How not to fall into the "black hole"?: The Est -model of strategic development of the retail company
In developing the strategy of companies doing business in the retail industry, we use the model of 'The Est' (McMillLab | Doolittle). Model positioning 'The Est' for retailers derived from the word 'best', which suggests the need to be the best for their customers in a particular aspect of the retail business. According to this model, the retailer should strive to be the best in one of the categories for specific groups of customers, rather than trying to be the best in everything and everyone. To do this, it is often necessary to refuse service "not their" customers, sometimes the exception of goods that today allow to earn a profit, or forget about short-term profit for long-term success.
The "black hole." Retailers seeking to be the best for everyone, sooner or later fall into a "black hole" where the values of economic indicators significantly lower than the average business. In other words, "black" hole, a place where to get retailers to die as those who have forgotten their customers. The following figure shows the industry average U.S. retail market, and the respective retail companies with a consistent strategy of positioning in accordance with the classification model for 'The Est'. In this case, the profitability: the average income in the industry - 2,72%, Est retailers - more than 4% of those who are in the middle - about 1%.
CHEAP-EST: Lowest Price
(Examples of retailers Wal-Mart, Costco, Dollar General)
Position Cheap-Est is to establish and maintain the price of the goods sold is lower than the prices of all competitors. To be in this position, the retail company requires a huge effort to maintain discipline and perfection of low cost operations and business processes. Take a stand Cheap-Est is very difficult for multi-format retail companies - or are you a hard discounter or not.
BIG-EST: The dominance of a particular category
(Example: Home Depot, Barnes & Noble, Best Buy, Bed Bath & Beyond, Sportmaster, M. Video, Las knigos)
The position of the Big-Est can be defined as stores that offer a wide range in a particular category. Such stores are also called "killer" category. Retail companies, positioning itself as a Big-Est, do not necessarily have the biggest shops in area, but they always take care of the maximum selection in this category. But to ensure success in the future, these companies should, at least, to do two things, apart from offering a wide range in the dominant category:
1. Buyers should view them as companies that offer solutions to their problems, not only a large number of goods.
2. Buyers should view them as a company that saves them time, offering everything you need to solve a particular problem - so you never have to make several trips.
HOT-EST: Following fashion and trends
(Examples: Chico's, Starbucks, Target)
Stores that are successful, offering the most modern and current range, are in the position of 'Hot-Est'. Speaking of modern and contemporary range, we do not mean the latest unique collection of Paris or Milan. Position Hot-Est - it stores that have the latest products that consumers have started buying large quantities. In other words, we are talking about mass fashion. Fashion can be a significant factor in the growth of sales in all channels.
EASY-EST: Service-oriented problem solving
(Examples: Container Store, Publix, Kohl's)
This type of retail companies include those companies that are focused on helping customers solve their problems. They often have to deal with customers who do not know exactly what they want. Typically, these customers come to the store to look for ideas, goods and services that will help them find a good solution. For them, it is also important to know that they have bought the goods in the right place. Buyers of these stores:
- Want to simplify the solution of their problems, which they would not be - from the purchase of gasoline, or a complex purchase like buying a car;
- Want to exhort the choice of options, which are highly suitable for them;
- Want to get the solutions proposed by the store that knows the subject matter, and understands their needs, wants and desires.
QUISK-EST: WINNIG WITH FAST SERVICE
Retailers Quick-Est focused on the speed of service. They strive to be the fastest in the service in meeting the specific needs of its customers. Typically, these companies:
- Have a convenient location for shoppers, entrance and exit;
- Have a large number of retail outlets;
- Have a convenient parking close to the entrance of the store;
- Have a store layout for customers who already know they are looking for and just want to find a shop that offers the goods or services for a minimal loss of time;
- Very quickly serving customers at the cash register;
- Have a simple, fast and accurate process of finding and buying a commodity.