Some of these accepted truths need to be examined, and challenged! In fact, some of them really are myths.
Myths are beliefs that explain and make sense of the world around us. Myths are especially appealing in times of great change, turbulence and turmoil because of the powerful appeal and comfort they offer. But danger lurks. If retailers make management decisions based on assumptions that are, in fact, myths they will be myth-led.
Don't let your business become a victim of these myths. Let's challenge some widespread truths and expose them as myths.
Myth: My best customer is the one who buys the most.
How would you describe your best customer? Many retailers would say their best customers are the ones who represent the greatest percentage of their sales volume. For example, if asked who his best customer is a retailer who sells family apparel - men's, women's and children's - might answer that because he sells more men's apparel than women's or children's his best customers are men. Upon inspection, however, he discovers that his best customers are women who not only shop for their own clothing, but also for the men in their families.
So, just because a particular product category is selling best doesn't mean that the expected end-user is the one buying it. Our best customer must describe the person acutally making purchases, not the end-user for which the products we sell are targeted. Remember: It's not enough to know what's selling; we must know who's buying.
Myth: Baby Boomers are getting old.
We hear it all the time. The aging Baby Boomers are to turn 50 years old soon. Bring out the signs with larger type and start thinking about ways to accommodate these old folks! Take heed, Baby Boomers may be aging, but they are not getting old. They have yet to behave the way the generation ahead of them behaved at the same age, and there is no indication that they are about to start.
Baby Boomers got their basic training in shopping malls. They've grown up shopping at and supporting specialty stores, and they're not suddenly going to shop at department stores simply because their parents did. It's a state of mind, and they will not act the way the previous generation did.
Baby Boomers always have been unpredictable. They always have enjoyed the limelight, enjoyed the attention their sheer numbers allowed them to command. They relished the SINKs and DINKs stages of life (Single-Income, No Kids, Dual-Incomes, No Kids). Then they started having families, again in a conspicuous way.
Once their kids are grown and raised, will Baby Boomers become "empty nesters" like their parents' generation did? Don't count on it. These aging Baby Boomers instead will become reborn SINKs and DINKs. It's an attitude!
The danger of believing the myth that Baby Boomers are aging: If you treat them as if they are over the hill, you will turn them off and miss a big opportunity.
Myth: Bigger is better.
This is what we call the steroid promise. Its focus is only on growing sales volume, even with a lower margin, higher inventory and higher advertising spending. It is growth at all costs - just to drive up sales. The myth is that with more sales all your problems will go away. It is a common belief that the 1980s validated, but the 1990s expose with regularity.
To sum up the danger of this myth, we offer the Theory of Too's: Too big, too fast, too bad. Better is better. Growth is OK only as long as the balance sheet continues to be strengthened and customer loyalty continues to grow. These things make a retailer better, not just bigger.
Myth: Retailers can get high margins.
When planning for the next season or for the coming year, some retailers are tempted to project the gross profit margins they attained one or two years ago. "We should be able to get our margins back up," they say confidently.
Those days are history. Margins are being driven down more by customers than by competition. Shoppers increasingly rally around the NPR banner: Never pay retail!
The influences of competition in lowering margins are not to be ignored, however. Shoppers enjoy the low prices at discounters and membership warehouse clubs and expect other retailers to match those prices. Those lower prices result from lower operating expenses, a trend every retailer also must attain.
Large chain discounters use cost controls as a price driver. One national retail chain maintains operating expenses at about 16 percent of sales. This means they can have gross margins of just 18 percent and still make a two percent profit. Other retailers struggle mightily to keep competitive.
If you prepare projections that assume higher margins for 1996 then begin to spend against those projections, you will create a disastrous domino effect! Cash flow will be immediately reduced, which will have an increasingly suffocating effect on the health of the business and the walls will cave in quickly.
However, by recognizing that attaining higher margins is a myth, you will not anticipate gross margin dollars that cannot be achieved. Odds are greatly increased that you will survive.
Myth: Cyber-shopping will dominate retailing.
This is a very popular myth these days. We hear a lot about cyber-shopping, the Internet, virtual malls and the like. Frankly, that technology once again appears to be ahead of the tactics. It will take years for computers to become the home appliances the futurists imagine.
Recently, a group of 300 systems people from retail organizations were gathered for a meeting. They were people who use computers daily (and knowledgeably) and work in retail. They were asked to stand if they owned a home computer. Nearly all 300 rose! They were asked to remain standing if they had surfed the Internet from home. At least half of them sat down. When asked to remain standing if they had purchased merchandise over the Internet, only 10 remained standing.
Here's another thought on the myth of the cyber-shopping revolution. Those products that can be sold successfully by computer will tend to be products that men buy. Why is that? Because the majority of computer users are male. As long as computer use continues to be dominated by males, cyberspace will not soon become a hot bed of retail activity. Few men choose to shop, or enjoy shopping. Why would men use the Internet to browse a shopping mall?
Myth: Good customer service is the key to success.
Many retailers are quick to assure us that they believe in good customer service. But good customer service for who? For which customer?
Most retailers assume good customer service is having a friendly, knowledgeable staff person available to answer questions and greet people. But every customer is different and requires a certain type of service.
For example, one shopper may like a store with a good reputation and enjoy the relationship type of selling. This person might prefer salespeople who really know their products and will take time with her.
Another shopper may demand an environment that is sensitive to her time constraints. A working mother, for example, may want to get in and out of a store as quickly as possible and need to be able to shop late evenings and weekends. This shopper may like to make a decision and a transaction on her own, with no fuss and no hassle.
Yet another, perhaps younger shopper may prefer a store with a lot of choice, a variety of merchandise and a lively, helpful staff that respects teenagers as bona fide customers, not potential shoplifters.
So how does one store provide good customer service for these three different shoppers? Chasing after a one-size-fits-all solution is why so many customers are disappointed. Once this myth is exposed, however, each retail organization can realize that it has several sub-sets of customers to serve, each with its own ideas of what constitutes good customer service. Then retailers can effectively serve each customer type.
Myth: Location, location,location.
There used to be three rules to success: Location, location, location. Now location is one of what may be 25 rules. Purely real estate driven decisions are treacherous today. It's not a matter of traffic counts or how many people live within a one- or three-mile radius. It's more a function of who are your customers and what are their shopping behaviors. Retailers need to consider not only demographics but psychographics (attitudes, values, lifestyles). There is no more dough for the cookie-cutter rollouts.
The old location rule also assumes that your customers shop you only by default, based on convenience as measured in miles. Today, convenience has more to do with saving time, being in stock, ease of transaction, confidence and trust in the store and its products, a sense of personal safety while shopping and so forth.
By recognizing this as a myth, you are free to concentrate on providing whatever it is that really constitutes convenience for your best customers. And, it could save you from some pricey - and long - leases.
Don't Be Myth-led
Myths are funning things. "It always rains in Seattle" has kept millions of people from moving there. "Lou Gehrig's record will never be broken" probably discouraged thousands of ball players from even trying.
Might there be myths in your way? Being successful in retailing is tough enough. There is no room for being myth-led.
What Do You Think?
Here is a list of seven prevailing ideas that may really be myths.
Let us know what you think :
1. My best customer is the one who buys the most.
2. Baby Boomers are getting old.
3. Bigger is better.
4. Retailers can get higher margins.
5. Cyber-shopping will dominate retailing.
6. Good customer service is the key to success.
7. Location, location, location.
A. I'm sick and tired of hearing this. Thank you for exposing it as a myth!
B. You guys mythed the boat on this one. I don't agree that it's a myth.
C. Shhhh! This is the one I most want my competition to continue to accept as truth!
D. Ouch! This is very difficult for me to accept as a myth, but I see your point.
Fax your responses to Outcalt & Johnson at (206) 467-8868.
Richard F. Outcalt and Patricia M. Johnson are principals of Outcalt & Johnson: Retail Strategists, a consulting/speaking team based in Seattle, WA. Working only as a team, they provide strategic retailing services to owners or CEOs of retail businesses. They are available for on-site two- or three-day special assignments for retailers anywhere in North America.