INDEPENDENTS REPORT: Making the difference
Black Monk Consulting. Perhaps the name of this company says it all: If you want to be successful in business today, you've got to be different. That's exactly what Black Monk's founder and president, Ryan Mathews, believes and what he reinforces in the mindsets of numerous food industry clients.
Three years ago Mathews, a futurist and author, teamed with Fred Crawford, a strategist who has worked with such global companies as FedEx, Nike, Kroger, Ahold, Disney, Coca-Cola, and Procter & Gamble, to launch a research project to try to confirm what they thought to be true about retail. The result was an analysis of retailing around the world, encapsulated in their book "The Myth of Excellence," which can help independent grocers differentiate, compete, and win.
"Fred and I began our research by surveying 5,000 consumers worldwide," explains Mathews, "and ironically, we found the results of the survey to be counterintuitive to what we believed. We then surveyed another 5,000 people and achieved the same surprising results. That led us to take a closer look at current consumer behavior and what's actually driving the components of retail."
'Fair and honest prices'
Ultimately capturing 100,000 pieces of research data from 14 countries, Mathews and Crawford identified a theory they call the Myth of Excellence, which is based on the interaction of five elements present in all retail transactions: access, experience, price, product, and service.
"We began to clearly understand that what consumers were saying was important in the shopping experience was much different from what retailers were saying was important," says Mathews. "In the past the food industry has always assumed that people want only the best-quality products at the lowest possible prices, but that's no longer the case. Consumers no longer expect the best of everything in a store. As far as being able to get the highest possible quality at the lowest price -- they don't buy it. They don't believe it's possible."
Continues Mathews: "Interestingly, we found through our research that low price is today always trumped by fair and honest prices. And in regards to quality, what consumers prefer is a range of good products. Why? The customer often expects their store to be out of stock on their No. 1 pick, so they expect their second choice to be a good one."
Contrary to real estate and store development experts, Mathews says, "Forget 'location, location, location' and all those right-hand turns into the parking lot. Consumers told us that their troubles lie not in finding a supermarket, but in dealing with the logical navigation of the store once they enter the facility. We refer to this as 'access.' Consumers will locate your store, but how well do they locate the products they wish to buy within the store?"
Overall, the Myth of Excellence indicates that the retailers most liked and supported by consumers were those that were dominant in one of the five elements, differentiated in another, and achieved parity in the three other areas. Notes Mathews: "Consumers desperately want a point of differentiation, whether it's quality, unique signature items, customer service, or simply how they feel about themselves as a result of the shopping experience. They want to know whom they're doing business with and what they stand for."
Learn to listen
Is any one of the five attributes more important than another in the consumer's decision-making process? Not according to Mathews, who cites numerous operators such as Ukrop's; Wegmans; H-E-B; Trader Joe's; Whole Foods; the Detroit area's Holiday Market and Papa Joe's; McGonigle's Market in Kansas City, Mo.; Pro & Sons; and certain IGA supermarkets that have achieved remarkable success without giving the store away.
"On the flip side Wal-Mart, the world's largest retailer, which was once an independent, dominates solely on price and differentiates in variety. Think back to the beginning -- there were no aspirational products in Wal-Mart's inventory mix. Clearly, they built their business on selling cheap Tide and Crest. But, by and large, today's Wal-Mart offers a wide range of good products."
Additionally, Mathews attributes much of Wal-Mart's growth to the company's ability to listen to the consumer. "The company understood early on what value meant to a person with little or no money," he says. "Sam Walton listened to his customers and institutionalized their voices. In my opinion, a large amount of retail failure today is because retailers are not listening to the consumer."
Building trust
What are customers saying? "You can't afford to be a 'so what' supermarket with Kraft Macaroni & Cheese on sale this week," notes Mathews. "The 'oh' factor is important to us. 'Yes, entertain me, and with your fair and honest prices, allow me to trust you. Through your service, show me that you're sincere.'"
While Mathews believes that the key to differentiation is to dominate in one area, he submits that independents that pay closer attention to the so-called "soft attributes" will ultimately survive and thrive.
"Great retailers differentiate by offering unique items, expert care, excellent merchandising, and aligning their companies with great suppliers. However, while they realize that transactional knowledge is important, they also arm themselves with human knowledge. Consider, for example, Ireland's Superquinn. In my view, they're one of the best at incorporating high tech to achieve 'high touch.' The company's retail systems, especially on the front end, are remarkable, but all are designed to deliver what appears to be highly personalized service."
Concludes Mathews: "In the long run, Wal-Mart may be less of a threat to the great independent operator than a chain. Many of today's chain retailers think they're differentiating and providing value, but they're still trying to be everything to everybody. Inventory assortments are out of control -- and the high/low pricing game in which many are participating simply violates one of the principles customers want most: trust."
Mathews' verdict? "Consumers are crying out for values today -- not just value."
Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].
Three years ago Mathews, a futurist and author, teamed with Fred Crawford, a strategist who has worked with such global companies as FedEx, Nike, Kroger, Ahold, Disney, Coca-Cola, and Procter & Gamble, to launch a research project to try to confirm what they thought to be true about retail. The result was an analysis of retailing around the world, encapsulated in their book "The Myth of Excellence," which can help independent grocers differentiate, compete, and win.
"Fred and I began our research by surveying 5,000 consumers worldwide," explains Mathews, "and ironically, we found the results of the survey to be counterintuitive to what we believed. We then surveyed another 5,000 people and achieved the same surprising results. That led us to take a closer look at current consumer behavior and what's actually driving the components of retail."
'Fair and honest prices'
Ultimately capturing 100,000 pieces of research data from 14 countries, Mathews and Crawford identified a theory they call the Myth of Excellence, which is based on the interaction of five elements present in all retail transactions: access, experience, price, product, and service.
"We began to clearly understand that what consumers were saying was important in the shopping experience was much different from what retailers were saying was important," says Mathews. "In the past the food industry has always assumed that people want only the best-quality products at the lowest possible prices, but that's no longer the case. Consumers no longer expect the best of everything in a store. As far as being able to get the highest possible quality at the lowest price -- they don't buy it. They don't believe it's possible."
Continues Mathews: "Interestingly, we found through our research that low price is today always trumped by fair and honest prices. And in regards to quality, what consumers prefer is a range of good products. Why? The customer often expects their store to be out of stock on their No. 1 pick, so they expect their second choice to be a good one."
Contrary to real estate and store development experts, Mathews says, "Forget 'location, location, location' and all those right-hand turns into the parking lot. Consumers told us that their troubles lie not in finding a supermarket, but in dealing with the logical navigation of the store once they enter the facility. We refer to this as 'access.' Consumers will locate your store, but how well do they locate the products they wish to buy within the store?"
Overall, the Myth of Excellence indicates that the retailers most liked and supported by consumers were those that were dominant in one of the five elements, differentiated in another, and achieved parity in the three other areas. Notes Mathews: "Consumers desperately want a point of differentiation, whether it's quality, unique signature items, customer service, or simply how they feel about themselves as a result of the shopping experience. They want to know whom they're doing business with and what they stand for."
Learn to listen
Is any one of the five attributes more important than another in the consumer's decision-making process? Not according to Mathews, who cites numerous operators such as Ukrop's; Wegmans; H-E-B; Trader Joe's; Whole Foods; the Detroit area's Holiday Market and Papa Joe's; McGonigle's Market in Kansas City, Mo.; Pro & Sons; and certain IGA supermarkets that have achieved remarkable success without giving the store away.
"On the flip side Wal-Mart, the world's largest retailer, which was once an independent, dominates solely on price and differentiates in variety. Think back to the beginning -- there were no aspirational products in Wal-Mart's inventory mix. Clearly, they built their business on selling cheap Tide and Crest. But, by and large, today's Wal-Mart offers a wide range of good products."
Additionally, Mathews attributes much of Wal-Mart's growth to the company's ability to listen to the consumer. "The company understood early on what value meant to a person with little or no money," he says. "Sam Walton listened to his customers and institutionalized their voices. In my opinion, a large amount of retail failure today is because retailers are not listening to the consumer."
Building trust
What are customers saying? "You can't afford to be a 'so what' supermarket with Kraft Macaroni & Cheese on sale this week," notes Mathews. "The 'oh' factor is important to us. 'Yes, entertain me, and with your fair and honest prices, allow me to trust you. Through your service, show me that you're sincere.'"
While Mathews believes that the key to differentiation is to dominate in one area, he submits that independents that pay closer attention to the so-called "soft attributes" will ultimately survive and thrive.
"Great retailers differentiate by offering unique items, expert care, excellent merchandising, and aligning their companies with great suppliers. However, while they realize that transactional knowledge is important, they also arm themselves with human knowledge. Consider, for example, Ireland's Superquinn. In my view, they're one of the best at incorporating high tech to achieve 'high touch.' The company's retail systems, especially on the front end, are remarkable, but all are designed to deliver what appears to be highly personalized service."
Concludes Mathews: "In the long run, Wal-Mart may be less of a threat to the great independent operator than a chain. Many of today's chain retailers think they're differentiating and providing value, but they're still trying to be everything to everybody. Inventory assortments are out of control -- and the high/low pricing game in which many are participating simply violates one of the principles customers want most: trust."
Mathews' verdict? "Consumers are crying out for values today -- not just value."
Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].