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Retail success is ultimately based on a foundation of product, place, people and time. Smart entrepreneurs consider all four thoughtfully before launching any new retail venture, or developing a strategy for expansion.
Entrepreneurs who rush into business without taking a serious look at these factors, are handicapped from the start. Many subsequently fail to increase sales over time, maintain profit margins or develop a healthy repeat customer base, because they didn't have the right combination of product, place, people and time.
Most likely, they concentrated on product alone, or the intersection of product and place only. By limiting their focus, they limited their chances of success.
On the other hand, specialty retail entrepreneurs with a keen understanding of how each of these facors impact success, and how they affect and feed off each other, can dramatically improve their ability to make big profits and grow. Here's how to examine each of the four factors to develop a strategy for success.
Specialty retail is product centered. The physical product is the most central and palpable component of the business. The theme or identity of the store centers around the product. Ask any retailer and they'll say they are primarily concerned with the physical product that they deliver to the consumer. The most successful retailers understand their product very well.
Of course, getting the product right is key for the success of any retail enterprise. Stocking the right product or creating the most useful service, and pricing and presenting them effectively, are at the core of any retail business strategy. Yet, against the realization that between 60 and 70 percent of purchases are unplanned, it's clear that many factors besides product are required to transform browsing into buying.
The concept of place is deceptively simple at first glance. Is it a consideration of where the product or service is or will be sold? Although location is important, a myth of retail is that location is supremely important. The phrase, "Location, location, location!" is a time worn retail mantra, but it doesn't give us the entire picture.
Central place theory, created by noted geographer, Walter Christaller, describes the distinct relationship between the number of consumers in a marketplace and the types of goods and services that can be successfully sold. For smaller populations, only basic needs, products and services will be purchased.
As population density increases, a larger variety of more specialized, upscale goods and services can be sold. Retailers that don't consider how the size of their market population impacts response to their product offerings can be in for a rude awakening when the product doesn't match the people.
The Time Component
Much has been written about the time pressed lifestyles of consumers who are constantly trying to get more done in less time. Because consumers have less time to shop, or they wish to spend less time on routine shopping, smart retailers now cater to these needs by making shopping even more convenient and less time consuming.
To take it one step further, with the right inventive approach to convenience and time savings, retailers can paradoxically tempt consumers into spending more time in the store. The ultimate goal today is to create a shopping experience that's both functional and fun, while also being a convenient and rewarding experience that makes the customer feel good.
There is a real brilliance to some of the retail synergies already in the marketplace or being developed now. Many are aimed at giving the customers convenience, while tempting them to stay in the store longer.
For example, the introduction of Starbucks coffee shops inside Target stores is a retail alliance that generates sales and extends brand visibility for Starbucks, while giving Target's customers convenient access to a desired brand that sells a feel good, pick me up product that, not coincidentally, gives them more energy to shop.
The Starbucks locations keep shoppers in the Target store longer, generates foot traffic for Target and increases the average number of customer trips to the store. The same goes for Starbucks. No matter how big or small the retail company, profitable alliances can be a big part of the location equation.
There are other ways to keep consumers longer and encourage more frequent visits. Well executed, creative in-store displays can create the magic that helps products, "Jump up and hit shoppers in the eye," says noted retail anthropologist, Paco Underhill.
Of course, holiday seasons are prime times for retailers to create brilliant, eye catching displays, but there's no reason to stop at the holidays. Gift, home decorative, seasonal or trendy products can be visually merchandised with creativity and flair throughout the year.
Displays that frequently change create buying urgency in the consumer's mind. Smaller retailers can learn a great deal from Target's home décor section, or just about any section at Pier 1. These retailers are very skilled at creating the impression that many products are short run or handmade items that may not be available later.
The People Quotient
Savvy retailers of all sizes also know that understanding their customers means going beyond a demographic profile and recognizing that people shop differently every time they go shopping. The same consumer may shop for price at a mass discounter one day and on another occasion buy liberally from a luxury boutique.
A last minute shopper at an airport sunglasses kiosk is in a different frame of mind, and therefore operating under different buying motivators, than the same person after they reach the vacation destination and spot the sunglasses kiosk beachside. Yet demographically the consumer hasn't changed.
Shopping is the most preferred activity of people while on vacation. There are many untapped specialty retail opportunities to be leveraged for resort operators and retailers in vacation locales.
The best retailers take stock each time their customers shop, asking themselves what the customer's outlook is, why the customer is shopping that day, and what the shopper's ultimate mission is, from the immediate and mundane purchase to the impulsive or aspirational buy. Retailers who focus on these factors build healthy repeat customer bases that are positioned to generate sales far into the future.
One retailer that leverages repeat visits to local stores is Starbucks, with a retail strategy that pairs coffee themed gifts with music CDs. The company not only leverages its traffic, but delights customers by giving them something interesting and different to purchase when they come in. To create urgency and emphasize uniqueness, these products are never in the stores long.
Looking toward the future, leasing managers and operators of public central places where there is heavy foot traffic can leverage their traffic with the right creative mix of retail and service offerings. Airports, which began mall style retailing in the 1990s, are a good example of how the right retail tenant mix can delight shoppers and generate big profits in locales where the primary purpose is not retail.
A recent survey by a major airport retailer discovered that more than 50 percent of airport purchases were not need driven. People bought simply because the opportunity was offered to them and they had time on their hands.
Every year more central places with high foot traffic that cater to consumers on a mission other than shopping have some type of basic retail offering. These range from train stations catering to office workers to resorts catering to vacationers. Other public spaces not primarily designed for retail, such as downtown office complexes, universities, resort hotels, cruise ship terminals and highway service plazas, continue to present tremendous opportunities for specialty retail entrepreneurs and leasing professionals.
As these opportunities emerge, remember that product, place, people and time all affect whether a retail business will succeed over the long haul. Understanding how these elements converge will create opportunities far beyond the traditional product centered view of retail. After all, a retailer is not just in the apparel business, jewelry business or the larger shopping center business; all retailers are in the life enhancement and entertainment business.
This article was edited from a story on SpecialtyRetail.com, written by Lionel Binnie, the president of M-Source, a retail consulting firm in Briarcliff Manor, NY.
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