The best retailers have spent years — often decades — cultivating their brand. But they can get into trouble when they look at today’s technology and try to envision ways they can leverage programming magic to boost margins. The problem is that the mere attempt threatens to undercut the brand. Worst-case scenario, the IT project succeeds — and the short-term profit boost comes at a long-term weakening of the brand. That will ultimately hamper a never-ending list of future profit-enhancing tactics.
In the last two weeks, we have seen two major retailers, with some of the best brand attributes in the industry, risking it all. Whole Foods Markets and Nordstrom — which, along with Trader Joe’s, have arguably the best customer service reputations in the U.S. — have each launched new operations.
Let’s start with Whole Foods. Here’s what it said on May 6: “’Today, we are excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace,’ said Walter Robb, co-chief executive officer of Whole Foods Market. ‘Offering our industry leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.’”
This is one of those “can’t win” scenarios. What does Whole Foods mean by "value prices"? If it means “high prices for high quality,” that’s ostensibly no change. If it means “low prices for low quality,” it will be killing everything the Whole Brands name stands for, even weakening stores that are not part of this specialized rollout. If it means “medium prices for medium quality,” it might as well be rebranded Mediocre Markets.
Presumably Whole Foods means low prices for high quality. And that’s where the real trouble lurks. It can’t sustainably deliver truly low prices for organic all-natural products. That can’t be done with volume, or else Walmart would be the neighborhood source for top artisanal cheese. That leaves two options. The first is fake pricing. That means retaining high pricing while hoping that millennials won’t notice. But mobile devices and instant price comparisons have pretty much killed that option.
More likely, the company will opt for relatively low prices with goods that sound high-quality but aren’t. How long will that likely take to boomerang on them?
The age range of millennials has never been consistently defined, but they can be anywhere from teen-aged to 35. The new Whole Foods premise that this huge age range — a demographic, by the way, that already dominates many Whole Foods locations — has a common set of needs, product desires and disposable income is flawed. The only explanation would be that Whole Foods has a much more narrow definition of millennial in mind, a definition it opted not to share when it announced this plan.
Whole Foods said that it plans on “building a team to focus exclusively on this new concept and is currently negotiating leases. The plan is to begin opening stores next year, and given the more standardized design and product assortment, the Company expects a fairly rapid expansion from there.” More standardized product assortment? Is that marketing speak for offering fewer SKUs, which translates to less choice or more items not available?
Whole Foods has done a wonderful job positioning itself as a high-quality leader, with an emphasis on organic. Any move away from that is extremely risky. But, alas, it is not alone.
Nordstrom‘s effort is not nearly as risky as Whole Foods’, but it’s not wise. It is trialing curbside pickup for online purchases. The intent is to offer convenience when shoppers just want to pick up something purchased online. “A store employee will run the purchase outside so the customer never has to leave his car,” said a report in the Puget Sound Business Journal, which then quoted Nordstrom President Jamie Nordstrom saying, "We're trying to make shopping more convenient. In the past,we’ve made people come all the way up to the back of the third floor.”
At a glance, it seems an admirable effort, extending the customer service reputation of the chain. But the true realization of that goal would be a white-glove home delivery of the item, where the employee would unwrap the product and remove all of the packing debris. (Take that Amazon Frustration-Free Packaging.) Then the associate would assist with the item, potentially helping the shopper find apparel items that would complement the new purchase. That's the kind of service people expect from Nordstrom's, not throwing a package in the car and running off.
In the classic battle of mostly-in-store retailer versus mostly online e-tailers, the stores need to flex their muscles. With Nordstrom’s, it’s taking their legendary customer service, complete with endless patience and that Nordstrom “we’ll take care of everything” attitude and amplifying it. Curbside provides no opportunities to make the experience powerful. Yes, curbside can be quick and convenient, but it’s playing into e-commerce’s hands because that is something that the Amazons of the world can match and better. Play that game at your own peril.
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