Up Close & Personal

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Up Close & Personal

  1. 1. Up close and personal How stores can drive profitable growth by optimizing the customer's in-store experience
  2. 2. 1 | Viewpoint
  3. 3. Up close and personal | 2 Stores remain the hub of the retail industry's value proposition—the places where customers can actually see, touch and feel what's for sale. Leading retailers ensure that their Stores today are grappling with a stores deliver on their customer multitude of challenges. Operational promise. They have an exceptionally costs continue to climb and most clear understanding of the needs and retailers are scarcely managing to expectations of their customers— contain, let alone reduce them. especially the most profitable ones. Store over-supply and price deflation And they use that knowledge to are slowing growth, just as customer create a totally customer-centric expectations, fuelled by the store environment. Winning retailers proliferation of new sales channels, procure and create products at the are soaring. Staff turnover is high. right price, bringing them to market And in-store management struggles to almost before customers realize they equip their workforces with the want them. resources to understand and serve customers whose demands can change By combining relevant technologies from one day to the next. with an appropriately skilled and motivated sales and support team, these leaders provide both the ease of access and the informed, in-store assistance that customers demand. In terms of space, layout and design top stores are both functional and provide an engaging experience. 2
  4. 4. 3 | Viewpoint Figure 1. Retailers continue to “annoy” their consumers with under-whelming shopping experiences. Number of times, out of four shopping visits, that consumers become annoyed by retailers’ service actions 3% 8% 6% 21% 0 Times 1 Time 2 Times 3 Times 61% 4 Times Figure 2. Most consumers are willing to defect from the retailer to which they’re most loyal to a comparable retailer that already has eliminated the consumer’s most vexing shopping annoyance. Consumers’ willingness to defect from a retailer to which they’re loyal to a competitor if the competitor eliminated the consumer’s most vexing retail annoyance but the loyal retailer did not Very likely 30% Likely 36% Neither likely nor unlikely 27% Unlikely 4% Very unlikely 2% 0% 5% 10% 15% 20% 25% 30% 35% 40% Percentage of respondents Source: Accenture Retail Consumer Service Experience Survey: US Results April 2007
  5. 5. Up close and personal | 4 Accenture research reveals that customers profess disappointment (see Winning stores know that today's customers choose stores on the basis figure 1). They say there are usually too customers seek either convenience or of price, product selection and few of the products that they came for, an engaging experience when they proximity—in that order.1 Interestingly, and too many that they don't actually shop—very often both—and they most consider the Internet an want. They complain as well about poor actively invest to satisfy both demands. extension of the shopping experience in-store service. Most will readily go Top stores provide the right offer, in rather than a substitute for it. This is elsewhere if another store offers better the right environment with the right not so true for consumer electronics product choices or lower prices (see service model. By meeting or exceeding (or for male shoppers); but Dell's figure 2). the customer's in-store expectations, recent decision to start selling more of these stores are keeping their its computers through Wal-Mart and Profitable growth depends, of course, on customers, attracting new ones—and other stores is a sign of the times. loyal customers. But few stores are enjoying superior margin and revenue Consumers still seem to prefer the managing to capture the loyalty of growth as a result. "real" shopping experience to the today's fickle and discerning shoppers. virtual. Food retailers in the US and UK lose up The pay-off, in fact, can be substantial. to 40 percent of new customers within Our research suggests that service three months; and on average, US enhancement initiatives will reduce Yet the right in-store experience can companies lose up to half of their consumer erosion and likely grow be hard to find. Different motives customers every five years.2 What's same-store sales. Indeed, by closing the prompt different shopping missions— more, Accenture research reveals that loyalty gap and boosting customer very often to the same store. Once the loyalty gap is widest among the retention rates by just five percent, in-store, however, a majority of wealthiest customers3 (see figure 3). companies can boost profits by as much as 95 percent. Footnote 1: Accenture Consumer Survey, April 2007 Footnote 2: Accenture Loyalty Study Footnote 3: Act Now! Customers are limited, May 2007
  6. 6. 5 | Viewpoint Figure 3. Retailers have created a Loyalty Gap among their loyal consumers. Consumers expectations for preferential treatment versus percent of shopping experiences where they receive preferential treatment from a retailer to which they’re loyal % of Consumers 70% 60% 50% 44% 40% 20% 30% 20% 10% 0% <$50K $50K-99K $100K+ Expect Receive Source: Accenture Retail Consumer Service Experience Survey: US Results April 2007
  7. 7. Up close and personal | 6 Accenture has worked with a wide store, and train sales forces to provide customers on the other side. The new variety of retailers in many different the preferential treatment that these store might take some sales away countries to create compelling in- consumers say they want. from the original, but it could also store experiences. There is no single lead to more sales overall. approach to securing customer loyalty. The most successful retailers take a In every case, however, a successful highly systematic approach. The US Translating this insight into outcome has hinged on mastery of office supplies company, Staples, tailored product offerings and an three powerful and inter-related carefully analyzes its customers' effective in-store experience capabilities. purchases, conducts continuous Today's shoppers are, of course, a • An exceptionally clear understanding surveys to monitor trends and then highly differentiated demographic. of the specific needs and shopping uses this data to develop distinctive Working women, Baby Boomers, missions of the most profitable strategies that target big, frequent singles, teenagers and even children target customers shoppers in its stores. Similarly, each want products, services and shopping • A commitment to translating this store manager at Zara, the Spanish experiences that are as distinctive as insight into tailored product apparel manufacturer and retailer, they are. Leading retailers aim to offerings and a highly effective in- keeps a close watch on consumer satisfy these diverse requirements by store experience behavior and trends and swiftly relays tailoring their store offerings and the information, through the relevant formats. • An operating environment that regional manager, to the product harnesses both technology and development team. The system helps Hence the trend to "niche" stores, like human capital to maximize Zara bring the most sought after new those for "Tweens" (9-12 year olds); or profitability fashions to market in a fraction of the Footlocker's partnership with Nike, its time it takes competitors. biggest supplier, to launch a network Top stores exhibit all three of specialty, "House of Hoops" capabilities—but especially the last The UK-based retail grocer, Tesco, basketball stores across the US. As one. Without the right operating meanwhile, uses the data generated some electronics devices get smaller environment, customer insight and an by its loyalty "Clubcard" to identify and shoppers buy more music and optimal in-store experience simply and keep track of the personal movies online, consumer-electronics can't deliver the benefits that drive preferences of 13 million individual retailers like Best Buy have actually success. shoppers. In quarterly mailings to begun to shrink the size of new these individuals, Tesco includes stores—especially as they seek to Gaining a clear picture of the personalized vouchers that "buy" penetrate previously overlooked but specific needs and shopping products at no additional cost to the fast-growing locations like suburbs, missions of target customers shopper, but which benefit Tesco by where space for big stores is tight. The days when the goal of retailing boosting sales volumes and getting was simply to sell more to more customers to try new products in new Small-size Tesco Express stores, often people are long gone. Relentless departments where they may continue located adjacent to gas stations or bus expansion has given way to investor to shop in the future. stops, have catered very successfully pressure to wring greater returns out to the growing clamor for of existing operations. The name of For other types of successful retailers, convenience, largely ready-meal the winning game is differentiation just keeping their eyes open has been grocery shopping in the UK. These that is meaningful and relevant to the key. Starbucks, for instance, owes stores are often equipped with self- most profitable customers. much of its spectacular growth to the serve, "grab-and-go" checkouts—the observation that people want to buy a sort of swift and painless exit, Accurately identifying, targeting and cup of coffee on the spur of the facilitated by state-of-the-art tracking the fast-changing preferences moment—an insight that inspired the technology, which increasingly of these customers are fundamental company to open stores in surprisingly characterizes an optimal in-store first steps—and they can be tricky. close proximity to each other, experience. Retailers need to be able to recognize sometimes on opposite sides of the "loyal" consumers when they enter a same street, just to capture the
  8. 8. 7 | Viewpoint Figure 4. One quarter of consumers identified receiving too little attention from a sales associate as their most often encountered retail annoyance. Percent of consumers who encountered specific retail service annoyances in the past 12 months Too little attention 7.1% 17.3% Too much attention 4.4% 10.7% Cross-sell pressure 3.4% 8.3% Difficulty with returns 3.4% 7.5% Rudely treated 2.3% 7.5% 0% 5% 10% 15% 20% 25% 30% Percent of consumers Quite Frequently Frequently Figure 5. Rude treatment by sales associates represents consumers’ most desired service annoyance to be eliminated by retailers. Consumers’ most desired service annoyance for retailers to eliminate Too much attention 8% Too little attention 16% Cross-sell pressure 19% Difficulty with returns 19% Rudely treated 29% 0% 5% 10% 15% 20% 25% 30% 35% Source: Accenture Retail Consumer Service Experience Survey: US Results April 2007
  9. 9. Up close and personal | 8 Enhancing the customer's in-store Creating an operating Top stores carefully count customers experience can include the provision environment that maximizes in and out and compare that number of inter-active kiosks where customers profitability with a count of who actually bought access product information— Accenture research confirms the something in the store. They do so, personalized information when critical importance of customer service moreover, on a store-by-store basis so activated with a loyalty card, as at to an optimal in-store experience. It they can tailor product offerings to Boots, the UK drugstore. Many, also reveals how difficult this specific customers. moreover, now seek to emulate seemingly simple concept is to get Waitrose, the grocery division of the right.4 Many retailers claim to greet Best Buy, for instance, manages its UK's John Lewis stores, which has every customer, but most don't deliver product assortments on a store-by- begun to offer merchandise on an on that promise—a significant failing store, cluster-by-cluster basis to occasion and time-of-day basis— since serviced customers convert provide the right inventory for different products for breakfast, much more frequently than un- customers specific to each store and lunch and dinner times—in some of serviced customers (see figure 5). to meet local market needs. Kroger, its stores. Serviced customers, indeed, have a Ahold USA and Bashas' are among higher average order size and spend leading food retailers that use Top stores, indeed, manage to combine more money. They also spend sophisticated production planning convenience with some form of an additional time in the store, giving methodologies and predictive models engaging shopping experience. Apple's sales staff the opportunity to boost to maintain the fine balance between edgily designed computer stores, for the breadth of the sale. "in-stock" and over-production in example, are famously enjoyable their fresh foods departments. places in which Mac enthusiasts can The key to success—in fact, the browse and play. And the open-front foundation stone of all customer Leading retailers also are tackling the store appearance tends to draw the service—is the right operating problem of shrink and labor simply curious in as well. Once inside, environment. Top stores are effectiveness. Activity-based costing customers can check personal emails, transforming their point of sale and that utilizes engineered labor seek advice from the store's "expert" customer service systems into multi- standards is one example of the desk and participate in training purpose, point-of-service networks analytics that can help refine in-store sessions that help them get the most that reduce total cost of ownership by processes and identify upstream out of their Mac. integrating with workforce manage- constraints on optimal in-store labor ment and other in-store technologies performance. Best Buy and Gap are Customer service as good as this only like hand-held terminals and kiosks. implementing integrated workforce happens when fully informed BP, for example, is transforming and management tools that link major HR- employees are empowered to deal rationalizing the retail outlets in its related systems including time and with customers in a positive manner— worldwide network of 25,000 gas attendance, scheduling and HR talking to them, showing them respect stations to a single IT platform. By re- records to manage payroll in a and treating them, in effect, like configuring both front and back-office seamless environment. And the drug guests (see figure 4). John Lewis tops operations, retailers can powerfully store, CVS, is among several top stores the UK polls in this regard. While in reinforce their customer-centricity— that use sophisticated shrink the US, the top-performing organic and boost profitability as a result. transaction monitoring tools, grocer, Whole Foods Market, which integrated with video monitoring, to recruits employees passionate about Winning retailers have created a capture theft. food and who can give customers, selling culture that facilitates high direct, detailed and personal attention, customer conversion—a culture is widely regarded as a paradigm of sustained not only by specific greeting service excellence. and selling techniques, but also by employee reward systems that are based on systematic service measures. Footnote 4: Accenture Conversion Study 8
  10. 10. Up close and personal | 10 Next Steps Providing the right in-store Above all, they recognize the experience to retain the loyalty critical role of the right of your most profitable operating environment in customers isn't easy—but as the reinforcing customer-centricity. experience of leading retailers shows, it can be done. Top stores know just who their best customers are and they turn this insight to action by providing tailored product offerings in differentiated formats within engaging store environments that deliver exceptional customer service.
  11. 11. For more information please About Accenture contact: Accenture is a global management consulting, technology services and North America outsourcing company. Committed to Janet L. Hoffman delivering innovation, Accenture janet.l.hoffman@accenture.com collaborates with its clients to help them become high-performance Europe businesses and governments. With Richard Wildman deep industry and business process richard.wildman@accenture.com expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and Asia-Pacific technologies to help clients improve Andrew Clarke their performance. With more than andrew.clarke@accenture.com 158,000 people in 49 countries, the company generated net revenues of Latin America US$16.65 billion for the fiscal year Vasco Simoes ended Aug. 31, 2006. Its home page is vasco.simoes@accenture.com www.accenture.com. Copyright © 2007 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

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