Bad Economy Or Bad Retail?

Amazon, Kohl's and Whole Foods Market provide valuable lessons on how retailers can surmount the recent economic downturn.

The temptation is to associate the effects of our economic situation — and the subsequent lack of shoppers in stores — with the recent financial death spiral of brands and retailers. In retail, the logic has been to assume that shoppers were increasingly reluctant to beat a path to their local Circuit City, Samsonite, Crabtree & Evelyn or Walking Store (all of which have filed Chapter 11), prevented by a lack of discretionary funds.

Yet, if we compare dead or struggling retailers to those operators that are doing well — even in a downturn — all of the general blame heaped on the economy may have sidestepped a fundamental truth: in retail, as with brands, products and services, the economic situation has been the acid test and the ultimate proving ground not just for retailers that provide "value" (e.g., low prices), but also for those that are customer-centric and offer shopping experience and innovation, well beyond price.

Whole Foods Market, Amazon and Kohl's have not only succeeded despite a poor economy over the past 12 months, but in three-year consolidated analyses also tended to demonstrate strong growth and profitability, especially when compared with legacy struggling retailers within (and even outside of) their retail "peer groups."

Forging and Growing Customer Relationships

Two big reasons for this success are (1) an organizational belief in innovation coupled with (2) an orientation to customer relationships, and a willingness to listen and respond to shopper trends. At each of these retailers, there are customer relationship strategies in place that have worked synergistically with a pragmatic focus on efficiently and profitably placing products on shelves, in aisles or on the Web.

In the case of Kohl's, profitable store-based expansion and growth have been strategic, with a heightened ability to develop high-quality private label brands (notably in apparel) that resonate with shoppers. Strategic growth means that Kohl's has been selective of opportunity while also listening to customers.

At Amazon, which may have largely invented the concept of "review-centric" and "shopper-centric" Internet shopping, it's the company's innate ability not only to predict shopper behavior (e.g., "Shoppers like you have bought …"), but also capitalize on it (as with the recent purchase of Zappo's) that sets it apart from other retailers.

Whole Foods, as a broadly acknowledged master of showcasing food as an experience, has been able to adjust both to the economic situation and the frequent reference to the company by some as "Whole Paycheck. The dismissive moniker may arise from the fact that the jaw-dropping receipt presented at checkout often represents purchases for occasions shoppers don't make elsewhere: ingredients for a special dinner party, an indulgent dessert with a significant other, a lunch treat to break the midweek blahs. And while Whole Foods will never (and should never) compete with, say, Walmart and its "Everyday Low Price" mantra, by building an aura and even an experience around a "whole deal," Whole Foods is providing its shoppers license to enjoy guilt-free spending, because "value" is defined in many different ways for many different occasions.

It's not Just at the Shelf

The Hartman Group's collective research continually reinforces the notion that "retail" isn't just a space where things are sold, but also a process that can extend into numerous aspects of shoppers' lives and last for months between the time of the first interest in a product and its ultimate purchase. Examining shoppers from an anthropological viewpoint, we can develop an understanding of how lifestyle, knowledge gathering, decision processes and other parts of the shopping experience fit together. Armed with this acquired knowledge, retailers can convert that understanding into deeper, more profitable customer relationships.

Harvey Hartman is founder, chairman and CEO of The Hartman Group, a leading consumer culture consultancy powered by a primary research firm specializing in the analysis and interpretation of consumer lifestyles, and how these lifestyles affect the purchase and use of today's products and services in tomorrow's marketplace. He is the author of the book A Brand Called Hope: Reimagining Consumer Culture. Visit www.hartman-group.com for more information.