Retailers: Choose Your Battles and Reap the Rewards

"The 2006 Consumer Sentiment Index," a recent study from AlixPartners, indicates that retailers should dare to be average: Customers are looking for five basic retail attributes-access, experience, price, product, and service. The study found that consumers respond much more strongly to excellence than fair quality in one or two of these categories (even if performance is average in the rest) across the board. It is the retailers that can deliver this excellence that are currently the most competitive and that are, correspondingly, creating the best shareholder value. "One of the things the study consistently shows us is that executives can get caught up in their own ideas about what consumers want," says Russell Jones, director of AlixPartners. "It's really important to be looking at this kind of information to understand what you're doing relative to your competitors and what you have to do to be successful with customers." The report surveyed 6,000 consumers across a broad range of demographics, and found that customers are shifting buying decisions to correspond with what they want in product vendors. What customers want the most, according to the study, are courteous employees. This service selling point came before well-marked prices, good-quality merchandise, in-stock merchandise, and honest prices, in that order. Respectful employees are especially important according to Jones, because "when people go shopping, that's a big part of their day-to-day interactions. Honest pricing, the fifth most valuable attribute, along with well-marked pricing, which jumped from the number five slot on 2005's list to the second position this year, marked a shift in customer demand away from the cheapest product to the best value and shopping experience. Correspondingly, while the "best" had proven alluring in past years, consumers showed their preference for good, convenient items. The values placed on merchandise quality, in-stock merchandise, and a wide assortment showed that customers are not willing to pay for incremental differences for the "very top" product. Customers also expressed desire for better return policies and store layout that is easy to navigate. The study also rated retail chains in 13 separate categories according to customer preference. Although the study shows a move away from price as a number one selling point, Wal-Mart came out as the most overwhelming presence in the retail industry. The value chain came in as the number one discount retailer, number one grocery, number two convenience chain, number three in both do-it-yourself and electronics, and number 4 or 5 in all of the other categories. "Wal-Mart has focused on making large numbers of people feel comfortable shopping in their stores," Jones explains. "The population of the United States who enjoys shopping at Wal-Mart is much higher than experts think, because they are not in the same demographic." Other retailers that captured top spots were Barnes & Noble for books, Nordstrom and Kohl's for department stores, Walgreen's for drug, Best Buy for electronics, Staples and Office Depot for office supplies, and Academy Sport and Outdoors for sporting goods. The retailers who won the highest marks were those who outperformed their competition significantly in one or two aspects of performance. For example, Home Depot acquired its top spot largely through pricing, while more expensive chains, like Nordstrom, were able to do so by offering exceptional service. "It's very difficult and very expensive to be ahead of everyone on every dimension of the retail shopping experience and the retailers typically who try to do that end up falling short on all of those areas," Jones says. "If a retailer doesn't understand the two things that they really want to be good at, they run the risk of being mediocre in all of them." Related articles: Companies? Listen up! Meet Expectations Before Trying to Exceed Them Required Reading: Love Thy Customer