Sam Swaminathan

Retail: Retail: The Devil is in the The Devil is in the

DetailDetail

2

OUR ORGANIZATIONS TODAY

• Although their size has greatly increased, there has been virtually no new idea of organization since the concepts of corporation, nation-state, and university emerged a few centuries ago.

That is like having Boeing 777s with the cockpits of DC3s.

3

• Radical social change and ever-increasing diversity in the way people live, think, and work demand radical organizational change.

OUT OF SYNC!

4

LEARNING TO FORGET

• Whatever made you successful in the past will not make you successful in the future.

• Applying past learning alone cannot guarantee success; in fact, it guarantees failure.

• Learn to forget; don’t forget to learn.

THE RETAIL TRIANGLE

Customer LoyaltyCustomer Loyalty

7

• If you were to be given the choice of being presented with• all the assets of Coca-Cola, except

its name, or • only the name

• Which option would you take?

BRAND LATENCY

8

• Coca-Cola has brand latency. It has the implicit power to continue to sustain a market well into the future simply because it is what it is.

• BRANDS COUNT

BRAND LATENCY

9

• But in a world where the cycle of innovation is being progressively crunched - a world where markets grow, unfold, and die in nanoseconds, brands alone cannot create customer loyalty.

BRAND LATENCY

10

• How do you prove your loyalty to your customers?

• Not by pursuing customer loyalty, but by being loyal to your customers.

CUSTOMER LOYALTY

11

• In a customer-loyal world, your first concern is someone who purchased your product, because that customer is your best and cheapest billboard.

CUSTOMER LOYALTY

12

• In a customer-loyal world, you thank your customers, not in expectation of what they might do in the future, but for what they have done in the past.

CUSTOMER LOYALTY

13

• In a customer-loyal world, you make your own value structure isomorphic with that of your customer base.

• Build that in, and loyal customers will come.

CUSTOMER LOYALTY

14

• Like every other form of loyalty in a particalized world, customer loyalty is as thin as the horizon. Abuse it once, and you have lost it for good.

CUSTOMER LOYALTY

15

• Products disappear, brands fall out of favor, in ever tighter cycles. All you can transfer from product to product, from brand to brand, is your customer’s loyalty. And because your customer is under no obligation to be loyal to you, loyalty is the most valuable commodity you can own.

Scarcity creates value

CUSTOMER LOYALTY

16

• Great service at a restaurant means that the food arrives on time, is presented properly, and the plates are cleared gracefully and promptly.

• Great hospitality means that you leave there feeling the staff is on your side.

• What would a restaurant with great hospitality do if you left your credit card or bag behind?

Hospitality is an emotional skill.

GREAT HOSPITALITY

DistinctivenessDistinctiveness

18

• If you parachuted into the cosmetics section of a major department store, could you tell which one you were in?

• If the product names were disguised, could you distinguish the Estee Lauder counter from the Lancome counter?

Selling Cosmetics

• The way cosmetics are merchandised and sold hasn’t changed for over two decades.

• Hi-end products are sold almost exclusively in upscale department stores and account for as much as 20 percent of store profits.

19

20

Distinctly DifferentDrawn into the Sephora store by red carpet, lured by

soothing music, you enter the Temple of Beauty:

o "What's Hot" Fragrance Wall: Features new and best-selling fragrances. A quick way to experience the latest bestsellers. Each fragrance is displayed in its own brightly-lit alcove.

o Fragrance Organ: Our circular scent bar, where you can test and compare fragrances. Use a tester stick to experiment with fragrance notes and accords. A fun, interesting way to learn about scents.

o Treatment Library: Our unique new presentation. At Sephora, you do not have to search for treatment products under a company name, instead products are showcased according to your needs, for instance, Dry Skin, Oily Skin, Body or Sun.

The Future of Beauty

21

Distinctly Differento Lipstick Rainbow: The image of Sephora - a shade for

every occasion, mood or style. Approximately 365 shades - one for every day of the year. Finding the perfect red is now a reality.

o Nail Polish & Pencil Spectrum: Sephora brand's nail polish comes in roughly 150 shades packaged in practical miniature bottles. Sephora brand cosmetic pencils, in 150 shades and growing, offer jumbo and slim sizes for eyes, lips and cheeks.

o Private Label Bath: L'Art du Bain adds color and luxury to your bathing ritual. Pick a shower gel or bubble bath from an array of 18 colors and fragrances. Sephora brand's bath collection also includes glycerin soaps, bath oil pearls, bath salts, potpourri, and fragrances.

The Future of Beauty

22

The Future of Beauty

Defying traditional selling, by giving you what you want:–

• Freedom – hands-on, self-service shopping environment

• Beauty – through an international array of luxurious beauty products

• Pleasure – through expert advice, personal freedom, and service displays

23

Traditional Sephoramodel model

Commission Yes NoGift with purchase Yes NoOne brand per counter Yes NoMf. controls display Yes NoEasy to sample No YesShop unmolested No YesEasy to compare No YesCustomer in control No Yes

THE NEW DIMENSIONTHE NEW DIMENSION

24

DISTINCTIVENESSDISTINCTIVENESS

“By the combined force of its ambience, design, and merchandise mix, Sephora blows away all other competitors in its category. And it does so without the gift-with-purchase clutter, hard sell and often haughty sales people that define much of department store beauty retailing. In fact, what I liked most about Sephora was the egalitarian way it treats both shoppers and merchandise.”

Marianne Wilson, Chain Store Age

Employee Employee HappinessHappiness

PEOPLE – SERVICE – PROFITS

Employee HappinessEmployee Happiness

Customer SatisfactionCustomer Satisfaction

ProfitabilityProfitability

PEOPLE – SERVICE – PROFITS

27

• Care more than others think wise.• Risk more than others think safe.• Dream more than others think

practical.• Expect more than others think

possible.

STARBUCKS

EMPLOYEE HAPPINESS

28

STARBUCKS

• There is no finer example of the fact that a company can provide long-term value for shareholders without sacrificing its core belief in treating its employees with respect and dignity.

EMPLOYEE HAPPINESS

29

• If people form an emotional tie to the company and buy its dreams, they will pour their heart into making it better.

• Success is empty if you arrive at the finish line alone.

• A company can grow big without losing the passion and personality that built it, only if it’s driven by values and by people, not by profits.

EMPLOYEE HAPPINESS

STARBUCKS

30

• Any number of different factors can knock a company off its course. But passion is, and will always be, a necessary ingredient. Even the world’s best business plan won’t produce any return if it is not backed with passion and integrity.

EMPLOYEE HAPPINESS

STARBUCKS

31

• Employer of choice• Higher pay than the market• Benefits not available elsewhere• A group of investors and managers should not

win at the expense of employees

• Health-care to include 20 hour a week employees

• Treat people like family and they will give their all

EMPLOYEE HAPPINESS

STARBUCKS

32

• Bean Stock - stock options to all, in proportion to the level of base pay [started at 12% - now 14%].

• Investors might hold a slightly smaller percentage of the company, but the value of their holdings would grow faster and more surely.

• A special exemption from the SEC was required.

EMPLOYEE HAPPINESS

STARBUCKS

33

• Since that day, no one is called an employee. Everyone is called a partner.

• A partner earning $20,000 would be given $2,400 of stock options. He could cash in one-fifth of the amount each year after that, simultaneously buying at the first year’s low price and selling at the current price, keeping the difference.

EMPLOYEE HAPPINESS

STARBUCKS

36

• Established Collaboration for Hope and Advancement in India [CHAI], a project to build strong communities in the tea growing district of Darjeeling from where it purchases some of the finest teas available in the world.

• From 17 stores in 1987 to 6,284 in 2003.

EMPLOYEE HAPPINESS

STARBUCKS

39

• Your competitor can imitate everything you possess – technology, location, product range, distribution, logistics, financial chicanery,… What he cannot imitate is the combined passion, will, and capability of your people. That is your only lasting competitive advantage. Use it or lose it.

AND FINALLY…

40

BROUGHT TO YOU BY

SAM SWAMINATHANCenter for Creative Thinking

http://www.ccthinking.com