The Key to Economic Survival

Operating amid the worst economy in three decades, retailers still struggle to build loyalty among cost-conscious shoppers. Tapped-out consumers may look at pricing when deciding where to shop, but they are also hungry for value—a factor that transcends price. If chains can transition to more consumer-centric strategies, from promotions and assortments to pricing, retailers can begin targeting shoppers at a local level and delivering the value they crave.

Alexi Sarnevitz, senior director of global retail strategy, SAS, Cary, N.C., chatted with Chain Store Age senior editor Deena M. Amato-McCoy about how consumer-centric operations not only re-personalize the retail experience, but will help chains ride out the economic storm today and become a competitive force tomorrow.

Have you ever seen a retail environment like this before? 

The short answer is no, and there is no question that these are very challenging economic times. Madeleine Albright, who spoke at our SAS Global Forum in April, summed up the situation well when she described a conversation she had with Alan Greenspan, who said we are experiencing a ‘once-in-a-century crisis.’

Many of us have experienced economic slowdowns during our tenures in retail, but what makes this the worst in our generation is the dramatic change in consumer psychology. With less discretionary cash to spend and a fear of financial and job security, they have changed their shopping behavior and search for value in new ways in hopes of rebuilding lost wealth due to the stock and real estate market collapse.

Combine this new shopper mentality with an over-saturated marketplace, and it is no wonder that former industry leaders like Circuit City, Linens ‘n Things and Mervyns went out of business, and icons like Neiman Marcus and Saks are experiencing such steep sales declines.

What are some of the changes retailers are implementing to survive? 

All retailers need to watch expenses and cash flow, but they also need to continue investing in solutions—not only to survive, but also to come out of the recession even stronger and ready to compete. That’s why consumer-centric strategies, or delivering a more tailored and personalized shopping experience, are topping retailers’ priority lists.

Chains need to immediately respond to rapid changes in customer tastes, a practice that generates a strong return on investment today, while making retailers stronger long term. And based on IDC’s presentation at NRF this year, chains know this. The research firm surveyed 120 retailers and manufacturers, and 75% identified consumer centricity as one of their top three success factors for 2009.

What are retailers focusing on? 

The two key elements are consumer-centric marketing and merchandising. From the marketing perspective, the industry is shifting from a one-size-fits-all mass-media strategy to more personalized communications based on customer buying patterns and preferences. These are being delivered via a variety of communications vehicles including mobile devices and in-store kiosks, in near real time.

From a merchandising perspective, chains are tailoring and localizing assortments and pricing based on local consumer demand. Retailers are pursuing this with “bite-sized” initiatives that produce great ROI in as little as six to 12 months.

Top priorities today include price optimization and direct-marketing campaign management. Retailers often deploy a series of self-funded, bite-sized programs with the goal of achieving transformation into a customer-driven enterprise that is well positioned for long-term success.

What role does technology play in the mix? 

Technology is a critical enabler. A customer-driven enterprise requires execution at a very detailed level. Automation, enabled by analytic technology, is required to achieve this in a cost-effective manner.

While there are different pieces within the technological consumer-centricity puzzle, the key is the use of scalable applications with embedded analytic technology, specifically forecasting, data-mining and optimization solutions. These scalable business applications are often integrated and operate through business process workflow. These technologies are game changing because they allow 21st-century retailers to offer the more personalized service of yesteryear in a cost-effective manner.

As industry adoption of customer centricity grows, how do you see the customer experience evolving in the future?

With the pervasive Web access enabled by today’s mobile devices, the multichannel world is evolving into a single retail channel with multiple consumer touchpoints. This allows consumers the choice, control and visibility to construct their own personalized shopping processes—a foundational element of customer-centricity. As a result, customer-centric retailing will become more pervasive and ultimately the dominant operating model embraced by the industry.