The Golden Rule of Retail Innovation

By Gareth Jude | Feb 5, 2019 | 0

The golden rule of Retail Innovation is that it is only sustainable when it solves a customer problem, does something positive for the business and aligns with your purpose. Retail Innovation is like a three-legged stool. If all three legs are not securely in place it will inevitably collapse in use. In my career I’ve seen Retail Innovation collapse many times. Let’s talk a bit more about the three legs and why you need them all in place to succeed.

As retailers we serve customers every day so solving their problems is a good place to find opportunities for Retail Innovation. A common customer problem is that the way we serve them today is often no longer the way they want to be served. The digital world has changed shopping forever and while customers may still be buying the products and services we sell, they might not be buying in the way we are set up to serve them. Depending on your perspective the customer is king or, as one senior Japanese retailer once told me, the customer is god. Either way solving customer problems is undoubtedly a worthy goal but solving customer problems is only one leg of the stool. If the program you put in place doesn’t do something for the business or align with your purpose it will not succeed.

It’s hard to imagine solving a customer problem not fitting a retailer’s business purpose, but it does happen. Imagine you are running a chain of restaurants. Your research tells you a big customer problem is the lack of choice and options in your menu.  You implement a radical program that dramatically increases menu options and even allows customers to assemble meals to their own preferences from a range of options. Unfortunately, the program fails because it doesn’t align with your purpose. Your purpose is to serve good food quickly and the extra menu options slow you down. Customers who love options love the program but others who were attracted by your core purpose of good food served fast drift away. Even worse the results are bad for the business. The extra options decrease efficiency and increase costs and your service quality surveys show satisfaction decreasing due to longer wait times. This example is not so imaginary. It’s the dilemma being faced by the QSR sector worldwide. Solving a customer problem is only one leg of the innovation stool. Solving a customer problem is not enough in itself to sustain a program of Retail Innovation.

Retail Innovation that does something positive for the business is also worthy but pursuing this goal can easily conflict with customer outcomes and business purpose and cause the program to fail. Imagine you are running a chain of service-based retail outlets. More and more customers are doing their basic business online and you are receiving less and less traffic to your stores. You decide to radically reduce the store footprint and increase the services available to customers online. You begin to close stores, but new business falls almost in direct proportion to the number of stores you close. The upturn in online transactions is not enough to make up for the lack of new customer recruitment the store closure program is causing. The program is unsuccessful because while there were obvious cost benefits to the business it didn’t offer enough positives to the customer and undermined your purpose of being a trusted community advisor. This example is also not so imaginary. It’s the dilemma being faced by service-based retailers worldwide. Doing something positive for the business is only one leg of the innovation stool. If the program you put in place doesn’t solve a customer problem or align with your purpose it will not succeed.

If we think back to some of the big retail innovations of the last couple of decades, they were all three-legged stools. When Apple decided to open a chain of their own stores, they gave customers an experience they couldn’t get in a regular retailer or dealer, they drove dramatically increased sales and margin for their business and created a space which embodied their purpose. When Starbucks introduced free Wi-Fi and mobile apps, they created a digital haven and quicker transactions for customers, a decade of comp. store growth for their business and alignment with Starbucks purpose of creating a “third place” for its customers. When NIKE decided to introduce customer co-creation to their stores, they enhanced customer experience and connection with the brand, delivered positive financial and customer engagement results for their business and alignment with NIKE’s purpose of providing innovation and inspiration to every athlete they serve. They all followed the golden rule. Retail Innovation is only sustainable when it solves a customer problem, does something positive for the business and aligns with your purpose

 

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