Why should I buy from you?

The magic question every retailer needs to be able to answer

The new retail world

In this post from 2 weeks ago we touched on the ‘new retail paradigm’. Once upon a time a lot of the value that retailers generated came essentially from ‘place’ - from their role as part of the distribution chain connecting manufacturers of product with consumers. At least some part of the margin that they generated (which is after all the premium they can charge over the wholesale cost of what they are selling) came from the fact they were there and were probably one of only a few retailers in your neighbourhood selling that particular product.

In that world of a few decades ago, ‘transaction costs’ for consumers were high. In economist-speak transaction cost is a broad term encompassing how expensive, time-consuming and generally bothersome something is. And in the retail world before the internet being a consumer involved significant transaction costs - getting to the retailer selling the product you wanted, finding it on their shelves and getting it home again were all time consuming and if you wanted to compare prices by going to other stores too, those costs just multiplied.

To anyone who has grown up in the last 20 years, though, all of that sounds bizarre. We now live in a world where every product, from every brand is available to us almost instantly through the internet and where price comparison is a mobile search away.

Indeed more than one retailer has reported to me over the years that one of the most significant drivers of traffic to their website has come from customers actually standing in their stores, using the internet to research specifications or note down measurements. And if customers are looking at your website from inside your store you can be fairly sure they are price-comparing you against others from there too.

So in most circumstances¹, the answer to that customer question “why should I buy this from you, right now?” can no longer be “because you are here and you can’t be bothered to go anywhere else”; it needs to be something different. If retailers are to avoid having their margin competed down to the wafer-thin returns of the pureplay online retailers, then they need a great answer to this magic question.

The good news is there are plenty of great answers they might choose. In another threaded series of posts here on Moving Tribes we will explore some of those answers (and how we might benefit from them) in depth and I’ll also challenge you to come up with more.

2 retail archetypes - the curator and the expert

To get us started, though, here are two classics.

You might operate in a sector where there is simply a huge amount of choice of different types of product available - so much so that customers are in danger of being overwhelmed by that choice and struggling to find what they want.

In response to that, you might have scoured the market and carefully selected a subset of products that you think will appeal to your customers, cover all of their most frequent needs but be simpler and easier for them to browse.

If that’s the case, you are earning your margin from the retail archetype we might call curator. Think of a clothes shop in this context. Every season there are a bewildering array of garments of all types that customers could buy in any number of colours, designs and fabrics. The effective clothing retailer (whether an independent or a chain) therefore places huge emphasis on buying well - scouring the market for clothes which are on-trend, well priced but also are likely to appeal to the particular target market that retailer is aiming at.

When that’s done well the outcome is a store full of things that appeal to the customers walking through the door and which go well together - a strong selling season lies ahead.

Or let’s consider a different scenario. You might be in a sector where products are quite complicated. There is a lot of terminology involved. Customers don’t buy your product all that often and therefore arrive in your store worried that they will buy the wrong thing or simply confused and in need of help.

Your response to that has been to make sure your store colleagues are well trained in the products they sell and in the kinds of questions customers are likely to ask. You work hard to de-mystify some of the terminology in your point of sale and your whole sales process is designed to reassure customers that you are giving them the right product for them.

In this scenario, the retail archetype you are living is one we might call expert. Your success (and most directly your profit margin) will come from your ability to put customers at ease. Your sales cycle is quite possibly longer as customers need time to consider their options and you still face the challenge of closing the sale rather than ending up in the horrible position of offering expert advice and then seeing the customer turn to an online provider at the last stage, but fundamentally it is your product knowledge, and the way you bring that to life in store and online which is the driver of your success.

If curator and expert are two possible retail archetypes, there are plenty more and we’ll work through them in this series of posts from time to time.

Careful, it’s a trap!

This opening discussion, however, should finish with a health warning, because there is a trap in the retail archetype model.

Whenever I talk a retail team through this way of thinking about their business, they find it easy to fit themselves into one of the archetypes. “Ah yes,” many specialist retailers tell themselves, “we definitely fit into the expert category”.

The sting in the tail is this - it doesn’t matter whether you think you are an expert-type of retailer. What matters is what your customers think. And as we’ll see in future posts, making the archetype that you want to apply to your business actually come to life for your customers is more of a challenge than you might think.

And if you think that’s an exaggeration, consider the story of the specialist retailer in a complex market with customers anxious about buying the wrong thing which discontinued the product training programme for its store sales colleagues as an unnecessary expense.

I won’t give you a prize for guessing who that was, because I’m sworn to secrecy (it is a real story about a major UK High Street brand), but there are also no prizes for guessing how well that strategy went!

In future weeks we will explore the curator and expert archetypes some more and come up with a few others too. For the time being, if you’ve enjoyed reading this post please do share it to your network, I’d love as many people to get involved in the discussion as possible.

1. Why only in most circumstances and not all? Well, there are some special retail circumstances where a brand essentially bids for a local monopoly. Think about that bar of chocolate you want at the motorway service station. The easy availability of the same bar delivered to your home tomorrow is small comfort when you want to eat it now!