order to cause a significant impact on customer behaviour.
• There are various factors that contribute to the branding strategy (new brand or co-branded) of added-value services, such as service type, project timeline, and overall objectives.

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White Paper: Added Value Retail Services

  1. 1. August | 2014 Research Paper Added-Value Retail Services Increasing the Value of the Retail Store Channel
  2. 2. Think Blink At Shikatani Lacroix, we design compelling at-purchase moments that connect in the blink of an eye. Our philosophy and strategic design approach, Think Blink, is driven by a consumer’s motivation to make a purchase decision. Everything we do is geared to owning the “at-purchase” moment. Our firm has a well-earned reputation for designing integrated brand experiences that effectively connect brands with consumers to drive measurable results for clients. !! About the author Sydney McMurter, Research & Strategy Shikatani Lacroix As a researcher and strategist at Shikatani Lacroix, Sydney conducts research and analysis for brands such as TD Bank, PepsiCo Canada, and Tim Hortons. ! Prior to joining SL in 2012, Sydney graduated from York University with an Honours Bachelor of Science degree in Psychology and a certificate in Urban Studies, where she researched the connection between psychology and design. ! 2 | Added-Value Retail Services | Research Paper | August 20, 2014
  3. 3. • In an increasingly complex omni-channel retail environment, the retail store still plays an important role through offering an in-person brand experience. !• Offering added-value retail services is one strategy that can emphasize the value of visiting a store. !• These added-value services must be strategically tailored to specific customer needs in order to cause a significant impact on customer behaviour. !• There are various factors that contribute to the branding strategy (new brand or co-branded) of added-value services, such as service type, project timeline, and overall objectives. “The Blink Factor is the ability to stand out and effectively communicate a meaningful and differentiated offering, and must be present during the At-Purchase Moment to ensure maximum impact.” Jean-Pierre Lacroix, President Shikatani Lacroix Summary The Shikatani Lacroix Think Blink Process 3 | Added-Value Retail Services | Research Paper | August 20, 2014
  4. 4. Value of the Retail Store ! With the increasing complexity of shopper behaviour, channel dynamics, and the competitor relations, the task of creating a distinct competitive advantage at retail and preventing loss of sales has become incrementally more difficult. Influences and impacts cannot be completely isolated and business systems are continuously evolving, with consolidation of major retailers occurring as a means for growth. This report clarifies the current role of retail stores and provides insights into creating successful added-value strategies to grow margins through physical retail stores. ! As online retailers become more dominant and can offer items at lower costs, one may believe that physical retail stores are becoming extinct. However, according to a 2013 A.T. Kearney report, in 2012 60% of the total shopping time (including the research phase) was spent in retail stores and 92% of sales occurred in a physical store location. Furthermore, consumers reported that retail stores still fulfill important needs, such as obtaining a product or service immediately, providing an opportunity to test or try products, or as a social event. Retail stores are also the only channel that can offer a brand experience to all five senses and allow for face-to face social interactions. Therefore, this channel cannot be undervalued, especially when some of the top 2014 consumer trends have been reported to be instant gratification and in-person interaction and experiences (Euromonitor International, 2014). ! When designed correctly, a retail store can be a place for discovery, entertainment, social interaction and need fulfillment. They also provide an opportunity for higher margin transactions, since in-store visits are more likely to be unplanned and customers are therefore inclined to spend more compared to the frequent “mission” trips that occur in the online channel (A.T.Kearney, 2013). Therefore, the retail store still plays an important role in increasing a retailer’s ability to avoid commoditization while increasing margin, a key factor in the success of a retail operation. 4 | Added-Value Retail Services | Research Paper | August 20, 2014
  5. 5. Added-Value Services in the Retail Store ! To increase margins in retail stores, it is also important to make a retail location worth repeated visits. Retailers need to emphasize their unique value compared with purchasing online or from competitors and build customer loyalty, especially since customers can act as powerful brand ambassadors through online reviews (Euromonitor International, 2014). One way to accomplish this task is to provide added-value services that allows the company to build stronger affinity with key target segments, while helping increase overall store sales margins. ! Although initiatives such as improving customer service are not new concepts, in today’s hyper-competitive marketplace it is especially important to develop a strategic retail added-value plan. This takes service to a new level, evolving from facilitating a product to providing added-value knowledge that fits a unique and specific customer need. This strategy must originate from consumer needs to ensure customer satisfaction and allows a brand to earn more. Yet, the added-value strategy must be specific and differentiated since generalized efforts to improve customer experience will be costly and inefficient (Booz & Co., 2008). ! Identifying the appropriate services and strategy is an added challenge. Booz & Co state in a 2008 report that retailers need to identify and focus on the services that would make a real impact on traffic, conversion and transaction size and that fit with the existing offering and overall corporate strategy. The service model must also be adaptable to evolving “competitive dynamics and consumer preferences”. Furthermore, they note that traditional survey methods may not yield ideal results for determining consumer needs since customers often do not know what they want, and a pilot service offering may be necessary to determine impact. 5 | Added-Value Retail Services | Research Paper | August 20, 2014
  6. 6. Retail Consumer Needs ! Research into general customer trends and behaviours can provide a starting point for developing added-value strategies. Euromonitor International’s “Top Consumer Trends for 2014” report states that consumers are currently looking for a simplified life, convenience and are increasingly value-focused. ! Retailers should consider the following when considering evolving their service offerings: ! 1. What is the key customer target group to whom new added-value service offerings would have the highest appeal? ! 2. What customer underserved offering is not being met by the current channel? ! 3. If the given business category is vulnerable to disruption, how would the new entry overcome this? ! 4. How will the organization create value and margin through these new services? ! 5. What impact do the new services have on the existing product mix and offering? ! 6. What are the current service gaps which will need to be filled with a new added-value offering? ! 7. Should the new services be branded, sub-branded or identified through a descriptor? ! 8. How sustainable is the new added-value services and how quickly can competitors match the offering, driving commoditization and price competition? ! Answering these key questions will assist in helping define the ideal added-value services that are differentiated and sustainable for the retailer. 6 | Added-Value Retail Services | Research Paper | August 20, 2014
  7. 7. Branding Added-Value Services ! Once the right service type has been identified through a review of the various questions and current business model, the next challenge is to develop the service branding strategy. Branding is very important because it influences customer perceptions, trust and awareness. Retailers may choose to use their own “private label” brand service, bring in a reputable outside brand through a co-branding partnership, or use a combination of the two approaches. ! Determining the appropriate use of these branding strategies depends on the type of service and how quickly it needs to take effect and the role of the service on the overall branding of the business. For example, offering a service with the retail store name can help build brand equity. Creating a completely new brand for a service will take more time to create awareness and a positive image. Conversely, using a co-branding store-within-a store partnership is a quicker way to establish trust of a service. Using a new parent brand combined with a new brand co-branding strategy is an efficient way to develop the brand, since qualities of the former will be absorbed by the latter. In this case, it is important that both brands are mutually beneficial and are a natural fit in terms of brand personalities (Leuthesser, Kohli, & Suri, 2002). ! Consideration should also be given to understanding how branding of the new services can build differentiation and reinforce the organization’s position and direction. Often, the introduction of a new brand or sub-brand leads to confusion in the market place and may undermine the credibility of the organization. Conversely, if the current organization lacks the credibility or brand trust to deliver the new services, the launch or acquisition of a brand may help pave the way for success. Best Buy likely went through the same process when they chose to retain the Geek Squad name for their added-value electronics and upgrade service. 7 | Added-Value Retail Services | Research Paper | August 20, 2014
  8. 8. Conclusion ! Providing a new meaning and purpose for bricks and mortar channels of distribution is a highly topical subject amongst retailers and their boards. A key opportunity is to provide added-value services not available as part of an online interaction, thereby driving greater affinity to an in-store experience. The challenge is understanding which of these services bring true value to customers that warrant better margin and a higher degree of store loyalty. For the retailer, the second challenge is ensuring their service platform and brand trust can effectively bridge their current offering with those of a new added-value service platform. 8 | Added-Value Retail Services | Research Paper | August 20, 2014
  9. 9. References ! 1. Leuthesser, Kohli, & Suri, HENRY STEWART PUBLICATIONS 1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47 SEPTEMBER 2003. ! 2. Euromonitor International, “Top Consumer Trends for 2014”. ! 3. Booz & Co., 2008. “Winning in Retail with a Targeted Store Service Model”. ! 4. A.T.Kearney, 2013. “Recasting the Retail Store in Today’s Omnichannel World”. !! 9 | Added-Value Retail Services | Research Paper | August 20, 2014

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