RetailT
echnology
WHAT ARE THE BEST WAYS TO INCREASE SALES?
Romeo Richards, retail profit and loss prevention expert, discusses how the fate of today’s biggest UK retailers can serve to remind everyone in the industry what a successful retailer does to increase sales
“
I was watching a BBC interview with Philip Clarke, the then Tesco chief executive officer. He
was drilled over Tesco profit reduction the second year running,” commented Richards, who is founder and chief executive of Retail Profit Protection Experts, a division of The Business Education Centre and author of twelve books on retail profit and loss prevention. Clarke gave three reasons for the reduction in
Tesco’s profit: the economic conditions; competition; and the internet, to which Richards responded: “Hearing excuses for poor performance from the chief executive of Tesco was a bit disappointing because for years Tesco symbolised retail excellence. “In his book The One Thing Y
ou Need T o Know,
author Marcus Buckingham asked former Tesco chief Sir Terry Leahy what was the secret behind the retailer’s success. Sir Terry responded that when he became the CEO of Tesco, the first thing he did was to ask the question ‘who do we serve?’ When he found the answer to that question, he went about restructuring Tesco to serve Tesco’s target market. One of the things he did when he discovered that Tesco’s core market was the ‘Ordinary Joe’ was to increase the number of checkout counters in every Tesco store. When asked about the significance of more checkouts, he responded that Tesco customers did not want to be patronised, they wanted to be shown respect – and what better way of showing respect for someone than showing respect for their time?” Richards turned to fashion retail. “Recently Next
profit overtook Marks & Spencer for the first time in its 32-year history. Next’s success stemmed from its home directory and online division. But what is really responsible for Next’s success according to retail experts is its knowledge of its customers. Next, according to one fashion consultant, knows its customers better than any other fashion retailer in the UK.” But what is the connection between Tesco and Next’s success and increasing retail sales? “Tesco and
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Tesco and Next’s success were the result of extensive customer knowledge
Next’s success were the result of extensive customer knowledge, prompting the retailers to deliberately engineer their business model to appeal to their target market,” he responded. “When Tesco answered the question ‘who do
we serve?’ it redesigned it stores to appeal directly to those people. Next, knowing the majority of its customers prefer credit, introduced its Next Directory Card to appeal to them and make it easy for them to buy from Next.” There is a very important lesson for all retailers
to learn from these retailers’ success, according to Richards. “The lesson is this; increasing retail sales requires you answer the three key questions. Who do we want to sell to? What are we going to sell to them? And how are we going to sell it to them?” He continued: “The myth in retail is that
customer responds only to price reduction. Clarke moaned about the fact that low price retailers Aldi and Lidl and high-end retailer Waitrose were stealing customers from Tesco. If price was the only reason Tesco customers were deserting her for Aldi and Lidl, they would have gone to Poundland or 99p Stores. “Customers who desert Tesco for Aldi and Lidl
did not do so because of the price but because Aldi and Lidl sell low price merchandise made in Germany. It is the ‘made in Germany’ they are buying. Those who desert Tesco for Waitrose did so to buy the experience of buying in Waitrose. Customers do not go into a retail store to buy the merchandise neither do they go there because of price – they go into retail stores to buy the experience of buying the merchandise. As a retailer, you cannot understand the experience your customers seek from your store if you cannot answer the above three questions,” he concluded. “If Mr Clarke had started with the question
‘who do we serve,’ the question his predecessor started with, Tesco would have been able to retain its leadership position in the retail industry. Remember: shoppers go into your retail store to buy experience not your merchandise.”
Spring/Summer 2014 15
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