Today’s consumer is redefining the nature of value. Price is paramount, but consumers also demand the same or greater value for less money. Penny pinchers will not suddenly become big spenders given constraints on disposable cash, reduced asset values, clampdowns on corporate bonuses and, for many baby boomers, upcoming retirement. Retailers must identify and serve that price-value sweet spot to win loyalty and market share.
At Accenture, we believe that any retail organization can develop an adaptive and effective response, retain relevance and achieve high performance, if they focus on three core areas:
Growth and Investment: Growth is still possible, but it must be pursued in accordance with a clearly understood and delivered value proposition. There will always be a market for “cheap,” but the retailers that truly understand their customers recognize that relevant value—leveraging a unique, branded experience and pricing it for the times—offers much more robust growth prospects.
High-performing retailers will choose to invest for growth in areas that they know to be highly relevant to their customers’ new and emerging needs.
Operating Model and Capabilities: There are three key tenets to an adaptive operating model: smart merchandising, customer connection and lean operations. Smart merchandising is critical for any retailer seeking to achieve high performance. Understanding what customers want, at what price, when and through what delivery channel, and then translating this into operating excellence is a requisite survival skill. Successful retailers are revealing what their customers value by leveraging sophisticated analytics and then using the information to determine their competitive positioning.
Retailers that provide effective multichannel access will have an advantage. Accenture research indicates that high performance retailers operate in a fully integrated multichannel environment that ensures brand, product and service consistency across all channels.
All retailers need to be lean and manage their controllable costs better to protect margins as price pressures continue—closing less productive stores, cutting back on discretionary spending, boosting marketing returns and rationalizing SKUs.
However, becoming lean without sacrificing customer satisfaction is tricky, and time will tell if consumers are delighted or discouraged by rationalization. SKU rationalization can risk further straining relations with suppliers, as well as customers.
Talent Management: The recovery period offers an opportunity to upgrade talent, thanks to a surfeit of college graduates and record numbers of experienced people facing unemployment. Retailers can raise the talent bar and build new skills in their field and headquarters organizations.
For example, at headquarters, retailers are searching for new skills to supplement their core merchandising and marketing capabilities, such as developing deep quantitative capabilities necessary for modeling, pricing and other merchandising optimizations.
Sourcing talent quickly and consistently to fill identified gaps is critically important. Some retailers will choose to launch the talent sourcing and recruiting effort using their existing staff. However, in an effort to cut costs some retailers will seek to outsource non-core competencies, especially if doing so helps fill critical talent gaps more quickly and offers sustainable cost savings.
Ultimately, the recovery strategies taken by retailers to achieve high performance will vary depending on their individual circumstance and priorities, however, all will need to be adaptive to capitalize on new and evolving customer trends and a dynamic competitive environment. The effects of the recession are likely to endure, but the opportunities it offers for equally enduring competitive advantages are huge.
Janet Hoffman is global managing director of Accenture’s Retail practice. Accenture is a global management consulting, technology services and outsourcing company.