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Accenture Outlook: Up Close and Personal - Retail industry report

Accenture Outlook: Up Close and Personal - Retail industry report

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Published by Accenture
With such formidable competitors as Amazon and Apple successfully invading their space, many traditional retailers will struggle to keep pace over the next decade unless they can swiftly develop a deeper, more intimate and long-term relationship with consumers.
With such formidable competitors as Amazon and Apple successfully invading their space, many traditional retailers will struggle to keep pace over the next decade unless they can swiftly develop a deeper, more intimate and long-term relationship with consumers.

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Published by: Accenture on Feb 06, 2012
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The journal of high-performance business
Industry Report | Retail 
Up close and personal
By M. Reaves Wimbush and Christopher R. Roark
With such ormidable competitors as Amazon and Apple successullyinvading their space, many traditional retailers will struggle to keeppace over the next decade unless they can switly develop a deeper,more intimate and long-term relationship with consumers.
This article originally appearedin the 2011, No. 3, issue of 
Outlook 2011
Number 3
It may sound too good to be true: A one-stop shop or almost all o consumers’ everyday needs—romgroceries to bill payments, mailservices to cell phone top-ups, traveltickets to bank loans. Practicallyat your doorstep and accessible 24/7.In act, it’s up and running—inMexico.OXXO, Latin America’s largestconvenience store chain, withmore than 6.5 million transactionseach day, provides these necessi-ties via some 8,600 locations acrossMexico. The secret o the Monterrey-based behemoth’s success: a corpo-rate strategy and positioning ullyaligned with a complete under-standing o its customers’ mostimportant needs.In the retail industry as a whole,however, such strategic alignmentis all too rare. Most retailers stilldene their operating model interms o product categories or storeormats, not customers. They man-age tactically, or the short term,and season to season. And becauseo their structural shortcomings,they have been remarkably slow toinnovate. Which is why consumers,empowered by technology thatgives them unprecedented choiceand price transparency, have turnedincreasingly to more agile andcreative interlopers. Among manuacturers, or example, Apple has redened expectationsin consumer electronics by oeringiconic product and service expe-riences across all channels. Andonline pure plays such as Amazon.com can meet consumer needs ina range o segments more quickly,cheaply and conveniently thanmost retailers can. Amazon, indeed, has eectivelyreinvented the retail value proposi-tion itsel. With no stores to sta or maintain, Amazon’s operating costsare signicantly lower than thoseo most brick-and-mortar retailers.Indeed, its SG&A expenses are300 basis points lower than thoseo many traditional multichannelretailers, and as much as 700 basispoints lower than category-ocusedcompetitors. It is these ecienciesthat give Amazon the fexibility toinvest in getting to know consumers,making acquisitions to ulll their unmet needs and spending on R&Dto develop such groundbreakingproducts as the Kindle e-reader.More broadly, the new entrantshave changed the name o theretail game thanks to an astutecombination o sophisticatedinsight and superior executionaccurately identiying customersunmet commercial and emotionalneeds, and then guring outhow best to ulll them. Now,recognizing the urgency o thethreat these challengers pose, aew leading retailers have started totry to emulate their example.Such companies typically ocus onaddressing three specic questions.
1. How can we understand customerswell enough to be truly authentic inmeeting their needs?
Most retailers’ perceptions o their customers are incomplete. Theyrely on such rudimentary demo-graphic data as loyalty cards andbasket analysis, ad hoc qualitativeassessments or generalized second-
Outlook 2011
Number 3
Retailers can learn about their cus-tomers not only through their ownresearch but also by tapping into thewealth o knowledge that their suppli-ers possess. As vendors, or the mostpart, o other people’s brands, retail-ers have had ew reasons to make thehety investments in R&D or xedassets that sustain both the superior strategic planning and superior inno- vation capabilities o consumer prod-ucts players. But by collaborating withmanuacturers, they can gain accessto these players’ broad, cross-categorycustomer insights—and vice versa.Indeed, both parties can benetrom shared insights. One largeretail drug chain, or example, hasused a third-party tool that developsa 360-degree, multichannel view o its customers by integrating online,mobile and in-store data.By sharing consumer data witha manuacturer, this retailer hasilluminated opportunities to createproducts that more perectly meetconsumer needs. And together withone o its suppliers, the companyhas developed a testing approachto ensure it gets products right be-ore distributing them.Collaboration can be an especiallyattractive option i a strategic gap inthe marketplace has been identiedbut the retailer is unsure about howbest to ll it. This could meanpushing a private-label option, or example, or deciding to rely onnational brands (see sidebar, page 4).ary market research—not enough todevelop the holistic customer viewthey need to create highly relevantoerings. But by supplementing their point-o-sale data with primary re-search and predictive analytics, theywould be able to segment customersinto more robust behavioral proles,incorporating not only today’s corecustomer base but also the shopperswho will drive tomorrow’s growth.Consider one large airline, whichhas leveraged analytics to optimizemarketing campaigns, reduce churnand build richer dialogs with keycustomers.The company’s satisaction surveys,or instance, solicit customer eedback on such critical issues ason-time departures and the lengtho check-in lines, as well as perspec-tives on in-fight entertainmentand service.The surveys have helped the compa-ny’s strategy team determine just howand where to innovate the customer experience. And not only or thosewith rst-class tickets—thanks to itsintense customer ocus, the companywas one o the rst airlines to recog-nize that passengers in
classesappreciate a little pampering. Bybeing an early adopter o personalTVs or every seat, as well as allow-ing passengers to use onboard SMSmessaging and personal electronicdevices with a “sae fight” mode,the company developed deep cus-tomer loyalty.
2. How can we earn the trust andloyalty of consumers by makingtheir lives easier?
they can help relieve the pressuresand rictions o everyday lie havegained signicant competitiveadvantage. PetSmart, or example,Today’s customers place a high value on oerings that make their lives easier. And retailers thatleverage analytics to discover how

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