Before you start developing a new store formula you need to ask one essential question: do you really need a completely new concept or can the existing formula be updated through a process of evolution? To answer this question, it is advisable to go through the discovery phase step by step. When the phase has been completed you can determine in a considered manner how you wish to proceed. Is a completely new store concept a responsible choice or will an improvement of the existing formula suffice? In other words: the discovery phase will assist you in making your decision: is it going to be a ‘revolution’ or an ‘evolution’? The discovery phase consists of several components. Your objective during the first step is to arrive at a precise definition of your customers and their wishes. In the second step, you will need to establish your store’s identity. In addition, you can study all the market trends and developments during this phase.
The discovery phase
Important questions to ask in this phase
Evolution or revolution: the desired change process
Best in class: What are the market developments?
Consumer: Study trends and developments
Who and what do I want to be for my customers?
What is my identity, what do I offer and… what is my added value?
Step 1 of the discovery phase
What solutions should I offer my customers?
Modern retailers need to see their businesses from a broader perspective than merely that of selling products. If a retailer intends to survive in the competitive world, he will need to view his store as a service solution centre. The question he should ask himself is not: ‘what products shall I offer my customers?’, but rather: ‘what solution can I offer my customers?’. Because the following has to be considered: when a customers walks into your store, buying certain products is not his only purpose. It is much more than that. Customers visit your store to find a ‘solution’ for their ‘problem’.
We can illustrate this with an example. Let us have a look at successful clothes stores such as Zara and H&M. What has made them so successful? Is it really their lowprice policy? No, if we take a closer look, we see that they offer their customers not only inexpensive clothes, but also – or perhaps we should say especially – solutions. First of all, they guarantee that their customers will never be lagging one fashion trend behind, because chain stores are the industry’s trendsetters. Moreover, they guarantee their customers exclusivity. What does this mean? That customers never need to worry that the clothes they have bought at Zara's or at
H&M's will also be worn by the masses!
These two clothes stores offer a new collection every four weeks, their way of preventing their customers from taking home clothes that are either out of fashion or worn by everyone! In other words, Zara and H&M offer their customers the solution of being dressed in exclusive clothes according to the latest fashion at a highly affordable price. And, of course, in this industry, this is
the best way to gain competitive edge!
A good way to find out what problems customers face, and therefore, what solutions they are looking for when they come to you, is to determine the ‘shopping risks’. It may seem strange to you, but many people consider shopping as a risky operation. Why? Because they experience shopping as a process full of uncertainties. Customers do not know what to expect. To them, shopping is like making a risky bet or buying a ticket in the lottery! The customer does not know whether to regard the choices he will make as a gain or as a loss. And, therefore, whether it will be a pleasant or an unpleasant shopping experience.
Based on the ‘shopping risks’ we can divide customers into four groups.
1. Buyers who want to avoid taking financial risks
This group of customers is highly ´value conscious’, which makes them see shopping as a financial risk. Their problem is that they are always looking for bargains. If your customers belong to this segment, you should look for a formula that offers a solution for ´cost versus gain´.
2. Buyers who want to avoid the physical effort
These customers consider shopping as a threat to their energy level and as a physical effort. Their problem is: ‘I'm so tired that I can't be bothered with shopping.’ Do you recognise your customers in this phrase? Then your solution should be a store formula that gives these customers a pleasant and relaxed shopping experience. Make sure they really enjoy themselves when they are shopping!
3. Buyers who want to avoid the risk of losing time
These customers consider shopping as a time-consuming exercise. Their problem is: ‘I may have enough money, but I'm always short on time’. If these are your customers, you could develop a timesaving formula, because that will provide the solution to their problem. The difference between these customers and those under points 1 and 2 is that they are not looking for ‘material solutions’, but rather for a ‘psychological solution.’
4. Buyers who want to avoid psychological risks
These customers are afraid that shopping may endanger their status in society. They are struggling with the problem that their social environment Discovery phase frame continued (family, friends, etc.) will judge them on the basis of the stores where they shop. ’Tell me where you shop and I'll tell you who you are!’ You can solve the problem of these customers by means of a formula that makes them experience shopping as a unique experience that further enhances their self-image. Therefore, the solution is: give them the proud feeling of pleasant shopping! As you have seen above, by simply asking questions such as ‘what solutions can I offer?’ and ‘to whom can I offer them?’ you will discover step by step whether your store formula satisfies the needs of your customers.
But we are not there yet. Because what matters is not just what you offer and to whom, but also how you offer it.
Step 1 Brand value and identity
As we have said before, the discovery phase consists of several investigative steps. After the first step, in which your customers and their wishes have been defined, we will now move on to the second step, where you can define your store’s identity. The key question in this respect is: how does you customer currently define you? In other words: what brand value or brand identity fits the store formula in the customer's opinion?
Besides finding the answer to this question, it is also important to uncover how the organisation itself defines its identity. Of course, the two definitions should not differ too widely. The study of the brand value of the present formula can be carried out in several ways. It can be carried out using questionnaires or by means of a customer panel or a customer discussion group.
Specific workshops are a good means of finding out how the store’s identity is defined within one's own organisation.
Think beyond your own business
Besides studying the market position of your own organisation, it is also important to consider the market as a whole. Where are you in the market? How does your formula compare to that of the competition? Who is really ‘best in class’ in your field? What consumer trends and developments are taking place? Having a look across the national borders is also important: what is happening in Europe? In America? Study trips, store visits and having a look at how others work are the best ways to find out.
10 important retail and consumer trends
When developing a new store formula or redeveloping an existing formula, it is of the utmost importance to anticipate the latest trends and developments. Trends and developments both in customer behaviour and in retail formulas.
At present, the following megatrends can be observed:
1. The world is turning into one big (fast food) shopping centre
Today you can shop anywhere. At the airport, train station, petrol station, hospital or museum. Today's consumer does not need to look for a shop because the shops will come to him. You can shop and eat wherever you are.
2. Hypes and incidents increasingly determine consumer behaviour
Since 11 September 2001 and the financial crisis we know that international events can change consumer behaviour overnight. Consumer trust changes with world politics. Spend money today and save tomorrow? Or the very opposite. Just try and base your policy on that.
3. Anyone can sell anything
Computers in the supermarket. CDs at the petrol station. Travel agency at the chemist’s and toys in the home improvement centre. Individual industries are disappearing; everyone is selling everything.
4. The consumer is a professional buyer. Prices are once again essential
After the abundance of the 1990s, the consumer has rediscovered price-conscious buying. If I am price-conscious, I can spend the same budget twice. The faithful customer is being replaced by the bargain hunter and the smart shopper. They are here to stay for a long time. They want to go on holiday AND have a new wide-screen TV. It is all possible within the same budget.
5. Stores become brands
There is no room for ‘mousy’ shops anymore. You need to be distinctive and recognisable. We are all selling the same things. Not only does it matter what you sell, but also how you sell it. 'How’ you sell it determines your identity and added value.
6. Monobrand stores beat multibrand stores
The store is the brand. The brand is the store. Without a familiar face, a store cannot distinguish itself from the rest. Several brands in one store make this difficult. Only a few department stores will survive. The department store as a ‘house of brands’. The sum of the brands creates the experience.
7. Combination marketing enhances the brands
Synergy through power. Lagerfeld at H&M. Philips and Douwe Egberts in Senseo. A Ferrari laptop.
8. We look for authenticity and experience
The future is uncertain. We look for our sense of security in old values, but with a contemporary, recognisable added value. ‘The modern spin-off of traditional value’. What is from the past is good, but with today's creature comforts. In addition, we look for the experience, not rushing about, but consciously enjoying good quality. We only live once. Go on a distant journey, see a particular artist perform… Price is not an issue. A priceless experience.
9. Food does not escape consumers' capriciousness either:
Food retailing used to be secure in comparison with the non-food industry, especially in terms of statistics. Today, retail food is just as dynamic as fashion. The modern-day consumer eats the way he dresses. And the supermarket has no other option but to join in the trend, because failure will mean the consumer going elsewhere.
Plenty to choose from…
Price first, then time
Time remains an important factor. Much to choose from, little time. The consumer needs help as regards both product range and choice in what to buy. However…. No longer at any price.
Traditional meals are disappearing
We eat throughout the day. On the road, during working hours and at school. No time for breakfast… This needs to be anticipated by new formulas as well as product ranges.
Fast-freshness is the trend.
We are fed up with the hamburger. Fast food is OK, but it has to be healthy. Prepared in the store so that we can see that it's fresh.
I am what I eat
Obesity as the biggest threat to public health. The government will take action. Same as with smoking. A health warning on the packaging of almond paste cakes. Retailers will have to anticipate this.
Snacks: from snacks (indulgence) to food
Having a snack in between, this indulgent moment will have to be a healthy moment too. New products, new formulas. Nutritious instead of sweet.
A brands focus on fresh
Groceries in the supermarket, price as their only distinctive feature. Margins have melted away. Added value in fresh products; focus on fresh products replaces the focus on price. There is still money to be made here. Potatoes in brand packaging – a matter of time.
Bread is the theme of the future
We like a healthy snack. Freshly baked in the store. We like Mediterranean. Bread is part of these cultures. Warm, sunny and southern and healthy. Bread is becoming
Retail beats the catering industry
The Dutch catering industry will be unable to fight retail's growth in the out-of-home channel with real formulas of its own.
10. Innovate or die
Consumers change. They continuously formulate new requirements. Customer retention until the end of the week. Then there will probably be something new again. New, newer, newest. Failure to join this trend means you disappear.
This chapter is part of the book "the store manual" of Jos de Vries The Retail Company
The Store Manual (2005) Jos de Vries The Retail Company has been working his way through the marvels of the Retail world since twenty years. Since the Retail branch on its way to professionalism is developing and also scholarly interest was growing, there still wasn’t a manual.Jos de Vries The Retail Company has made a definite change in bringing out “The Store Manual” a must for every store.You can order this manual for € 35,00 (excl. Postage and Package)
Jos de Vries The Retail Company BV
3605 MA Maarssen
P.O. Box 1194
NL-3600 BD Maarssen
Tel. : +31(0)346 - 563764
Fax : +31(0)346 - 572722