Winning At Retail E-Book

Willard N. Ander

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 305

Veröffentlichungsjahr: 2010

Beschreibung

Praise for Winning At Retail "Winning at Retail offers the most effective strategies availablefor retailers. At McDonald's, the 'Quick-EST' model is crucial,because being close and convenient to where our customers live,work, and shop helps us create maximum value. If you want toharness your company's strengths to become a leader in yourcategory-and stay in tune with what your customers want-this is thebook for you." -Jim Rand, Senior Vice President of Business Development,McDonald's Corporation "Winning at Retail provides a thoughtful approach to retaildifferentiation. Ander and Stern warn of the 'treacherous middle'into which retailers too easily drift. They inspire us to avoidthis peril through case studies of retailers who have assumedleadership through courageous choice." -Robert L. Price, Senior Vice President and Chief MarketingOfficer, Wawa "In a difficult retail environment, this book provides crucialguidance for staying on top of your competition-by taking thecustomer seriously and leveraging your strengths to provideexperiences that increase customer loyalty. Will Ander and NeilStern elegantly argue that you can't always be the biggest,fastest, and trendiest place on the block, but it takes only one ofthese 'Ests' to be a category leader. Businesses big and small canbenefit from the carefully distilled lessons in this book." -Bernd Schmitt, Professor of Marketing, Columbia Business Schooland author of Customer Experience Management

Leseprobe

Table of Contents

Title Page

Copyright Page

PREFACE

MCMILLAN|DOOLITTLE: A BRIEF HISTORY

MCMILLAN|DOOLITTLE’S POINT OF VIEW

Acknowledgments

PART I - The Theory

CHAPTER ONE - EST: A COMPASS TO AVOID RETAIL’S BLACK HOLE

EST DEFINED

EST IS NOT A MARKETING TOOL

THE INTRODUCTION OF EST

DOES EST CHANGE? ABSOLUTELY

PUTTING EST TO WORK

THE PROOF IS IN THE RESULTS

CHAPTER TWO - CUSTOMERS ARE #1 Now It’s Time for Retailers to Start Treating ...

THE MYTHS OF CUSTOMER SERVICE

PART II - The Practice

CHAPTER THREE - CHEAP-EST: WINNING WITH PRICE

CHEAP-EST DEFINED

CHAPTER FOUR - BIG-EST: WINNING WITH DOMINANT ASSORTMENTS

ARE CATEGORY KILLERS STILL KILLERS?

CHAPTER FIVE - HOT-EST: WINNING WITH FASHION

CHAPTER SIX - EASY-EST: WINNING WITH SOLUTION-ORIENTED SERVICE

CHAPTER SEVEN - QUICK-EST: WINNING WITH FAST SERVICE

THE FUTURE FOR QUICK-EST LOOKS BRIGHT

CHAPTER EIGHT - PUTTING EST TO WORK

GREENS FEES, PAR, AND EST

APPLYING EST

EST IN THE REAL WORLD

EST IN ACTION: BEST BUY AND COACH

PART III - The Future

CHAPTER NINE - EST ISN’T FOREVER Retail Is Tougher Than Ever

CONSOLIDATION

COMPRESSED LIFE CYCLE

THREE’S A CROWD

FALLING OUT OF EST

MARKET SQUEEZE

CHAPTER TEN - DEVELOPING TOMORROW’S HOT IDEAS

THE HOT ZONE

HOME-HAPPY BOOMERS

TWO APPROACHES TO GENERATION Y: GET THE PARENTS, GET THE KIDS

INCREASING ETHNIC DIVERSITY

HAVES AND HAVE-NOTS

LOOKING INSIDE FOR HOT IDEAS

GO WHERE THE CUSTOMERS ARE

WINNING RETAILERS ARE IN MOTION

CHAPTER ELEVEN - PUTTING THE CUSTOMER IN CONTROL

RETAILER EFFICIENCY VERSUS CUSTOMER EFFICIENCY

THE FIVE CS OF PUTTING THE CUSTOMER IN CONTROL

CUSTOMERS IN CONTROL: GUIDELINES TO LIVE BY

CHAPTER TWELVE - A GLANCE AT THE FUTURE

FUTURE TRENDS

NOTES

INDEX

Copyright © 2004 by Willard N. Ander and Neil Z. Stern. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Ander, Jr., Willard N.

Winning at retail : developing a sustained model for retail success / Willard N. Ander, Jr. and Neil Z. Stern. p. cm.

ISBN 0-471-47357-X (cloth)

1. Retail trade—Management. I. Stern, Neil. II. Title.

HF5429.A655 2004

658.8’7—dc22

2004002264

PREFACE

“How did you go bankrupt?” “Gradually, then suddenly.”

ERNEST HEMINGWAY,THE SUN ALSO RISES

Montgomery Ward. Woolworth. Florsheim. County Seat. Service Merchandise. Bradlees. Builders Square. eToys. The retail landscape is littered with the bodies of companies who simply were not good enough to compete for a customer’s business anymore. Many of these companies were once the shining stars of business, the subjects of glowing praise from analysts and often-positive case studies in books just like this one. What happened to them? They fell into the Black Hole of Retailing, the place where losing retailers go to die.

The sad fact of these companies’ demise is that their death may have been avoidable. They failed to react to the signs around them and positively change their business while they still had time. Most companies eventually react to their fate, but way too late. Consistently winning companies react before Wall Street tells them to, before their sales volume is in permanent tailspin, before a competitor grows too big and too powerful, and, most important, before customers have given up and moved on to spend their retail dollars at a multitude of other choices.

The “B-Est” retailers—those with a defined position in the marketplace—have determined how to carve out and own a place in the customer’s mind. They fiercely defend this space but are also astute enough to recognize when it’s time to find something new.

All retailers are destined to decline: There is a force at work—an inevitable retail life cycle—that leads to certain failure unless something dramatic occurs to interrupt the flow and change the outcome. There is a natural inflection point in the life of every concept and every retailer. Failure to react at this critical point can lead to a painful downward spiral. React properly, and companies can experience a rebirth and live to fight another day. The best retailers are those that recognize the necessary role of business reinvention and seek to stay ahead of the pack.

Unfortunately, most retailers fail to react to the inflection point, fail to listen to what their customers are trying to tell them, and are generally content to get by with being pretty good. Being pretty good is an invitation to enter the loser’s playground, an area in which many retailers dwell today. It’s not a far ride from the loser’s playground to the Black Hole.

This book is not based on fancy academic theories that have no place in the real world. Winning at Retail is a rather boring title, we have to admit. It’s not going to win any awards for creativity. There are no cute parables—not a single fish or piece of cheese. This book is based on McMillan|Doolittle’s long history of documenting retail’s winners and losers. It’s also based on our experience consulting with the world’s best-known retail and service companies. We have had some wonderful successes with our clients, and we learned from those experiences; we have also had some failures along the way, and learned from those as well. In this book we talk about stores and about customers. We discuss what separates the winners and losers, and we extract key lessons from each.

For retailers, this book is a must-read to understand where your company stands in its life cycle and to begin to plan new courses of action. For suppliers, you’ll find that the lessons in the retail world are very similar to your own. You will also want to know whom to align with, now and into the future. For retail investors, real estate companies, financial institutions, and others closely aligned with the retail world, Est offers an early warning system—well before earnings begin to decelerate and decline. Finally, we are all customers—all experts in an intimate way in this fascinating $3 trillion a year business.

We pull no punches—that’s not our style. We’re candid, straightforward, and passionate about the business that we’ve devoted our careers to understanding. We are true to McMillan|Doolittle’s intrepid motto: “Occasionally wrong, but never in doubt!”

Why are we writing this book now? As we will demonstrate, the retail business is getting tougher than ever. Consumers have access to an unprecedented number of choices and are becoming more selective about where they shop. Retail space per capita has reached unprecedented levels, and the consumer, once buoyed by exuberant spending in the late 1990s, is coming back down to earth. This equation of too many retailers chasing too few consumer dollars has made for some painful times for the nation’s retail companies. Only the best are thriving now, and we expect that to be the case in the future. Few retailers will be able to survive in the coming years without excelling in meeting consumer needs.

Why should you listen to what we have to say? We have a long history of participating, analyzing, and consulting—we are grounded in both the reality of being a retailer and the forces that swirl around the industry.

MCMILLAN|DOOLITTLE: A BRIEF HISTORY

Norm McMillan and Sid Doolittle, the founders of McMillan| Doolittle, first worked together in the late 1970s, when Norm took the assignment of leading one of many turnaround efforts at Montgomery Ward & Co. Sid, a veteran of Chicago-based Wards, was part of that team. In the span of four decades, Wards had gone from being one of the nation’s largest merchants to being a retailer in desperate need of a turnaround. Part of Norm and Sid’s mission was to survey the retail landscape, figure out what separated the winners from the losers, and then help Montgomery Ward re-create itself as a winner. A very big task, indeed.

The two men brought different skills to the job. Norm began his career in advertising, and then cut his retailing teeth developing a strategy for a struggling discount chain called Target. Before joining Wards, Norm led a team in the mid-1970s that articulated a new mission and vision for Target. (The result was a strategy the retailer hasn’t strayed from yet, as it’s grown from being a struggling unit of a department store company to becoming the nation’s fifth-largest retailer, with nearly $40 billion in sales.) Norm created a then (and still) revolutionary document, titled Guides for Growth, which helped steer Target’s course as a fashion-driven discounter.

Sid had spent his entire career with Wards. He ran merchandising, buying, and catalog operations and also participated in long-term strategic planning. The two men shared a passion for retail stores and retail customers. Norm was proficient in the then-unnamed concepts of positioning and branding, and he understood what those things mean for retailers. Sid knew the day-in, day-out of retail and understood how to make stores and catalogs run smoothly and profitably.

Wards rallied a little, as it would do numerous times before finally closing down in early 2001. Sid left Wards in 1981 to become a retail entrepreneur, cofounding a regional chain in the nascent warehouse club industry. Norm went on to help position retailers owned by a company called Household Merchandising, including such well-known chains as Vons supermarkets and Coast-to-Coast hardware stores.

The two men reunited for a brief time at Household before they set out on their own in 1986, forming McMillan|Doolittle LLP, a retail consulting firm.

MCMILLAN|DOOLITTLE’S POINT OF VIEW

From the beginning, McMillan|Doolittle has had a few core principles:

• We preach positioning, which we define as owning something in customers’ minds. It also entails identifying specific customers and delivering something meaningful to them that the competition isn’t.

• We track winners and losers. Soon after Norm and Sid founded the firm, they introduced a newsletter called Retail Watch, with articles about the stores they toured. We still publish Retail Watch every month, in which we analyze and critique retail stores around the world, discussing new concepts and formats in categories as diverse as hardware stores and restaurants.

• Another core principle of our practice is the notion that retail is all about customers. From the beginning, we’ve worked with supermarkets, gas stations, and department stores, because we’ve always contended that customer behavior and trends remain constant, regardless of the retail format. Our customer focus also has allowed us to do work for companies that serve retailers, such as consumer product manufacturers, advertising agencies, investment banks, and real estate companies. No matter the client, our commonsense approach to retail remains the same: Give customers more of what they want and less of what they don’t want.

• Finally, we strive to be honest and straightforward. We also keep things simple, and we tell it like it is. There’s no place in retail for fancy and elaborate theories. Likewise, there’s no place in retail for somebody who’s hell-bent on using a million-dollar word when a ten-cent one will do just fine. Retailers have neither the time nor the inclination to digest euphemisms and sugar-coated remedies.

Our candor is a value to clients. It has made us sought-after speakers and commentators on the retail industry and has made Retail Watch a popular publication. Retailers use Retail Watch to track competitors, to learn about new store concepts, and to get ideas about best practices and worst practices. Real estate brokers and consumer product manufacturers use it as a tip sheet to scout for potential clients. What makes Retail Watch work, in our opinion, is our opinions.

We have a point of view, and we tell it. We don’t mince words. We don’t hesitate to voice our likes and dislikes, our concerns, and our doubts. Of course, we’ve upset some clients and potential clients, but we believe that our unabashed, uncensored opinions are what makes the newsletter valuable. (In fact, we’ve been called the Siskel and Ebert of retailing—although we never adopted a thumbs-up, thumbs-down system.)

With more than 17 years’ worth of articles, Retail Watch represents an unparalleled body of work about retail stores—particularly new concepts and prototypes for established retailers. When we write about stores, we focus on the retailer’s strategy and positioning. We also look for basic execution, but most important, we watch customers to get a sense of store performance. An accountant would insist that we review the books before assessing sales and profits. Of course, there’s a reason why accountants make crummy retailers. The number of customers in a store, where they are, and whether they’re leaving with purchases or empty-handed tells the trained eye a great deal about a retailer’s performance. We’d venture to say that you wouldn’t find many better-trained eyes than ours. We’re like the art critic who explains how to tell whether a painting is good: “When you’ve seen 50,000 paintings, you know whether the 50,001st is any good.”

Music fans love to tell about having seen a famous band long before it hit the big time: “I knew them when . . .” We’re like that with stores. Name a successful retailer in the second half of the twentieth century, and chances are that a partner with McMillan|Doolittle visited one of their first stores, studied its strategies, and gauged customer reactions. We probably also wrote an article about it—complete with discreetly taken photographs—for Retail Watch. For instance, Norm McMillan visited the first Home Depot in Atlanta. Sid Doolittle toured Price Club in San Diego, the nation’s first warehouse club store. We worked with Staples when the retailer had only two stores in the suburbs of Boston. We visited the first Wal-Mart supercenter in Washington, Missouri, as well as Wal-Mart’s first attempt at a supermarket/discount store combination, HyperMart USA, in Garland, Texas. We make it a point to visit stores that break new ground. That’s a thrill to us, because it’s like glimpsing the future.

One of the greatest things about the retail business is its immediacy. Inventory is bought and put on a certain shelf in a certain aisle at a certain price at a certain time of year. Soon after the store opens, the retailer has a pretty good sense of whether he or she has done all those things right or wrong. Retail executives don’t have to wait years to learn whether they’ve won or lost. In retailing, fortunes are literally made and lost every day based on thousands of seemingly insignificant contact points with customers. Were they able to park close enough to the store? Was the parking lot well lit? Could they easily find what they were looking for? Was the price competitive with another store two blocks away? Were they able to get through checkout quickly?

That’s what retail is all about. It’s not about poring over balance sheets and scrutinizing sales figures. These types of details make retail a tough and demanding business. In reality, it’s simple. Retail is about looking at stores and looking at customers. If retailers do a good job of that, they are not going to be wrong very often.

While that sounds pretty easy, it’s actually extremely difficult. Due to the nature of the business, a retailer has to make thousands of little decisions every day—and very few big decisions. That makes it difficult for retailers to think ahead five years, even one year, because the day-to-day business is so consuming. It has been said that retail involves looking three months into the past (what sold and what didn’t) and one hour into the future. That’s why so many retailers miss the big picture and fail miserably at long-term strategy and vision.

What we most enjoy about our place in retail is that we live in the thrill of the business’s immediacy while also exploring the strategies and positioning crucial for future success. We have the luxury of being able to look forward, while many of our retail clients do not. It provides us with a unique perspective to try to bridge that gap, because we understand day-to-day retail issues, yet we also understand that stores must develop forward-looking strategies or risk not being around in the future.

ACKNOWLEDGMENTS

We would like to extend our heartfelt thanks and gratitude to Norm McMillan and Sid Doolittle, our teachers, mentors, and guides, who continue to provide the heart and soul of McMillan|Doolittle’s retail practice. We would also like to thank Eddie Baeb, former retail reporter for Crain’s Chicago Business and current staff writer for Bloomberg News, for his invaluable assistance in shaping the content and tone of the book and for conducting much of the background research that shaped the foundation. We would like to thank the extended family of current and past McMillan|Doolittle partners, affiliates, and clients for providing many of the thoughts, examples, and ideas that form the foundation of this book. And special thanks to Felicia Glinstra and Alison Perkins for helping to develop the data and charts and for generally putting up with us during the process of writing this book.

PART I

The Theory

CHAPTER ONE

EST: A COMPASS TO AVOID RETAIL’S BLACK HOLE

Beware the Black Hole!

The Black Hole is the place where retail companies that are no longer relevant to customers go to die. As you may recall from high school physics, a black hole is a region in space where the gravitational pull is so strong that not even light can escape. That is also an apt description for retailers that have not established themselves as the best store for customers looking to fulfill a specific need: Once they are in the Retail Black Hole, it’s next to impossible to get out.

In recent years, the number of retailers entering the Black Hole increased as store productivity slowed and competition increased. Not only the small, regional chains were failing. Big-name retailers with hundreds of stores—some nationwide—were going out of business.

Chapter 11 bankruptcy has become practically a household phrase among U.S. consumers, with Kmart filing the largest such case in business history. Unfortunately, so-called Chapter 22 is becoming nearly as common—retailers who restructured their businesses once, only to meet the same bankruptcy fate a few years later down the line.

Frankly, it made our Black Hole presentations better, and we spend more than our fair share of time working with the press to explain what these failures mean to retailing and to consumers. It also became clear to us that these stores were failing because they were not properly responding to the way customers were changing: They had not become best at anything (or had ceased to fill that role) for customers.

Now, because of the Internet, extraordinary access to capital, and nearly instantaneous worldwide communications, retail change is happening faster than ever. Winning chains such as Wal-Mart are continuing to grab market share at an unprecedented rate, while foreign retailers with strong track records, such as Ikea, Zara, and H&M, are becoming a larger part of America’s retail landscape. Entire retail categories—such as variety stores, regional discount stores, regional electronics chains, and catalog showrooms—have all but disappeared. Once-successful retailers are becoming obsolete at a fast pace.

No retailer is immune. Kmart, the nation’s third-largest discount store chain, was forced to file Chapter 11 bankruptcy in January 2002. Less than a decade ago, Kmart was the nation’s second-largest retailer. Other large retail chains that may seem a long way from the brink are also in peril. That’s because stores like Kmart are adrift in a place that we call the Sea of Mediocrity. These stores aren’t best at anything, and they don’t have a distinct or sharply defined customer proposition.

It’s not easy staying on top, either. Over the years, the examples we use to illustrate winning retailers have gone through constant change. Role model retailers like Circuit City and Toys “R” Us have fallen on hard times, failing to react to their own individual inflection points. Even a gold standard retailer like Home Depot is looking into the rearview mirror, as nimbler competitors like Lowe’s do a better job of responding to consumer needs. The immediacy of the retail business and the customer’s response to a retailer’s offer create a constant scorecard with which to measure success. Comparable store sales figures (sales of identical stores currently versus a year ago) provide a running commentary on the industry. We know, almost in real time (Amazon.com showcases a gift meter on its web site), how a company is performing.

The ebb and flow of successful companies is hardly unique to the world of retail. The same phenomena take place every day in any business that serves the consumer. How, though, can one explain this logically, so companies can stay ahead of the curve instead of simply reacting to it? In too many cases, by the time a company is nearing Chapter 11 (or the Black Hole), it is way too late to effect meaningful change with the consumer or on Wall Street. The key, of course, is to determine trouble before it occurs and act accordingly.

EST DEFINED

The breakthrough for McMillan|Doolittle was our drive to articulate retail success in a straightforward way and make sense of the seemingly random changes we were witnessing on a daily basis in the retail world. Our goal was to simplify rather than complicate. We worked hard to be plainspoken and to come up with a better way of explaining things. Ultimately, that led to the development in the early 1990s of what we call the Est theory for retail success.

The Est theory derives from the word best, and it essentially says that a retailer must be best at one proposition that’s important to a specific group of customers. Retailers must strive for a specific positioning to a specific set of customers rather than attempting to be great at everything to everybody. To accomplish this might mean targeting a specific customer at the exclusion of others, giving up on merchandise categories that today might still be yielding profitable sales, or forgoing short-term growth and profits with an eye toward long-term success. These ideas were heretical for most retailers at the time and are concepts that most struggle with even today.

Est originated through an analytical exercise in which we systematically studied winning retailers (as defined by sales growth and profitability) to determine what made them tick. As we tried to discern the key attributes that made them successful, a rather startling pattern emerged. In those companies that had a singular defining characteristic from a consumer perspective, we saw well-above-average financial results, even among companies pursuing seemingly disparate aims. Companies for which we could not isolate any one defining reason for being almost inevitably wound up somewhere in the middle of the pack. It became clear to us that being the best with consumers had a clear impact on the bottom line.

Do you really have to be best to succeed? We are often asked that by our retail and service company clients who proudly show how good they are in many areas. As Jim Collins proclaimed in his book Good to Great, “Good is the enemy of great.” We agree, and we take it one step further. “Pretty good” are words retailers should dread, because if you are not an Est retailer and you’re still in business, that’s probably how customers describe you: “Pretty good.” That means customers have other stores they’d rather shop. Sooner or later (most likely sooner) they will find those stores or those stores will find them, and they won’t come back to you. Today’s time-starved shoppers don’t frequent mediocre stores.

Clearly, customers have less time to shop. They are also more knowledgeable about the products they want to buy and the stores that sell them. They have more choices of where to shop than ever before.

The customers who still frequent mediocre stores probably do so because of a historic attachment—it’s where they or their parents always shopped. Or they were attracted to the mediocre store because of a sales promotion. Or they simply didn’t have the time or energy to drive to a preferred store. Finally, being handy to where they live or work certainly helps. We can hardly dispute the old retail adage—location, location, location. Yet consumer research indicates that it is the proverbial kiss of death if location is the primary reason customers shop at your stores—someone else can always get closer.

Whatever the case, these types of customer relationships do not have a bright future, which is why pretty good isn’t good enough anymore.

Many of the stores now enshrined in our Black Hole memorial were pretty good stores. (See Figure 1.1.) Montgomery Ward, for instance, ranked third or fourth by consumers as places they’d likely shop for various items. While Wards wasn’t anything-Est, at least it was a close also-ran in some categories. That doesn’t sound too bad. Not many people hated Wards—but even worse, they were simply indifferent. How’s Wards on price? “Pretty good.” How’s Wards on service? “Pretty good.” How’s Wards on fashion? “Pretty good.”

FIGURE 1.1 Black Hole Memorial

How’s Wards on assortment? “Pretty good.” Those kinds of results from customer surveys may have seemed pretty reassuring to Wards’ executives. Actually, being pretty good at lots of things was the foundation of the modern era of mass retailing for general-merchandise stores. It was a pretty good formula into the 1980s. It’s not anymore.

Pretty good stores cannot satisfy increasingly demanding customers. Pretty good stores also cannot compete with today’s sharpest retail chains. Stores like Wal-Mart, Target, Costco, and Kohl’s have raised customer expectations. Falling short of expectations means not satisfying customers, and that’s the most direct path to the Black Hole.

EST IS NOT A MARKETING TOOL

Est is not simply a “marketing thing,” a way to position a company in advertising and external communications. The buzzword today is branding, and while we believe in the concept, too many companies confuse the articulation of a marketing and/or design message with the essence of the company. Est Retailers devote themselves with laserlike focus to their core customer proposition, what we call their Est position. They commit employees from the top to the bottom of their organization to that position. They communicate that positioning to their customers and execute it relentlessly at the store level. Est retailers also base strategic and day-to-day operational decisions on their positioning. An Est positioning is not simply the marketing message du jour—it is a way of life for successful retailers.

Wal-Mart is the quintessential example. Everything Wal-Mart does is focused on enhancing its position as the low-price leader. With its “Always Low Prices” tagline and “Everyday Low Price” positioning, Wal-Mart wins with customers on price. Yet this is not merely an advertising proposition—the drive for lower prices for the consumer defines every action that the company takes. It is at the heart of Wal-Mart’s mission, its very reason for being. Sam Walton founded what is now the world’s largest company (period, not just in retail) on the simple belief that customers would like to pay less for the products they purchase and that ordinary folks should have the opportunity to buy products that make their lives better. Every single action the company takes is measured against these fundamental principles.

We call that particular Est Cheap-Est (and it has served companies like Wal-Mart very well). The other Est positions that win customers are Big-Est, having the largest assortment of product in a specific merchandise category; Hot-Est, having the right products just as customers begin to buy them in volume; Easy-Est, having the proper combination of products and services that makes shopping easy; and Quick-Est, organizing the store to make the shopping trip as quick and efficient as possible. (See Figure 1.2.)

FIGURE 1.2 Est Model

THE INTRODUCTION OF EST

Norm McMillan, one of the company’s founding partners, first presented the Est theory in the early 1990s at an international food industry trade show in France. It played well in Paris (and subsequently Peoria), and we’ve been using and fine-tuning the model ever since. The theory has resonated with our clients (and to audiences throughout the world) for more than a decade because its message is easy to grasp and is actionable.

By further studying these companies, we also recognized they had done much more than carve out a niche. They weren’t simply the best among their rivals by default. These retailers had devoted their organizations from top to bottom to becoming the best in one particular area. It was the driving force of their businesses. Once we identified what the winning retailers strove to be best at for customers, the Est theory was born.

We liked the model we had hatched. It made sense to us. But we were waiting for someone to fire a silver bullet, to raise a question or example that Est couldn’t easily answer or explain. We’re still waiting.

DOES EST CHANGE? ABSOLUTELY

We created Quick-Est in the mid-1990s to recognize the growing importance of saving customers time and to recognize that retailers can win by focusing on providing customers with time savings as a key benefit. While this may have always been true, consumer trends (working women, less free time) finally made time a critical currency that we could effectively model. Who’s to say that another driving element won’t emerge as the consumer continues to evolve? However, we are cautious in screening between a fad and a key consumer trend.

In the mid-1990s, we also heard from people who thought we should add a new position to recognize the emergence of entertainment-focused retail stores. Remember “retail-tainment?” At the time, everyone from restaurants to retail stores packaged entertainment as a key selling factor. We considered adding categories like “Exciting-Est” or “Entertaining-Est,” but ultimately we rejected the idea because, regardless of how exciting it is, a store’s ultimate purpose is to sell merchandise. Customers need a more rational reason to visit a store than its entertainment value.

If all a store had going for it was that it was best at entertainment, could it win? We don’t think so—and the customers have voted, too. Warner Brothers shuttered their once-exciting retail stores, and many “eater-tainment” restaurants have scaled back their growth.

We believe a store can win by being clearly best in one of five critical areas: assortment (Big-Est), price (Cheap-Est), fashion (Hot-Est), solution-oriented service (Easy-Est), or speed-oriented service (Quick-Est). There are other possible niche Est positions (such as Fine-Est, for the high-quality, luxury retail segments), but successful retailers today serving the masses can clearly be defined by one of these core Est positions.

Does an Est retailer exclude a focus on those other retail elements? Of course not. As we discuss in later chapters, all retailers must provide a base level of competency across all factors critical to the consumers. The real winners are the ones who found an Est that they could own.

The advent of e-commerce also forced us to reexamine Est. Remember e-tailers? Certainly, this was no flash-in-the-pan trend like “retail-tainment.” We studied e-commerce and how customers shop online, and we found that e-commerce and some of its winners (Amazon.com, Priceline) in no way disproved the Est theory. In fact, we believe the theory applies as plainly online as it does in the bricks-and-mortar world.

As we said, the Est model will change over time, but the underlying theory is likely to stay intact. For instance, as customers and competitors evolve, it’s possible that Big-Est will no longer be a position that’s sufficient to win. Also, if customers become increasingly driven by safety, quality, or product integrity, we may add an Est position to reflect that. Quality, or getting the job done right the first time, is a critical element, particularly in the retail services industry. Part of the power of the theory is that it can easily be altered or adapted, yet still be true to its essence.

Fortune 500 companies such as McDonald’s, Procter & Gamble, and The Limited have put Est to work in their businesses. That’s because in addition to explaining what it takes to succeed in retail—a critical lesson in these perilous times for the retail industry—the Est model can be used in several actionable ways:

• Est is an analytical tool that companies, both retailers and nonretailers, can use to determine where they stand with customers and how they compare with competitors. In a very simple format, it provides a diagnostic tool to understand where a company stands.

• It is also a prescriptive tool for a company to identify market niches and growth opportunities. If there are available niches, it points them out. If there’s not a clear opening available (which is increasingly becoming the case), it identifies where the business will have to come from.

• Finally, Est can be used to form a company’s strategic foundation. It’s a way to focus strategic decisions and day-to-day operations on one big idea—the Est position.

The Est model is a powerful tool that helps retailers avoid the Black Hole and also helps them attain growth, profits, and enduring success.

PUTTING EST TO WORK

Our two favorite real-world examples of putting Est to work are Target and Vons supermarkets.

Soon after Target adopted its better-quality strategy in the mid-1970s, the company’s chairman at the time stood before a meeting of several hundred company executives and held up a pair of sneakers. He described the shoes as shoddy. The soles fell off easily, and several customers had complained. Then he asked which buyer had bought these shoes. A timid hand went up. The buyer explained that he got a great deal. The shoes were closeout items from China. Target bought them for $2 and was selling them for $8. It was profitable for the company and a great price for customers. A relatively small number of customers had complained, especially considering the phenomenal price. The chairman listened, then asked, “What does our strategy say?” No answer. “It says Target sells quality merchandise.” At that time, discount stores were known for selling shoddy products, but that’s not what Target aspired to be. The chairman then instructed the buyer to have all the shoes immediately removed from the stores and destroyed. The chairman chose a very public place to make a point about positioning and the importance of being true to an Est position, even at the cost of passing up profit opportunities.