The premise of this interview is what appears to be a pretty grim outlook for many independent retailers out there. Think about it: competition from the big box home improvement players is getting more rigorous and their service is improving every day. The percentage of millennials in the marketplace is growing all the time and online sales in the coming years are expected to grow exponentially. That means online players like Wayfair, Amazon, BuildDirect and others are gaining share on a regular basis with online floor covering sales pegged to go in only one direction: up.
Oh, and then there’s the shop online, pickup-at-the-store concept as offered by Home Depot and others. On top of that, many independents are growing. Some are buying competitors, gaining critical mass and becoming imposing competitors. Then there’s the in-home players who are always difficult to compete with.
The players in these categories are becoming stronger and taking more business from independent retailers. It raises many questions, such as what characteristics must an independent embrace to ensure their longevity? To answer these questions, I spoke with Paul Friederichsen, partner in branding consultancy The Blake Project and president of BrandBiz. This is an interview you can find on TalkFloor.com in the archives. The following are some excerpts from that interview.
TF: We’re all aware of the increased pressure independent retailers will be facing over the next five to 10 years not only from the big box and online players, but the burgeoning buy online, pickup at the store retailers and the in-home retailers—all of which threaten the very existence of many independents. And this only begins to touch on the budding millennial demographic. It’s an eye-opening set of circumstances for business people to deal with.
Friederichsen: If I could add a little to your assessment of the situation. Looking at the anticipated decline in the number of independent specialty retailers in the years to come, we are looking at a number that would be about the same number of Home Depot locations. Just a few short years ago, no one would have anticipated anything like that. My advice would be for retailers to really go back to the basics in determining what their position is in the marketplace because the marketplace has changed so dramatically since the end of the Great Recession.
The good news is that the economy appears to be moving in the right direction; the bad news is that as the economy improves, so does the competition. The end result is some very able and well-funded competitors from a variety of retail channels that are going to surround the independent. We always advise clients to begin with a marketing assessment. We look at what has traditionally been labeled the three “Cs”, the category, the customer, and the competition. If a retailer has a firm understanding of these factors, they are on their way to determining the best strategy.
TF: The challenges independents will face over the next decade are quite unique. There is competition from very large home improvement players, a wholesale move to online sales with some very large online players on the scene, plus we’re looking at a consumer—the millennial that makes purchases in an entirely different way. This is a very complex situation.
Friederichsen: You’re right, there are a lot of moving parts that have to be taken into consideration to develop a dynamic plan. Retailers need to consider breaking their efforts into the following logical compartments: branding, technology, product, training and follow up.
TF: Let me first ask you about branding. It sounds like the crux of this whole conversation. Talk about the process of developing a brand. I suspect every business has been and is continuing to build a brand whether it’s by design or by accident. Talk about the process of brand development.
Friederichsen: Branding is the foundation for this entire subject. Depending on the length of time a retailer has been in business, with some having been in business for a generation or more, the brand has already been established; it is set. Unless the operation is brand new or getting a complete makeover, we challenge retailers to take a really hard look at their brand, what it has become, and look at how the company has been communicating its brand. We frequently perform an audit for our clients which looks at the company’s communications, its advertising, its public relations—basically all communications, both external and internal, for the past several years. In many cases, particularly in companies that have been in existence for a long time, the demographic of their market place has changed and the company’s brand needs to be reflective of how the retailer seeks to position itself with its customer base. Even if a retailer has been in business a long time, the brand needs to be reassessed.
We call the finished product a positioning statement. It’s not a mission statement or a vision statement that many companies have. Basically, it clarifies who the company is and what it is in business for. The key is how the company differentiates itself from other brands. Brands are built on differentiation, otherwise the company is a commodity. The brand should be something that is truly unique and different within the market place, separating the retailer from the pack. It could be in multiple areas, or it could be in a single area. It could be service, it could have something to do with design and interior decorating, selection or customer satisfaction. It could be the manner in which the company approaches installation. The process is to determine what works for the company that places it above and beyond everyone else. It is a foundation upon which to build.
TF: We talked about the many complexities that are developing in the marketplace, many of which are in the area of technology. There is a major transformation in the way consumers buy product today, and as a result, retailers absolutely need to be digitally savvy to have a chance to capture their share of sales. Over and about that there is a very pressing need for the retailer to have a firm grip on how the business is performing, which can best be achieved with industry specific software.
Friederichsen: I remember the old adage, “If you can’t measure it, you can’t manage it or improve it.” And today, there is a great deal of technology out there that allows the independent to level the playing field. A retailer’s best competitors are no doubt using the same types of software. If retailers are not using tools that are available to them, especially in this environment—then shame on you. After all, technology is the great equalizer—especially when it comes to managing your business and making sure you are making the best informed decisions possible.
TF: An absolute necessity for a retailer going forward is to have a competitive website that can deliver a pleasurable experience to the consumer and drive that customer to the retailer’s sales floor. After all, if retailers are seeing fewer customers walk through their front door, there’s a good chance it’s because their website is not pulling its weight.
Friederichsen: There are more shoppers visiting the internet than ever before. Not only millennials, who appear to buy just about everything online, but boomers, gen xers and everyone in between is doing research and buying online. A retailer’s website is their portal to this audience and how they service customers. It is a virtual store, even if the retailer does not do ecommerce on it. It’s where they welcome their new and existing customers and it has to be exciting.
We know that the customer does a great deal of their research and shopping online before she ever sets foot into a store. Buying floor covering is not an impulse buy; it’s a very thoughtful purchase. Retailers can count on their competitors getting their game up. The challenge to them—even if they have been in business for 20 or 30 years and even if they have a very loyal customer following—is to stay current and to stay very fresh as far as their presentation is concerned, and that includes a consumer-friendly mobile presentation.
TF: You mentioned the word exciting, and I think that really is key to this technology discussion. Much of the competition that independent retailers face is not necessarily other flooring retailers but from automobile dealers, electronics stores and others that offer an exciting presentation in their showrooms. The sexy automotive add-ons and new, flashy electronic devices. It seems difficult for the flooring retailer to compete on the excitement front.
Friederichsen: Flooring retailers are certainly not excluded from bringing excitement into their showrooms. In fact, many are doing it right now. Industry software providers are now giving retailers an opportunity for salespeople to conduct business from a tablet or smart phone while on the sales floor. This provides them the tools to attach product images, room scenes, videos and other elements that the customer can take home with them and share with their friends on FaceBook and other media. It is an easy way to bring excitement on the showroom floor and better compete with non-flooring retailers.
TF: Products, as you mentioned, are an important element in this total picture. There is a great deal of similarity among many retailers, and often retailers don’t know when to say no to a supplier and end up with a sales floor hat is so cluttered and confusing that it literally drives customers away. Talk about selecting products attempting to build a uniqueness that’s right for the retailer’s customer base.
Friederichsen: Not only are the choices of products placed on the sales floor important, but the way they are presented is of the utmost importance. Often, the improvement is the manner in which products are discussed online. One of the factors we see currently in the commercial arena involves the presentation where products are paired or coordinated, carpet with tile for example, LVT with wood, where the presentation is more holistic, integrating color and texture for the entire space. And this is an option for the showroom as well as online.
A positive way to look at this situation is from the customer’s viewpoint. The customer is looking for a beautiful home. The question for the retailer is how they can solve that customer’s problem.
TF: One of the points you mentioned earlier was training. As you are aware, I interview a great many retailers and I ask almost all of them if they have sales meetings. The most frequent answer I get is “yes!” However, they are referring to product knowledge sessions where a supplier sales person comes with donuts and reviews a product his company is offering. Training sessions run by the retailer to discuss sales technique, exchanges with customers, follow up procedures, sales technique, company policy and other issues most often, in my experience, do not take place. What are your thoughts on a meaningful approach to training?
Friederichsen: I have been involved in leading many seminars on the importance of coordinating marketing efforts and training. It’s a very productive combination. Unfortunately, very often, sales associates are not as well-versed on the products on their sales floor as the customers they talk with. In fact, everyone in the operation should be the target of training when it comes to company policy, promotions and how customers should be addressed. I’ve seen situations were a retailer has launched a special promotion or has made certain statements in ads and other communications and many in the store were not made aware of them, which reflects poorly on the store. With the importance of service to most independents, it’s critical that what the customer hears is a common statement from all associates in the company that is consistent and supportive of company’s branding message.
TF: The last point you mentioned was follow up. Expand on how retailers can develop a follow up program.
Friederichsen: With the object being to maximize the number of customers that walk through the retailer’s front door and this being the age of data, every retailer has or should have the tools to record pertinent data. Retailers can collect data not only on customers but on consumers that have visited the store and have not purchased. It’s certainly less costly to communicate with people in a retailer’s database than to attract new customers. It also provides an opportunity, following up on a sale, to build a customer for life and to increase the prospect for generating positive reviews. The important factor here is instilling the discipline on the organization to capture the appropriate information and using it productively.
TF: The bottom line to this conversation is that whatever a retailer has been doing over the last several years, with the dramatic changes in the market place in the coming years, is likely to be less productive in the coming years.
Friederichsen: There is no silver bullet or magic answer to the topics we have been discussing. The recognition that we do have is this: An improving economy is a rising tide that will lift all boats—including that of a retailer’s competitors. That means independents will have to bring their “A” game to their marketing plan and work even harder to build their businesses. Nowadays there are a lot of people out there that want to take it away from you.