TIPS FOR BETTER RETAILING: “Power Retailing: Not Just for Large Firms”
by Joel R. Evans and Barry Berman
Business Week first popularized the term power retailing more than 25 years ago in citing the competitive advantages of certain large chains: They “are fast and focused. Merchandise is well-selected and plentiful. Customers go out of their way to shop at power retailers’ stores because they know they’ll find what they want with a minimum of hassles.”
The best practitioner of power retailing to date was the late Sam M. Walton with his Walmart discount stores and Sam’s Club chains. The professional management now in charge of the firm have sustained the company’s use of power retailing; and it is still by far the largest retailer in the world in terms of revenues. Today, Jeff Bezos and Amazon are dominating online retailing through the use of power retailing tools.
What power retailers all have in common is that they use consistent, directed, and comprehensive strategies. They identify customer needs and pay constant attention to the marketplace; identify new trends early, and often emphasized power assortments to dominate competitors; and use the latest technology — including computer and inventory-control systems. Some critics believe the major weakness of power retailing among chain retailers is that management policies are too often standardized and centralized.
There are three key principles that every retailer, regardless of size or line of business, could learn from the concept of power retailing: One, there must always be a “game plan” for the firm that is outlined in advance. Two, the retailer’s focus must always be on consumers and how to best satisfy them. Three, to be most effective in the marketplace, a firm needs to be dominant in at least one aspect of its strategy. In the broadest sense, power could result from having the longest store hours, the best delivery policy, and so on. As a result, a small firm could be a power retailer by serving an unfulfilled consumer need.
At the same time, every retailer must also recognize consumers’ minimum expectations for each element of its strategy (such as the store hours, product assortment, and customer services). Working women expect stores to have evening hours; this is a minimum requirement. Even if a firm dominates in other areas of its strategy, it must still satisfy the minimum standards set by consumers.
Here are six very different ways for a firm — even a small retailer — to act as a power retailer:
Be price-oriented and cost efficient to appeal to price-sensitive shoppers.
Be upscale to appeal to full-service, status-conscious consumers.
Be convenience-oriented to appeal to consumers interested in shopping ease, nearby locations, or long store hours.
Offer a dominant assortment with an extensive selection in the product lines carried to appeal to consumers interested in variety and in-store/online shopping comparisons.
Be customer service-oriented to appeal to people who are frustrated by the decline in retail service — as they perceive it
Be innovative or exclusive and provide a unique method of operations (such as kiosks at shopping centers) or carry products/brands/services not stocked by other stores to appeal to customers who are innovators, bored, or looking for items not in the me-too mold.
Two or more of these approaches could be combined to yield greater power.
Retailers will probably not be able to succeed over the long run if they are mid-level in all of the six areas just identified; they must do a superior job in at least one area. The amount of competition will be too intense for them to do otherwise. It should also be kept in mind that a price-oriented strategy may be the easiest for competitors to duplicate, at least in the short- run, and that price-sensitive shoppers often have little store loyalty.