Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Saturday, March 7, 2009

"Excuse me...where are the Calbee chips?"

Big Box stores have done well for themselves over the years, spreading like an epidemic across the entire nation. They offer some obvious benefits: the convenience of a one stop shop via wide selections across multiple product categories, as well as noticeably lower prices due to their massive bargaining power. Large signage, prominent displays, row after row of cash registers, a whole team of salespeople, effective planograms (notice how the large bottles are always at the bottom!)...the list goes on. It seems that these retailers have checked off every box for successful retailing. So what’s left?

For the most part, these retailers follow a standardized format, and you can pretty much expect to see the same things, at the same prices, in the same places when you pay a visit. So what is wrong here? Everyone has different needs! You can’t expect me to have the same buying criteria as the 60 year old man that is sitting across from me right now. Nor can you expect that I will have exactly the same wants that girl that sits beside me in class. Grocery stores have started to figure this out, and have responded by increasing their emphasis on ethnic foods to appease their shoppers. [i] Only to forget that its difficult (at best) to find the pizza flavoured Calbee chips located on the bottom shelf, tucked behind salted peanuts (I’m speaking from personal experience). What is the point of increasing selection when the placement is so obscure?

What about other retailers? Take a look at Best Buy. It’s leading the change on product selection and placement within its sector. In its Baytown location, it noticed an influx of Eastern European workers who came in specifically to purchase Apple laptops and iPods. These people were pressed for time, as they often squeezed in these trips right before they left the country. Best Buy responded by moving the iPods from the back of the store to the front, pairing them with overseas power converters, and simplifying the signage. The result? A sales increase of 67% amongst this customer segment – no chump change, I may add. [ii] It is changes based on consumer insights like this which help retailers differentiate themselves from others. No wonder Best Buy is doing well while rival Circuit City was forced to file for Chapter 11. [iii]

It’s not sufficient to apply the same customer segmentation across all stores. Sure, the profiles Jane & Bob (affluent, happily married with four kids), Trevor (low income, fated to be single forever), etc. are useful. However, differences still exist within the same group (hence the grocery stores’ shifting focus). Even though the demographic and household characteristics may be the same, cultural differences and preferences may lead to drastically different consumer behaviours. For example, the Best Buy in Chicago recently began stocking more Polish music CDs in their store after noticing that 25% of the people there were Polish speakers. But don’t try to take these “specialty” products and put them in another location – it just won’t make sense! In essence, retailers still have a way to go on identifying who the particular store’s customers are. This can be done by silently observing the breakdown of people who visit the store, as well as soliciting feedback from salespeople, who will have the best idea of what the customers want. If you find that 40% of customers are asking for “Mary Kate & Ashley Sweet 16 Licensed to Drive” video game, it may make sense to start looking into how to bring it in the store. Or what about making select customers feel more comfortable by recruiting sales people that they can relate with? I know that I would rather get music recommendations from someone my age than Uncle Frank, who still thinks that Michael Bolton is hip. These are considerations that vary by region and store, and are seldom captured in the holistic profiles.

Granted, there needs to be a certain degree of similarity between all its stores – that is important to maintaining the Best Buy brand and image. But minor adjustments can go a long way into driving sales (as evidenced by the Baytown example).

Go back to the basics of retailing – you can’t sell something if it’s not available. You also can’t sell something if it’s available and no one can find it. The key to any successful retailing strategy is to help customers find what they are looking for, and fast. Not everyone is going to ask where a product is located (seems from our discussions men are less likely), so if they can’t find it within a given amount of time, rest assured that they will not walk out of your store with a smile. And if they can’t communicate or don’t feel comfortable with the store’s sales people, the opportunity to upsell and cross sell completely flies out the window. All these shortcomings gives the store a bad image in the minds of customers, and pretty much hands your business over to your competitor on a silver platter.

[i] http://www.businessweek.com/magazine/content/08_21/b4085052698079.htm
[ii] http://www.ats.agr.gc.ca/us/4489_e.htm
[iii] http://www.washingtonpost.com/wp-dyn/content/article/2008/11/10/AR2008111002931.html