We’ve all heard this story
before, of course. Consider any of the more outrageous customer service efforts
you may have heard about Nordstrom’s, for example (nearly all of which turn out
to be true, as it happens), or more specialized retailers like Tiffany and Co.
Boyd’s has features like free valet parking, sales associates and personal
shoppers who form lasting relationships with repeat customers, and alterations
handled for free (with the cost of purchase) by a 39-person tailoring shop on
the premises. The salespeople keep in touch with their customers with
hand-written notes and updates on new products for sale – the level of service
that people who don’t understand retail think they should always receive, but
rarely want to pay for…
In a world where more and
more department stores are closing, and the handful still in operation, it may
seem amazing that Boyd’s not only maintains its operations but is in fact
expanding, hoping to increase its sales to female customers by expanding the
women’s clothing department. But where the article extols the virtues of Boyd’s
as a throwback to a previous century and suggests things that current members
of the industry could learn from their example, what struck me was that the
company seems to have happened across the concept that will keep them running
regardless of the competition from Amazon (or other online retailers) – and those
are the lessons we should be examining…
For all that it can be
incredibly difficult to execute correctly, let alone profitably, the basic
concept of retail has traditionally been to find something people want to buy
and put a large selection of it somewhere that those people already do. Firms
following a cost leadership strategy will then attempt to gain an advantage by
lowering their operating costs, increasing their profit margin and possibly by
lowering their prices, while firms following a differentiation strategy will
attempt to find reasonably cost-effective ways to add value for the customer. With
massive advantages in overhead costs (they don’t have to build or operate a
store) and inventory (they can and do have warehouses and distribution centers
all over the world), Amazon can out-perform almost any cost-leadership
competitor, and it is getting harder to find anything that will add sufficient
value to interest retail customers in shopping in the real world…
But what if we came at the
problem from the other direction? Just assume that anything we can buy can be
sold online for cheaper, and anything we can make will be duplicated by the
competition as soon as they can figure out how we do it; what’s left? Can we
offer a unique product, custom-made or custom-tailored? Can we offer a service
that isn’t possible for a web retailer? Can we offer a level of quality, either
in product or in services, which can only be provided through a relationship
business, between employees who know their customers? There was a time when a
retail business could succeed simply by being the only place in a local area
where a specific set of goods or services was available, but those days are
gone; can we out-perform not just the competitor across the street but everyone
on the Internet?
I’m not suggesting that any
of these concepts will be easy to develop, let alone implement. But the more we
consider the retail sector, the clearer it becomes that location, inventory
control, and competitive prices are no longer enough. Just as the mercantile
businesses of the 1800s were replaced by the national brands of the 1900s, this
new century is shaping up to be a time where the competition is always present,
and always has massive advantages in terms of volume, purchasing power, and
breadth of product line. But if the folks running Boyd’s are anything to go on
(and they’ve been right for 80 years so far) then retail isn’t going away any
time soon. It’s just evolving into yet another new form…
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