United States: Competing at the Speed of Retail
By Justin Wartell
Energy abounds in U.S. retail, even as consumer confidence seems to ebb and flow as frequently as the weather. But that’s the dynamic of the industry. It’s always been this way. Consumer interactions and business strategies perpetually collide to spark new opportunities for growth and delight, making the retail world a vibrant space. And the 50 brands on the U.S. list have been the ones constantly creating and recreating this vibrancy.
These brands define the industry and determine where it’s going. Their leadership, combined with the influence of new brands with unique business models, brings the world of retail into focus-interconnected, immediate, always on, dynamic, memorable and sometimes unexpected. Retail, of course, is constantly changing. Wait a couple of minutes and something will change again.
How do the brands that make the list succeed in this seeming tumult? Each year, Interbrand studies their success and documents their struggles. The summary criteria for both can be distilled into four ideas: First, top retailers challenge themselves to connect more deeply and meaningfully with customers. Second, they internalize a belief around speedy decision making to take action at the pace of the retail world. Third, these companies are aligned at the organizational level to the idea of experience in all its facets. Finally, these leaders optimize, scale and measure religiously. As they build their experience ecosystems, they know what’s working and not working.
The most valuable retail brands monitor the customer’s changing needs
In the race for relevance—that is, providing customers with a reason to choose a brand—the strongest relentlessly pursue knowledge about their consumers and incorporate those insights into their everyday behavior. With economic power distributed across an ever growing portfolio of touchpoints, customers—not the brand—set the rules of engagement. Altering the balance further, brands like Amazon (up 46 percent) have trained customers to expect tailored content, crowd- sourced advice, 24/7 shopping, unexpectedly good service and increasingly an expectation around near-immediate delivery. Best Buy, down 52 percent, and Toys “R” Us (off the list this year) are struggling to stay relevant and deliver value beyond price. Why would customers choose these brands as alternatives proliferate? What role should these big box retailers play in customers’ lives as e-commerce alternatives dilute their “category killer” equity? Answers to these questions may help to slow the deterioration of value in these once venerable retailers. It’s critical today to know the customer and monitor their changing needs—a tenet that must dominate the knowledge agenda within retail organizations today.
Leaders build a culture of efficient decision-making
The pace of retail and customer expectations around speed continues to increase. To respond, executives need to build cultures, processes and systems that enable quick decisions. This isn’t just about assortment adjustments. It’s about organizational commitment to moving at the speed of the retail world to remain competitive.
Convenience and addressing the needs of time-starved shoppers continue to dominate much retail thinking. Walmart, up 1 percent, and eBay, with a 12 percent increase in brand value, are revamping supply chain processes and exploring same-day delivery service. GameStop, a company that lost 29 percent of its brand value this year, struggles with speedy decision-making. The pace of change in gaming is faster than it can respond. Until GameStop’s leaders change their decision-making approach, they will continue to struggle. Without the ability to take risks and explore, they face a fate similar to Blockbuster. Building a culture that can adapt and confidently take risks will illuminate ways to win even in a tumultuous world.
It’s understood that experience extends beyond the store
Even the definition of retail is changing. “Retail” no longer refers to physical stores; it refers to the complete experience created by retail brands—from physical stores to digital touchpoints to service experiences to products. Retailers witnessing big gains this year have committed to this holistic view of experience. Rather than antiquated methods of maximizing stores at the expense of other channels, top brands think in terms of groups of touchpoints and the optimization of experience. Victoria’s Secret, which gained 11 percent in value, owns commitment to experience. Every touchpoint is flawlessly aligned to the brand’s goals.
Anthropologie, returning to the list this year, does the same. It complements a remarkable store experience with an inspiring staff, an aligned e-commerce channel and a product portfolio that tells a coherent story. In contrast, Radio Shack’s poor performance (down 26 percent) can be partially blamed on experience. Its flexible, small format is a start. But the alignment of its channels, especially product and service, underwhelm. To drive choice, companies must commit to the new definition of retail and celebrate experience across the organization.
The best continuously optimize, scale and measure
The need to move quickly can pressure retail leaders to abandon their commitment to the tasks aligned with optimization, scaling and measurement. Many do achieve top speed, as the industry demands, where it becomes challenging to evaluate on the fly. Across the top retailers, commitment to ongoing, meaningful measurement and refinement is clear. Big Lots, up 1 percent, constantly evaluates its loyalty program data around customer needs. It empowers decision-makers with insights that guide assortment decisions in near-real time. Tractor Supply, up 38 percent in value, has committed to a deeper level of research and analysis as a key driver for selecting sites, customizing merchandise and changing the experience.
Insights can enable optimization and a more efficient scaling of ideas. But it’s not all about customer knowledge. Tiffany & Co., up 15 percent, built its growth on the ability to trial, refine and deploy digital experiences that translate the brand into new and unexpected touchpoints. Measurement and proof of concept still wins. But it takes commitment to make this a part of the routine in retail.
2012 was an exciting and value creating year in retail. The total value of the strongest retail brands increased. This trend should continue as these brands live the principles that have made them strong: the relentless pursuit of meaningful customer knowledge, an efficient decision-making culture, a commitment to the new definition of retail and the determination to optimize and scale with purpose. That’s the recipe for success in 2013.