Selling to Customers Inside the Store This Season

Time Magazine has a short, but powerful recap on how stores aim to compete during the holiday season.  It’s good to see stores fighting back.

The most potent weapon that online retailers have is price.  That strategic advantage — low-price leader — has served Amazon well.  Despite razor-thin margins, Amazon is rapidly growing and investors have rewarded that growth.  To be clear, competing on price is a terrible strategy for anyone other than the low-price leader.

And companies that have invested hundreds of thousands of dollars (or millions of dollars) into a physical location will have a very hard time becoming the low-price leader.  When I “studied” business at McKinsey, they taught that retailers cannot win on more than two of the following: price, convenience, selection, quality, service.  Winning companies deliberately chose the dimensions on which they will be “good” and the dimensions on which they will be “bad.”  Wal-Mart, for example, is not known for convenience (way out of town) or service (non-existent).

In comparison to Amazon, the companies who invest in stores — whether they are banks, health care clinics, or retailers — must aggressively play to convenience, quality, and service.  These are the elements which differentiate them and provide the customer with real value.Recently, in an effort to upgrade my wardrobe, I purchased several pairs of shoes from Zappos.  None of them fit.  Consequently, it was a huge pain to find a UPS store, pack them up, and return them.  Worse yet, I didn’t have confidence selecting them because I’m not particularly knowledgeable about men’s shoes.  At a nearby men’s shoe store, a helpful clerk found several pairs, helped me try them on, and ordered a pair that wasn’t in stock.  I was in and out fast, served well, and very happy.  For many people, Zappos offers a great value proposition.  But for many others (me!), it doesn’t.

The beauty of strategy is that companies thrive by emphasizing distinct value propositions.  Here’s to the retailers who are avoiding pure price competition and winning on the other dimensions of customer value this season!