As we’ve seen in many posts in our blog, retail is an essential component of your fashion experience. Both haute couture brands and mass-market distributors realise that the retail component is an essential dimension of the customer journey.
From the perspective of the brand, retail is often described as the last mile, before you can reach your customer, but in reality, retail is the first touchpoint with your audience. For as much as we tend to value the process of value creation that takes place during the designing of the collection, the choice of manufacturing, the marketing campaigns, the retail moment is when we get to really test our intuition and vision against the needs and expectations of customers. It’s only at the retail stage that we get to experience the moment of truth.
The relevance of retail can be explained by thinking about how the store is where all brand dimensions coexist and convert into a sale. If we are to give more importance to retail and distribution in the management of our brand we should ask ourselves how can we maximise the value of our customers’ shopping experience? How can we apply a marketing strategy to increase the chances of converting customer?
Before we start addressing this interesting, but complex topic, it may be useful to start with clarifying the topic by asking ourselves very simple questions:
- Is retail more a product, or is it more of a service? Well, retail certainly sells products, but it is in itself a service.
- What is it that retail actually sells? Does it sell a product, a service, or an experience?
- How does marketing apply to retail? Do we market the actual product being sold in the store, the store itself, as a location to conduct the transaction or the brand that owns the store?
Regarding this last example, let’s think of fast fashion retailers: are they more distributors or producers? Retailers or manufacturers? It could be hard to say, but at the same time, this “area of grey” really shows us how retailing has become an area where fashion brands from all tiers of the fashion pyramid have been trying to build their own competitive advantage. Fast-fashion retailers should be considered a very useful benchmark to understand how the retail outlet could provide to a brand a much stronger point of differentiation, even when the collections in themselves have very little fashion content. There are many brands who have become shopper’s favourites for the simple reason that they are able to provide very exciting shopping experiences.
Despite these new trends, how does retail marketing fit into traditional marketing? We could go as far as to say that retail marketing is a little disregarded by traditional marketing theories. In the 4 Ps of Marketing (Product, Price, Promotion and Place), retail would fall into the last one: distribution. This may because of the fact that in many cases distribution is the last thing we think about, we focus on the product first, we then manage price, invest in advertising, and eventually design a distribution strategy. Current trends, however, show us otherwise.
In this post, we’re going to look into how retailers should think about marketing, or the process of attracting, converting and retaining customers. We’re going to look into more detail on this topic and to help you navigate the content we’ve actually broken it up in the following sections:
- Understanding How Retailing Works
- How Marketing Applies to Retail.
- Delivering a Retail Experience.
Alright, now with no further ado, let’s get down to it.
1. Understanding How Retailing Works
Starting out, it can be helpful to see retailing as part of a value chain (if this term is not clear in this article we explain in full detail what it means). A value chain is a model that allows us to understand the value creation of the company by splitting its processes into 4 essential stages: research and development, production, marketing and eventually distribution and sales. When discussing the role of the retailer as a player within this framework, it may be useful to clarify that in reality, retailers work in two distinct dimension, a vertical and horizontal dimension.
- Vertical retailing. They undertake different activities designed to bring to the end customer products and services.
- Horizontal retailing. They compete with other retailers to serve end-customers at the end of the channel.
These two dimensions of retailing may seem to describe retailers as passive components of the industry as if the manufacturer makes and the retailer sells. Current retailing is far from passive, retailers are very much active in their effort to add value to the value chain (advising, providing assistance etc.) Moreover, there is not anymore a clear cut definition of the specific elements that are part of the retailer’s job, on the contrary, there is a blurring of functions in terms of what retailers actually do, with a clear overlap with the functions performed by other players in the value chain.
An example of this new role of retailers is Zara, which is a brand showing that despite falling into the category of fast-fashion retailers, it is a brand that in fact performs all of the functions of fashion company: designing the collection, producing it, and distributing it.
If you’d like to learn more about the business models of fashion companies, and how they operate in the market, we address this topic in full detail in this article.
Another misconception connected to the role of retailers is the idea that distribution channels are based on transactions which involve only two players at once: manufacturers and wholesalers, wholesalers and retailers and retailers and customers. This is clearly not the case anymore as within the distribution channel there are going to be much more integrated relationships which create connections between players regardless of their level in the distribution chain. This concept of skipping and jumping connections to the market is part of the process of disintermediation which has been further accelerated by the digital transformation of business. In this sense, we’ve seen how in many cases retail outlets can go above and beyond in building relationships with customers through educationalinformativeaesthetic experiences. This is something that often happens in the context of flagship stores, which are spearheading the way towards the future of retail. The need to develop these types of stores is aligned with the growing complexity of customers’ taste and expectations towards their shopping experiences.
This evolution of customer shopping behaviour has disrupted the purchase-decision process of consumers, to the point that if before, the price was the biggest level of competition, now a much wider set of consumer needs, desires and priorities that have to be taken into account.
This is why, by all means, retailers have become brands by their own right. Retailers are the first point of contact between a brand and the customer, with all the benefits and responsibilities that being on the front line involves in terms of benefitting from loyalty or dealing with a complaint.
In this sense, retailers need to understand customers in order to service them and satisfy their needs.
2. How Marketing Applies to Retail
Marketing can be simply seen as an exchange of values, the customer buys values and exchanges money in return. If the customer is happy about the purchase, then the seller is also happy, as he will get the money in return for his goods and services and will get a chance of serving the customer again.
In the context of the Jobs to Be Done framework, customers exchange money in with products that allow them to get “jobs done for them”, There may be different types of jobs which will be satisfied by a purchase.
- Functional jobs. Sometimes we purchase clothing for the simple reason that clothing shelters us from the cold.
- Symbolic jobs. In many cases, fashion is also bought for the association that customers get by using certain brands and wearing certain products.
However, in between these two values, which I get as an output of the shopping decision, there are some values which are defined transactional.
- Transactional jobs. These values are associated with the process of shopping and are connected with the experience I get in the store, because of the interaction with the shop assistants or brand ambassadors.
It is in this last account, that the choice of a customer to purchase from is highly influenced by retail marketing, or as we’ve presented it the management of the process of exchanging values. If you’d like to read more about Jobs to Be Done, here’s an article that addresses this theory in more depth.
In order to manage this process there are a series of elements to take into account:
- Understanding what customers want.
- Create customer values that satisfy these needs.
- Communicate these values to customers.
- Deliver the customer values, and re-start the cycle.
Starting from the first challenge (understanding what customers want), there are a series of further questions we’re going to have to ask ourselves, such as: Who are our customers? What do customers purchase? How are they making store choice decisions? How do customers shop? How valuable are our customers? These are essential questions that make us realise the relevance of customer-centricity as a key element of contemporary business. Profiling our customers can help us better segment our market and communicate more effectively with the people who we want to involve in our business. In this article, we discuss different approaches to segmentation that can help us identify some of the key traits that describe our ideal customer.
Through this research, we need to understand customer values. These values are connected to customer preferences, intentions, attitudes that are part of the customer purchase decision process. In order to collect this information we can use different types of research methodologies such as interviews, surveys and questionnaires, but for as much as we’d like to believe that these studies are actually truthful, they are always based upon hypotheticals.
On the contrary, retailers can really understand customer behaviour because they can see real behaviour in action. An example of these metrics are footfall counts, which tells us how many people are coming in at a particular time of day, this could be very helpful to manage day-by-day operations. Another set of data that retailers may have access to is point-of-sale data which can very effective at measuring the store’s performance. We can also go step further in profiling our best customers through the use of loyalty cards.
Moving along with technological advancements we can also use monitors and cameras to observe real-time behaviour and understand things like the way they move through the store so that we can make sure the customers walk as much as possible, as, with more walking, there are higher chances of conversion. An additional strategy is connected to recording complaints, to make sure we’re actually monitoring the degree of satisfaction that our customers get after the purchase.
All of this connects with the idea of collecting “intelligence” which allows us to understand how to communicate our products so that they may resonate with our audience, and make us look perfectly attuned to their needs.
Once we have understood customer values we can move on and design a retail experience that is based on these values. This is what we’re going to address in the next section of our article.
3. Delivering a Retail Experience
Of course, we’re not actually talking about a specific experience as much as of a series of decisions that need to be made in order to take full advantage of information that we’ve gathered. In this sense the decisions we need to make are connected to:
- Identifying the right merchandise mix. This relates to the width and depth of our collections, the assortment of the products and the brands we are going to sell, as well as the pricing policy for the items we’re selling. Of course, we’re not going to sell everything in all the colour and sizes, but more importantly, are we going to sell our own brand, someone else’s products, or both?
- Identifying the store environment. These decisions relate to the design of the store, and its layout. We need to plan the store floor layout, with the movement of our customers in mind so that we can better position merchandising and allot room for item display. We’re also going to work on the mood of the store and on its atmosphere which gets people to touch and feel and try out clothing. We delve in more detail on how to manage your store environment in a post on store layouts and in one on the actual store atmosphere to help you on this fascinating topic. We talk a lot about impulsive behaviour and emotion-driven purchase, but impulses and strong emotions last very little time, an atmosphere or a well-designed mood can be a very effective way to lead customers into purchases.
- The human touch. These elements are connected to the attitude of the staff. The human touch is connected to how approachable and helpful shop assistants are and how knowledgeable they are of the products they are selling. The human component can only be delivered in-store and these are the elements really make up the transactional value of the shopping experience.
At this point, our next challenge is communicating customer values. In this context, retailers need to connect with their potential customers and deliver the intangible and tangible elements that define a shopping experience. In order to address this challenge, retailers can have three sets of communication strategies:
- Advertising. In this case, retailers use paid media to advertise their store experience using TV, radio, print media and PR. Actually, PR can be considered a means of communication in their own right, as a fashion brand has very little control over it. We discuss this communication strategy in more detail in this post.
- Stores. Stores themselves, through shop windows, ambience and internal signage and cues can communicate the value proposition to customers giving them a feel for the store. This is why in the retail game, just like in real estate, the mantra is location, location, location.
- Print Media. These approaches connect to the paper material that allows for communications between the store and its customers. Because of environmental concerns, this approach is becoming less frequent but other types of print communication such as branded bags would fit into this category as well.
The last stage of our journey is understanding how to deliver customer values. Retailers need to keep their promises and ensure the delivery of value to the customer. This happens in two dimensions:
- Customer Service. This is key, in making the transaction happen. Customer service is about delivering many of the intangibles which can be connected to the purchase of the physical product.
- Making the transaction possible. This relates to simply being able to make the transaction happen. It might seem simple enough, but a lot has to be right in order for the transaction to take place. The product needs to be available, the customer needs to be happy with the return policy in case there is a problem with the product itself.
So we’ve seen how much we need to process to build a marketing viewpoint into the management of our store. Now that we’ve covered all of these areas, we’ll move on to conclusive remarks.
In our article, we have broken down retail marketing in many smaller topics, but of course, we need to be able to approach this subject in a much more comprehensive way. As these ideas are interconnected and not at all to be managed separately, we need to build a clear vision for our store that allows designing a marketing strategy capable of attracting, converting and retaining our customers.
In this sense, the point of this article is to show how a marketing mindset applies to retail management and how a store manager can focus on those key elements that at the centre your customer’s retail experience.
Running a successful store requires a lot of effort, and on our blog, you’ll be able to find a lot of useful information on how to approach the many challenges that retail provides. Take a look!