Modern Magic Formula

customerserviceI recently had dinner with a small group of leading figures in the UK retail industry.  The broad topic of discussion was the current state of play with particular reference to shoppers changing habits and the rise of mobile and internet shopping.

The findings will form part of a larger report later in the year, so I won’t steal Kantar’s thunder.  However we did keep coming back to the same point.  Whatever the channel, the only real point of difference any retailer has is the way their people interact with customers.  There is nothing that any of us offer that someone else does not, or could not offer.  And they may well be able to do it cheaper, faster, better etc.

I have had the pleasure of working with Martin Butler in the past.  He puts it far more elegantly than I can and in much more detail – for more on this check out his books here.  Martin argues that ‘People don’t buy what you sell‘ and as a consequence retail is ‘The art of being chosen‘.  For all of our focus on new technologies and channels retail still is about being chosen and for me that increasingly comes down to customer service.

So called ‘showrooming’ (where a shopper visits a store to try a product with the full intention to buy online) is often seen as a threat by many retailers.  I have certainly been into stores to look at an item ‘in the flesh’ then walked out and bought it online using my phone before I hit the street.  And yet it is a great opportunity, here they are presented with a potential customer who is ready and willing to buy.  Great customer service can easily trump price and I have definitely been into a store to try with no intention of buying there and found myself handing over my plastic having felt I had just made a new connection.

Arguably any retailer who sees showrooming as a threat and not an opportunity has big issues.  These may not be easy to fix but I’d argue that they are simple to understand.  It is ultimately all about the people, all about their training, all about their leadership and all about their freedom to act.

This all seems very obvious.  Yet retail is typically very controlled and hierarchical, it’s more about monitoring and checking.  Staff clock in and out, there are strict rules to prevent theft and fraud and processes to ensure everyone keeps working.  In this environment there is little room for trust, procedures and policies rather than common sense cover all aspects of the job.

This frequently translates into a disengaged ‘jobsworth’ attitude.  Staff will not be willing to move away from the laid down policy regardless of the circumstances for fear of their job.  I heard a story of a staff member who left to train as a nurse.  On his last day after his shift a few drinks were had and somehow his shoes ended up in a canal – I think we have all been there.  No worries, he went back to his store that was just closing up to buy a pair of cheap sneakers to walk home in.  As the tills were closed he was refused to be served, he offered to leave the cash.  But no, there was no policy to cover this.  It might get the sales assistant in trouble.  So he walked home barefoot.  I forgot to mention – it was snowing.  Does anyone think this was in any way right?

The solution isn’t easy but it is simple.

Trust.

Trust that you have hired the right people (if you haven’t whose fault is that?), trust that they all want to do a good job (I know no one who sets out to do a bad job), trust that they want to learn and grow (we all do if we allow ourselves to admit it).  Build an atmosphere of trust and trust staff to not only do things right but to do the right things. Human beings not human doings.

The rest follows.

You will feel very exposed and yes sometimes your trust will prove to be misplaced. And weighed against the freedom and benefits of not having to act like a secret policeman, the improvements in customer service with the consequent improvements in results it is a risk that might be worth taking.

Of course this does not just apply to retailers, or even to organisations.  As individuals we are all looking to be chosen and trusting in ourselves is a good step on the route to being chosen. After all if you don’t trust yourself why should others trust you?

All we need is a magic formula
A whole new backbone
Is what we’re looking for
So you wanted to change the world
But I didn’t believe you
That’s why we’ll say goodbye to the good old days son
I’m trying the best I can
But there’s a white flag burning in the middle of my hand
I’m tired of being exposed
And I don’t know how much more of this I can stand

Modern Magic Formula – Biffy Clyro

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Lost in the Supermarket

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Today Tesco posted a 6% fall in profits, with like for like sales down 1.4%.  This is the second year running that they have declined.  They are not the only major UK supermarket to be struggling. According to the BBC “Recent industry figures showed the UK’s “big four” supermarkets – Tesco, Morrisons, Asda and Sainsbury’s – all lost market share in the first 11 weeks of this year to rival discount stores, as well as upmarket rivals Waitrose and Marks & Spencer.”

Ever keen to look for an external cause the finger has been pointed at the continental upstarts that have dared to open in the UK  in recent years.  Disparagingly referred to as “discounter’s”, these retailers, most notably Aldi, Lidl and Netto offer a no frills experience that undercuts our established incumbents.

In an edition of Question Time (the BBC’s political panel show) this subject came up and the left wing representative used the opportunity to make the point that the current economic problems had created an underclass so deprived that they have no choice but to turn to these discounters.

I don’t doubt that many people have found money a little tight and this may have tempted them to try the discounters but the success of these challengers is not entirely due to poverty.

When on holiday in Europe we often take a villa and do some self catering.  If we find an Aldi we consider ourselves lucky.  The range is good, prices keen and quality excellent.  Yet I hadn’t tried an Aldi in the UK.  I related shopping at Aldi here with ‘being poor’ and no one wants to be poor, or seen to be poor.  Indeed the view that  you have to be part of a deprived underclass to shop at the discounters was prevalent.  However my daughter’s dance lessons cause us to drive past an Aldi almost every day.  And I don’t mind admitting that saving a few pounds is also important.  Hesitantly at first, apologetically even, my wife went in and bought a few things.  No one in the family complained, there were even compliments about some of the produce.  She returned and tried more.  Now I often shop there, in fact I popped in last night.

Increasingly I find that once I admit to shopping at Aldi others ‘fess up too.  We cheerfully compare prices and smugly feel better about ourselves.  The economy may have helped but there seems to be a growing number of people who can feel comfortable without the security of the ‘big 4’ supermarkets and the brands they sell. Admittedly Aldi is a brand itself, appealing to value conscious consumers who don’t care about or can’t afford to care about labels.  Mine isn’t the only Mercedes in the car park either.

The problem facing the ‘Big 4’ is not just that discounters are cheaper than them, there is no longer any stigma attached to using them.   Furthermore the ‘Big 4’ got big by appealing to a broad range of shoppers.  In the internet world of endless choice that translates as blandness.  If you want a bargain go to a discounter and if you want the best go to Waitrose.  Tesco and others sit uncomfortably in the middle with no real identity.  The CEO of Tesco, Philip Clarke,  stumbled over this point when challenged by John Humphrey’s on this morning’s Today show:

‘Fill in this blank,’ said Humphrys. ‘I go to Waitrose for quality, I go to Aldi for value. I go to Tesco for… ?’ At which point Clarke made some comment about Parma Ham.  Having said that no one could beat discounters on price he then outlined a ‘strategy’ which was to cut some prices and carry out some store makeovers.

We’ve read a lot about the way the big Supermarkets use their purchasing power to beat suppliers into offering unsustainable prices and pay low wages on zero hours contracts.  Surely this means that no one could beat their prices?  Well it isn’t hard to understand.  The discounters are all about value, amongst other things they don’t take credit cards (which charge a commission), the tills are designed to be very fast (to reduce the number of staff) and the displays are simply adequate as is the service.  But the real difference is that in Europe work on a much smaller margin than is normal in the UK.  That’s right, they make less profit.  In % terms less than half than that of the UK based behemoths.  In the UK they can make more profit and still undercut the competition.

Ever wondered why so many European utility companies rushed to buy up our national assets in the form of energy and water companies?  Again they are used to making much smaller margins on the continent than is normal here.  They didn’t have to cut prices as no one rocked the boat and led on price.  A nice cosy, profitable few years followed.  Hopefully we’ll start to see a real challenger brand in this space too.

The big question is what happens when the economy improves?  Will we all revert back to our comfortable known supermarkets and brands?   I think that as a family we’ll continue shopping in Aldi and so will many others because the produce is good.  Not for everything, but for a lot.  The reality is that once you break free of the tyranny of big supermarkets you won’t want to go back, you can even start to look at other labels you can drop once you become comfortable with your own unbranded identity.

I’m all lost in the supermarket
I can no longer shop happily
I came in here for that special offer
A guaranteed personality

Lost in the Supermarket – The Clash