It’s Time For The Age Of The Customer

There were a lot of good reasons why retailers based their strategy, organization, and operations on stores. But a lot of those reasons have now become irrelevant. The one thing that is not irrelevant – and will never be irrelevant – is the customer.

To be clear, yes I am aware that retailers have been talking about customer centricity for more than a decade. But if you look at the way their organizations are structured and planned, it isn’t by customer, it’s by store and sometimes more broadly by channel. Retail has not made the changes it needs to make in order to truly be customer centric. For at least the last decade, it has been all talk.

Now, they will have no choice. The growth coming from stores is over for the foreseeable future. The ability to create price differentiation through brand and experience – as it is primarily expressed in stores – is significantly hindered. Retailers cannot continue to pretend to be customer centric and still allocate capital and resources like a store-based organization.

And I get it – I really do. Change is very hard. Being oriented towards stores is easy – it is everything that has worked in the past. Moving to a customer orientation is not a simple thing. Industry commentators, myself included, have said for years that retail used to be customer-centric, back when retailers only ever operated one store. When retail was the general store on Main Street, of course you knew every customer.

That had to go to the wayside to build chains. Rapid expansion of store locations meant giving up on knowing customers – knowing them as a company. Individuals have always been able to maintain good customer relationships, that’s the hallmark of an excellent sales person. But it’s the enterprise that needs to know the customer in order to be able to use that information that can deliver value to that customer on a consistent basis.

The good news is, there is more ability to “know” individual or small groups of customers than ever before. Technology has made it possible to know a customer at an enterprise level across a chain of stores, and across channels too. It isn’t easy. But it is possible.

That knowing – this is what will save retailers who can no longer rely on store sales or in-person experiences to drive revenue. But it will be the retailers who can reorganize themselves, their priorities, their strategies, and their allocation of capital to take advantage of that knowing who will survive and thrive to become the retailers of tomorrow – the post-COVID-19 retailers.

What does that really mean? Here are a few immediate thoughts:

• Plan by customer. We’ve been talking about “customer-centric planning” for years, but now it’s time to figure out what that really means. Planning has historically been based on last year results, or demand forecasts that start at a store or channel level. We need demand forecasts by customer segments. What percent of your customers are “one and done” customers? Are there any patterns in what they buy? Does that have an impact on color, class, size?
• A focus on retention, rather than acquisition. The cost to acquire a new customer just skyrocketed – not just because you are competing with everyone else for consumer attention entirely through the window of digital and social. Also because you don’t get to put your best face forward – your store – to convince a customer to buy from you. So what’s left? The good old standbys of Recency – Frequency – Monetary value. How much value could you drive in your organization just if you could turn 10% of your one-and-done shoppers into repeat customers? 25%? What about 50%?
• Stores need to go digital. Stores still play a role in the future customer experience, but it’s time to position them in the right place in that experience – as education, as trip assurance, instant gratification, a sensory experience, a validation. But they also need to occupy a genuine presence in digital, so that they can play a role in connecting the brand to a local presence. That means also empowering store associates to be digital, as ambassadors for the brand, as micro-influencers, as an army of people who can expand and extend the brand’s reach at a local level.
• Most importantly, undertake – and finish – the digital transformation of the business that retailers have been slowly coming around to over the last decade. Data is the fuel of customer insight, which in turn is what powers a customer-first strategy. Amazon has known this forever. They’re using it right now to grind the rest of retail into dust. It’s time to not just get on the bus. It’s time to actually drive it to a destination.

The Bottom Line

Whether you believe that the customer behavior shifts we’ve seen from pandemic lockdowns is aberrant behavior driven solely by the necessities of the moment, or the intensive acceleration of trends that are already in play, what you can’t deny is that some of these behaviors are going to stick. Retailers who continue to view their business through the lens of stores aren’t just falling behind. They belong to that other reality, the 2019 and earlier reality that was pre-pandemic.

We may not know exactly what the new reality will look like – I can almost guarantee that it will involve a lot more face masks, hand washing, and general fear of illness and contagion than we’ve ever seen before. But I also know it will look nothing like the past. And retail needs to start adapting to that idea right now. The era of the store is dead. The era of the customer – the true era of the customer rather than just lip-service to the idea – is just beginning.