Stores_final_lowres.pdf

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Up close and personalHow stores can drive profitablegrowth by optimizing the customer'sin-store experience


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Up close and personal | 2

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Stores remain the hub of the retailindustry's value propositionthe places

where customers can actually see, touch

and feel what's for sale.

Leading retailers ensure that theirstores deliver on their customerpromise. They have an exceptionallyclear understanding of the needs and

expectations of their customersespecially the most profitable ones.And they use that knowledge tocreate a totally customer-centricstore environment. Winning retailersprocure and create products at theright price, bringing them to marketalmost before customers realize theywant them.

By combining relevant technologieswith an appropriately skilled andmotivated sales and support team,these leaders provide both the ease ofaccess and the informed, in-storeassistance that customers demand. Interms of space, layout and design topstores are both functional and providean engaging experience.

Stores today are grappling with amultitude of challenges. Operationalcosts continue to climb and mostretailers are scarcely managing to

contain, let alone reduce them.Store over-supply and price deflationare slowing growth, just as customerexpectations, fuelled by theproliferation of new sales channels,are soaring. Staff turnover is high.And in-store management struggles toequip their workforces with theresources to understand and servecustomers whose demands can changefrom one day to the next.


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3%

6%

21%

61%

8%

0 Times

1 Time

2 Times

3 Times

4 Times

Figure 1. Retailers continue to annoy their consumers with under-whelmingshopping experiences.

Number of times, out of four shopping visits, that consumers become annoyed byretailers service actions

2%

36%

30%

4%

27%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Very unlikely

Unlikely

Neither likely nor unlikely

Likely

Very likely

Percentage of respondents

Figure 2. Most consumers are willing to defect from the retailer to whichtheyre most loyal to a comparable retailer that already has eliminated theconsumers most vexing shopping annoyance.

Consumers willingness to defect from a retailer to which theyre loyal to acompetitor if the competitor eliminated the consumers most vexing retailannoyance but the loyal retailer did not

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Source: Accenture Retail Consumer Service Experience

Survey: US Results April 2007


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Accenture research reveals thatcustomers choose stores on the basisof price, product selection andproximityin that order.1 Interestingly,most consider the Internet anextension of the shopping experience

rather than a substitute for it. This isnot so true for consumer electronics(or for male shoppers); but Dell'srecent decision to start selling more ofits computers through Wal-Mart andother stores is a sign of the times.Consumers still seem to prefer the"real" shopping experience to thevirtual.

Yet the right in-store experience canbe hard to find. Different motives

prompt different shopping missionsvery often to the same store. Oncein-store, however, a majority of

customers profess disappointment (seefigure 1). They say there are usually toofew of the products that they came for,and too many that they don't actuallywant. They complain as well about poorin-store service. Most will readily go

elsewhere if another store offers betterproduct choices or lower prices (seefigure 2).

Profitable growth depends, of course, onloyal customers. But few stores aremanaging to capture the loyalty oftoday's fickle and discerning shoppers.Food retailers in the US and UK lose upto 40 percent of new customers withinthree months; and on average, UScompanies lose up to half of their

customers every five years.

2

What'smore, Accenture research reveals thatthe loyalty gap is widest among thewealthiest customers3 (see figure 3).

Winning stores know that today'scustomers seek either convenience oran engaging experience when theyshopvery often bothand theyactively invest to satisfy both demandsTop stores provide the right offer, in

the right environment with the rightservice model. By meeting or exceedingthe customer's in-store expectations,these stores are keeping theircustomers, attracting new onesandenjoying superior margin and revenuegrowth as a result.

The pay-off, in fact, can be substantial.Our research suggests that serviceenhancement initiatives will reduceconsumer erosion and likely grow

same-store sales. Indeed, by closing theloyalty gap and boosting customerretention rates by just five percent,companies can boost profits by asmuch as 95 percent.

Footnote 1: Accenture Consumer Survey, April 2007

Footnote 2: Accenture Loyalty StudyFootnote 3: Act Now! Customers are limited, May 2007


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0%

10%

20%

30%

40%

50%

60%

70%


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Accenture has worked with a widevariety of retailers in many differentcountries to create compelling in-store experiences. There is no singleapproach to securing customer loyalty.In every case, however, a successful

outcome has hinged on mastery ofthree powerful and inter-relatedcapabilities.

An exceptionally clear understandingof the specific needs and shoppingmissions of the most profitabletarget customers

A commitment to translating thisinsight into tailored productofferings and a highly effective in-store experience

An operating environment thatharnesses both technology andhuman capital to maximizeprofitability

Top stores exhibit all threecapabilitiesbut especially the lastone. Without the right operatingenvironment, customer insight and anoptimal in-store experience simplycan't deliver the benefits that drivesuccess.

Gaining a clear picture of thespecific needs and shoppingmissions of target customersThe days when the goal of retailingwas simply to sell more to morepeople are long gone. Relentlessexpansion has given way to investorpressure to wring greater returns outof existing operations. The name ofthe winning game is differentiationthat is meaningful and relevant to themost profitable customers.

Accurately identifying, targeting andtracking the fast-changing preferencesof these customers are fundamentalfirst stepsand they can be tricky.Retailers need to be able to recognize"loyal" consumers when they enter a

store, and train sales forces to providethe preferential treatment that theseconsumers say they want.

The most successful retailers take ahighly systematic approach. The USoffice supplies company, Staples,carefully analyzes its customers'purchases, conducts continuoussurveys to monitor trends and thenuses this data to develop distinctivestrategies that target big, frequentshoppers in its stores. Similarly, eachstore manager at Zara, the Spanishapparel manufacturer and retailer,keeps a close watch on consumerbehavior and trends and swiftly relaysthe information, through the relevant

regional manager, to the productdevelopment team. The system helpsZara bring the most sought after newfashions to market in a fraction of thetime it takes competitors.

The UK-based retail grocer, Tesco,meanwhile, uses the data generatedby its loyalty "Clubcard" to identifyand keep track of the personalpreferences of 13 million individualshoppers. In quarterly mailings tothese individuals, Tesco includes

personalized vouchers that "buy"products at no additional cost to theshopper, but which benefit Tesco byboosting sales volumes and gettingcustomers to try new products in newdepartments where they may continueto shop in the future.

For other types of successful retailers,just keeping their eyes open has beenkey. Starbucks, for instance, owesmuch of its spectacular growth to the

observation that people want to buy acup of coffee on the spur of themomentan insight that inspired thecompany to open stores in surprisinglyclose proximity to each other,sometimes on opposite sides of thesame street, just to capture the

customers on the other side. The newstore might take some sales awayfrom the original, but it could alsolead to more sales overall.

Translating this insight intotailored product offerings and aneffective in-store experienceToday's shoppers are, of course, ahighly differentiated demographic.Working women, Baby Boomers,singles, teenagers and even childrenwant products, services and shoppingexperiences that are as distinctive asthey are. Leading retailers aim tosatisfy these diverse requirements bytailoring their store offerings andformats.

Hence the trend to "niche" stores, likethose for "Tweens" (9-12 year olds); orFootlocker's partnership with Nike, itsbiggest supplier, to launch a networkof specialty, "House of Hoops"basketball stores across the US. Assome electronics devices get smallerand shoppers buy more music andmovies online, consumer-electronicsretailers like Best Buy have actuallybegun to shrink the size of newstoresespecially as they seek to

penetrate previously overlooked butfast-growing locations like suburbs,where space for big stores is tight.

Small-size Tesco Express stores, oftenlocated adjacent to gas stations or busstops, have catered very successfullyto the growing clamor forconvenience, largely ready-mealgrocery shopping in the UK. Thesestores are often equipped with self-serve, "grab-and-go" checkoutsthe

sort of swift and painless exit,facilitated by state-of-the-arttechnology, which increasinglycharacterizes an optimal in-storeexperience.


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2.3%

3.4%

3.4%

4.4%

7.1%

7.5%

7.5%

8.3%

10.7%

17.3%

0% 5% 10% 15% 20% 25% 30%

Rudely treated

Difficulty with returns

Cross-sell pressure

Too much attention

Too little attention

Percent of consumers

Quite Frequently Frequently

Figure 4. One quarter of consumers identified receiving too little attention from a salesassociate as their most often encountered retail annoyance.

Percent of consumers who encountered specific retail service annoyances in the past 12 months

29%

19%

19%

16%

8%

0% 5% 10% 15% 20% 25% 30% 35%

Rudely treated

Difficulty with returns

Cross-sell pressure

Too little attention

Too much attention

Figure 5. Rude treatment by sales associates represents consumers most desired serviceannoyance to be eliminated by retailers.

Consumers most desired service annoyance for retailers to eliminate

Source: Accenture Retail Consumer Service Experience

Survey: US Results April 2007


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Enhancing the customer's in-storeexperience can include the provisionof inter-active kiosks where customersaccess product informationpersonalized information whenactivated with a loyalty card, as at

Boots, the UK drugstore. Many,moreover, now seek to emulateWaitrose, the grocery division of theUK's John Lewis stores, which hasbegun to offer merchandise on anoccasion and time-of-day basisdifferent products for breakfast,lunch and dinner timesin some ofits stores.

Top stores, indeed, manage to combineconvenience with some form of an

engaging shopping experience. Apple'sedgily designed computer stores, forexample, are famously enjoyableplaces in which Mac enthusiasts canbrowse and play. And the open-frontstore appearance tends to draw thesimply curious in as well. Once inside,customers can check personal emails,seek advice from the store's "expert"desk and participate in trainingsessions that help them get the mostout of their Mac.

Customer service as good as this onlyhappens when fully informedemployees are empowered to dealwith customers in a positive mannertalking to them, showing them respectand treating them, in effect, likeguests (see figure 4). John Lewis topsthe UK polls in this regard. While inthe US, the top-performing organicgrocer, Whole Foods Market, whichrecruits employees passionate aboutfood and who can give customers,direct, detailed and personal attention,is widely regarded as a paradigm ofservice excellence.

Creating an operatingenvironment that maximizesprofitabilityAccenture research confirms thecritical importance of customer serviceto an optimal in-store experience. It

also reveals how difficult thisseemingly simple concept is to getright.4 Many retailers claim to greetevery customer, but most don't deliveron that promisea significant failingsince serviced customers convertmuch more frequently than un-serviced customers (see figure 5).Serviced customers, indeed, have ahigher average order size and spendmore money. They also spendadditional time in the store, givingsales staff the opportunity to boostthe breadth of the sale.

The key to successin fact, thefoundation stone of all customerserviceis the right operatingenvironment. Top stores aretransforming their point of sale andcustomer service systems into multi-purpose, point-of-service networksthat reduce total cost of ownership byintegrating with workforce manage-ment and other in-store technologies

like hand-held terminals and kiosks.BP, for example, is transforming andrationalizing the retail outlets in itsworldwide network of 25,000 gasstations to a single IT platform. By re-configuring both front and back-officeoperations, retailers can powerfullyreinforce their customer-centricityand boost profitability as a result.

Winning retailers have created aselling culture that facilitates highcustomer conversiona culturesustained not only by specific greetingand selling techniques, but also byemployee reward systems that arebased on systematic service measures.

Top stores carefully count customersin and out and compare that numberwith a count of who actually boughtsomething in the store. They do so,moreover, on a store-by-store basis sothey can tailor product offerings to

specific customers.

Best Buy, for instance, manages itsproduct assortments on a store-by-store, cluster-by-cluster basis toprovide the right inventory forcustomers specific to each store andto meet local market needs. Kroger,Ahold USA and Bashas' are amongleading food retailers that usesophisticated production planningmethodologies and predictive models

to maintain the fine balance between"in-stock" and over-production intheir fresh foods departments.

Leading retailers also are tackling theproblem of shrink and laboreffectiveness. Activity-based costingthat utilizes engineered laborstandards is one example of theanalytics that can help refine in-storeprocesses and identify upstreamconstraints on optimal in-store laborperformance. Best Buy and Gap are

implementing integrated workforcemanagement tools that link major HR-related systems including time andattendance, scheduling and HRrecords to manage payroll in aseamless environment. And the drugstore, CVS, is among several top storesthat use sophisticated shrinktransaction monitoring tools,integrated with video monitoring, tocapture theft.

Footnote 4: Accenture Conversion Study


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Next Steps

Providing the right in-storeexperience to retain the loyaltyof your most profitable

customers isn't easybut as theexperience of leading retailersshows, it can be done. Topstores know just who their bestcustomers are and they turnthis insight to action byproviding tailored productofferings in differentiatedformats within engaging storeenvironments that deliverexceptional customer service.

Above all, they recognize thecritical role of the rightoperating environment in

reinforcing customer-centricity.



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Copyright 2007 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

About AccentureAccenture is a global managementconsulting, technology services and

outsourcing company. Committed todelivering innovation, Accenture

collaborates with its clients to helpthem become high-performance

businesses and governments. Withdeep industry and business process

expertise, broad global resources and aproven track record, Accenture canmobilize the right people, skills, and

technologies to help clients improvetheir performance. With more than

158,000 people in 49 countries, thecompany generated net revenues of

US$16.65 billion for the fiscal yearended Aug. 31, 2006. Its home page iswww.accenture.com.

For more information please

contact:

North America

Janet L. Hoffman

[email protected]

Europe

Richard [email protected]

Asia-Pacific

Andrew [email protected]

Latin America

Vasco Simoes

[email protected]

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