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Monday, May 28, 2007

12 Lessons From The Giant: What NOT To Do

Wal-Mart Nogales, AZ originally uploaded by djcn0te.
Whenever I have a Wal-Mart experience, thoughts percolate. I'll come home, shake my head and mentally walk through every step to recap all that was unimaginative, uninspired and unpleasant. And, then, I'll compare it to the whimsical, delightful and thoughtful experiences that I inevitably have at Target.

So, when I read this 4/30/07 Business Week cover story titled Wal-Mart's Midlife Crisis - Declining growth, increasing competition, and not an easy fix in sight by Anthony Bianco many of those percolations led to the following brew of lessons and observations about what NOT to do if you are serious about providing a consistently memorable and delicious consumer experience.

Early on, the article declares: "For nearly five decades, Wal-Mart's signature "everyday low prices" and their enabler—low costs—defined not only its business model but also the distinctive personality of this proud, insular company that emerged from the Ozarks backwoods to dominate retailing." But, what worked so successfully for so long, is no longer the magic formula.

The article refers to "botched entry into cheap-chic apparel", and "overdue improvements such as the store remodeling program launched last year"... More fundamental, though, is whether Wal-Mart is alienating those who brought it to the dance in pursuit of Target consumers.... Hmmm.

Regardless of those speculations, here follow my 12 lessons on what NOT to do if you are truly committed to delivering a memorable customer experience:

From a store perspective:
1. Don't allow your stores to become dingy, un-cared for, dated or unpleasant. Have a store remodeling plan in place and be sensitive as to whether you need to speed your cycle up or not. Consumers pay attention and it is critical to have an ongoing plan to keep stores looking fresh, fashion focused, engaging. Consider having an 'expiration date' [see Change And The Store Experience].

2. Don't create an environment that burdens your consumer. Make sure your stores are clean and uncluttered, that product can easily be located, that you minimize any kind of wait time [checkout, delivery, installation...]

3. Don't become complacent and think that good enough is OK. Banish mediocrity! Mediocrity goes hand-in-hand with indifference, and indifference drives consumers away.

4. Don't fall in love with expansion and lose sight of existing stores and customers. Great size is not necessarily a plus. Better to extract more value from existing resources, than always try to pursue new ones.

5. Don't understaff your stores. It sends a bad message.

From a strategic perspective:
6. Don't focus completely on being the lowest priced retailer. Price represents an ephemeral competitive advantage. Better to focus on your total experience to the consumer and the total value package you offer her.

7. Don't be a schmuck. Rather, be honorable. Be a good corporate citizen and community member. Be good to your employees who are your customer ambassadors. Be good to your customers who are your community and business ambassadors. Be honest and stay focused on how your business can improve your customers' lives.

8. Don't lose touch with the marketplace. Be aware that the marketplace changes constantly, that competition gets better, and don't ignore who your most critical customer is [hint: a woman].

9. Don't have tunnel vision. Do integrate your back-end [yes, controlling inventories remains critically important] into the whole of your operation to deliver the best possible experience to your staff and customers.

10. Don't ever underestimate the power of quality, convenience and customer service. They represent value to your customer.

11. Don't ever alienate your core customer base. Otherwise, you are dead in the water.

12. Don't wing it! Have a plan and integrate all of your elements to deliver that plan consistently and successfully to your customers.

In case you don't believe that focusing solely on price isn't enough: "To the selective middle-income shopper, quality, style, service, and even store aesthetics increasingly matter as much as price alone. "Here's the big thought Wal-Mart missed: Price is not enough anymore," says Todd S. Slater, an analyst at Lazard Capital Markets."

I chuckled at how Sam Walton made decisions for the carpet in his stores: "Aesthetics counted for so little that when the retailer finally put down carpet in its stores it took care to choose a color that matched the sludgy gray-brown produced by mixing dirt, motor oil, and the other contaminants most commonly tracked across its floors. To Wal-Mart, the beauty of its hideous carpet was that it rarely needed cleaning." Wow! How practical! No maintenance needed...

I compare that with the bright Target red carpet I saw being made at Mannington Carpet where we were informed that Target has a terrific maintenance program [one more reason to shop Target] and takes great pride in its red carpet and keeping it clean.

[The new simulated-wood vinyl floors that I experienced in Wal-Mart Plano: Like No Other Store! and newer stores may be aesthetically more pleasing, but it also requires considerably less maintenance than the hideous never-maintained carpet.]

In case you don't believe that the people aspect of your business matters: "While the look of its stores is primarily a function of how much Wal-Mart chooses to spend on them, the retailer is unlikely ever to come up with an ambiance conducive to separating the affluent from their money without changing its whole approach to labor. The chain's dismal scores on customer satisfaction surveys imply that it is understaffing stores to the point where many of them struggle merely to meet the demands of its self-service format."

Now, here is a thought. Wal-Mart may cater primarily to 45 million low income Americans, but aren't they, too, entitled to excellent service? What kind of message does that send?

The article mentions "In the past few years, Scott has reluctantly brought Wal-Mart out from behind its Bentonville barricades. Virtually from scratch, this famously conservative company has built a large public and government relations apparatus headed by Leslie A. Dach, a veteran Washington political operative of pronounced liberal bent." The 4/2/07 issue of The New Yorker in Annals of Spin. Selling Wal-Mart. Can the company co-opt liberals?? by Jeffrey Goldberg focuses on the public and government relations work [and the many PR challenges created...]. Although it seems more about suggesting that Leslie Dach sold out to Wal-Mart, the interesting information comes at the very end where we realize just how bare bones and subsistence-based the Wal-Mart model is and how much it is dependent on frequency of transaction for profitability....

"Mona Williams, the chief spokeswoman for Wal-Mart, disagreed. When she was asked why the company could not simply give two-dollar-per-hour across-the-board raises to its store employees, her reply was free of obfuscation. “Wal-Mart’s profit per associate is six thousand four hundred dollars,” she said. “If we were to pay two dollars more an hour to associates, that would cut four thousand dollars out of our per-employee profit. If anybody ever stopped to do the math, they’d see this. It would take two-thirds of the profit if we gave everyone two dollars more.” She added, “You could raise prices, but what about the woman who is shopping for Easter shoes for her kids? We can’t raise prices on her.”

Are you convinced yet that the 12 lessons from the giant on what NOT to do are sound? Here follow examples of retailers taking these lessons to heart:

+ The 05/14/07 issue of Boston.com Macy's sees food as the way to the wallet: in-store restaurants and cafes enable customers to take breaks without leaving the store premises, improving the Macy's experience and creating a strong point of differentiation. "The longer retailers can keep customers in stores, the more they will spend, said James Dion, president of the consultancy Dionco Inc. 'Combining services so shoppers can grab a bite to each and shop in one place plays right into the lifestyle of a lot of consumers.'" [Sounds like something Paco Underhill would say!].

+ USA Today's Fast repair a priority at Geek center article by Dylan T. Lovan, on 05/13/07 describes the new warehouse/repair center opened in Kentucky specifically to speed up repairs and give "the customer a better experience".

+ The 5/23/07 issue of The Seattle Times features Nordstrom: A fashion-forward future by Monica Soto Ouchi describing enhancements [e.g., perpetual inventory system] and ongoing improvements [e.g., remodeling and relocating stores] to maintain its strong customer service reputation.

Midlife is certainly no time to become complacent. In fact, complacency is what leads to crises. To avoid the level of complacency that Wal-Mart seems to have adopted, consider Martin Linstrom's 10 components to creating strong brands in Religion: Inspiration For Brands from Branding Strategy Insider. They certainly reinforce the 12 lessons from the giant on what NOT to do and offer sound advice on how to deliver a memorable customer experience.

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Anonymous said...

Love #7 up there, C.B. I think that one should be a little closer to the top – and generally be respected for any interaction, personal or professional.

CB Whittemore said...

Mark, you are absolutely right! Thanks for putting #7 into a larger context.

Anonymous said...

Evolving Excellence has been discussing how Wal-Mart's long supply chain has been impacting Wal-Mart... and how that then comes back to "bite" China. That long supply chain makes it especially difficult for the company to deal with fickle fashion consumers.



CB Whittemore said...

Ken, the notion of such a long supply chain is truly mind-boggling. Interesting that you bring up the effect on China. Makes sense that both ends of the tail would be affected. Also makes companies that have developed radically different supply chain models [e.g., Zara] that much more amazing. Thanks for visiting.

Anonymous said...

Sam Walton was a man of his time, a time that has past. This conclusion is drawn from the second paragraph following the "12 lessons": " I chuckled at how Sam Walton made decisions for the carpet in his stores: "Aesthetics counted for so little that when the retailer finally put down carpet in its stores it took care to choose a color that matched the sludgy gray-brown produced by mixing dirt, motor oil, and the other contaminants most commonly tracked across its floors. To Wal-Mart, the beauty of its hideous carpet was that it rarely needed cleaning." Wow! How practical! No maintenance needed... "

The "establishment" of the 1960s were still "white men in white shirts, neckties and suits". Their work ethic included a notion that providing luxury for employees was just plain wrong, possibly even immoral. Against that backdrop, DuPont gained a toe-hold for carpeting commercial floor space by comparing the cost cycle of carpets and hard surfaces. Carpet's initial higher investment is more that offset by vacuuming weekly versus sweeping daily, by steam clean twice a year versus buffing every month, etc.

Did Sam get DuPont's cost-cycle message? Did he reduce costs even further by never steam-cleaning? Imagine Sam's thinking versus this bit of trivia from the mid 1980s. A corporate interior designer for Sears told me that she specified loop pile carpet for many areas of the stores and transitioned to cut pile to subtly evoke the boutique aura for the clothing department.

Vestiges of the establishment's "no luxury" mindset lingered through the 1970s. Here are two examples. The world's first nylon plant, a major producer of carpet fiber, had no carpet in its main office building because the plant manager detested any trace of luxury, even in his own office. A federal agency in DC stirred up a hornet's nest when, upon relocating, found an old glued-down carpet in the office of an administrator whose rank was too low to allow a carpet.

CB Whittemore said...

Craig, thanks for sharing this perspective on a world so very different from today's.

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