Tragically, my television broke just days before the Super Bowl. Since we would not survive without a TV, we were forced into shopping for a fast replacement.
Before we ventured out to old-fashioned retail stores, we shopped online. In a half hour I went to about ten stores. All of the specifications were similar, and Target.com had the best prices. I would have bought the TV online right then, but I needed it for the Super Bowl this Sunday. So Kelly, Jack and I hopped in our time machine and went out to the nearby dinosaurs – Best Buy, Sears and PC Richard and Son.
The first brick-and-mortar store we went to was Best Buy. They had an impressively large, clean and well merchandised store. A security lady pleasantly greeted us at the door and we wandered over to the TV section. There was another pleasant associate who asked if we needed help. I told him we were just looking. The salesman and I both new this wasn’t true, but he was contented to go away to fiddle with his cell phone and I never saw him again. Best Buy’s prices were nearly double what we saw online, the specs looked the same, and with no one around to explain the prices Best Buy’s chances of getting the sale disappeared.
Next we went to Sears. You know that elderly relative at the Thanksgiving table who everyone is secretly worried won’t be there next year? That’s Sears. Along the path to the TV section we passed ugly cheap watches, messy unfolded clothing displays, and a rubber tire smell from the automotive department stunk up the joint like garlic at an Italian restaurant. The salesman was horrible. He nervously spent three or four minutes explaining that he didn’t have anything of the quality we wanted in the price range we saw online. He asked, “Would you like to look around to see if you like anything else?” I obliged and he went off to look in his computer system to see if he could find anything else for us. We left.
Next we went to PC Richard and Son, a store known for an aggressive sales staff with a price guarantee. The cheap and dirty carpet contrasted with crisp and clean high-tech devices. All of the price tags had two or three high prices with red lines drawn through them and a slightly lower, but still high price listed below them. We saw a TV on sale for $888 similar to a model I saw at Target.com for $599. The manager came over to explain a few things to me. First, he said Target advertises these prices just to get customers in the door, but their TVs are never in stock. Second, Target sells cheap off-brands or last year’s models that are inferior to their TVs. The manager then refused to match Target or even budge on his price. He didn’t offer any alternatives or attempt to explain why their TVs were so expensive, but just went on bashing his competition with a smug self-satisfied and condescending smirk on his face.
Then we went to Target and bought our TV. The price was great, and a friendly associate helped me pay and load it into my car in a matter of minutes.
There are only two ways a business can create a competitive advantage. They can either have a lower cost structure or create a compelling reason for consumers to pay more money. Target’s low-cost structure allowed them to pass savings to me, so I bought their product. None of the higher priced stores, so called differentiators, created a reason for me to pay up. Heck, Best Buy, Sears, and PC Richard didn’t even present a compelling case for their continued existence.
Yet the rest of the retail world is not doomed to fall victim to the internet and mass merchants. Retailers can survive or thrive by having an effective customer facing associate who is prepared and trained to explain the company’s value proposition. Customers cannot presently get reliable advice or a friendly and personable education from web sites. Also, some stores create an exciting shopping experience through merchandising, atmosphere, and store layouts. And when things go wrong, traditional retailers can compete by fixing customers problems without hassle. Call me a fanboy, but this sounds an awful lot like Apple retail stores.
Retail will undoubtedly include a growing online component in the future. By the time my one year old son Jack shops for a TV, Best Buy and Sears will have gone bye-bye if they don’t blend an online retail concept like Amazon with either a low-cost structure like Target or a value adding shopping experience like Apple.
Categories: Leadership and Management