Okay, so to wrap up this first section, we talked about the changing shopping behavior. We talked about the short term change and the enduring changes. And now let's wrap it up with some idea of what does it take to win in this disrupted changed retailing world. So let's focus on winning strategies. And what I want to do here is to provide a framework so that anybody can figure it out regardless of who you are or what you are. And in order to make this work, I've got to go back to the basic principles. So I came up with a new success matrix for retailers. Now, the first thing before I show you this is why do we need a new success Matrix? You know what I've been in a marketing professor for a very long time. I have a office full of books and tons of retailing books and they all have retailing frameworks. Why do we need a new framework? Well, when I went back to those retailing books and looked at those frameworks, the retailing frameworks were defined on two principles, not these principles that I'm going to show you. But on two principles which is one product, merchandise assortment, people would say if you were a good retailer, you were a good merchant, so you knew how to build an assortment, you knew how to merchandise your store. And the other thing, the retailing books focused on was operations and logistics supply chain, get the product where you needed it when you needed it. Still incredibly important. I'm not here to say that product and assortment and merchandising and supply chain and operations isn't important in retailing, it's vital. But the problem is things were missing from this matrix, which becomes very important in modern retailing and what's missing. The first thing is the customer, the customer is missing. So I base my framework on two principles. The first principle is the principle of customer value. You want to get customers into the store, you've got to give them something they value and what do customers value? Looking at all the data I just showed you what do customers value from a retailer? They want to buy something they value. That's the product at the right price but importantly, from someone they trust that's customer experience. And the second principle that was missing from these old retail frameworks is the principle of competitive advantage. It's not okay to just be doing what you always did when you have really aggressive new competitors, you have got to give them give your customers something better than the competition. You have to give them superior competitive advantage. So those are the two principles. So now, let me put that in a matrix, I call this my retailing success matrix. What does it take to win in during the retail apocalypse and post covid in retailing in the future. First thing is the principle of customer value. You've got to give customers what they want. That's going to be the columns of my matrix. So you've got to give them product benefits and you've got to give them the customer experience they want. And now what are the rows of the Matrix going to be? Well, you've got to do it better than the competition. And what does that mean in retailing? Give them more benefits, increase the pleasure, increased trust or take away the pain and that gives me a 2 by 2 matrix. And the first thing I'm going to say about this matrix is any one of these quadrants will represent a leadership strategy you can have as your strategy at what you're best at any one of these four quadrants. Okay, so let me explain the four quadrants to explain what winning strategies look like. And then I'm going to explain a little bit more complexity that this matrix has in it. It's a little bit more sophisticated than just a two by two matrix. So first, let's look at the four quadrants. First one says brand still wins. People have been predicting the death of brands forever, but brand is still important. You have a great brand, a great design, a great product, great technology. Guess what? People will come to you. And so although luxury was heard a little during covid, I predict a robust recovery luxury, luxury has been around for 300 years, luxury is not going anywhere. These digitally native vertical brands and the prototype is Warby Parker. Warby gave customers what they wanted. They knew their customer, they had the right values. They gave the product at the right price and customers responded they loved their glasses. ZARA incredible product assortment the inventory that turned over 18 times a year. Very fresh new fashion. Give me the product I want very fashionable. In ZARA's case people will come to your store brand. Brand/product superiority is a winning strategy, but so is a winning customer experience. So even holding products, the same retailers like say four or Italy that's like a fantastic food emporium drew people into their retail establishment, not because necessarily the products were differentiated, although perhaps some of the products were very cool, but because the customer experience was different. Now, Covid has changed what this means because both Italy and so for were very high touch customer in store experiences. And they have had to adapt and use technology and use other methods in order to bring their high touch experience down to a lower touch experience. But still they differentiate on the customer experience that I'm going to wrap around the product that is offered. So my definition of customer experience says, independent of the product that sold, you can compete on the interaction of the customer experience with the retailer over the brand. The the top row is give something of value to the customers that increases their pleasure, increases their trust. Makes the loyalty with the retailer stronger in a positive way. The other way to do it is to take away the pain. Price has always been a pain point. And so very successful retailers like Costco walmart TJ Maxx Burlington have competed and done very well even during Covid, because they offer the lowest price. Now, the way to win on lowest price is to bring your costs down. What's interesting about each of these models is their cost positions are very different. They compete on low price, but with a very different cost model. Low price, still a winning strategy. And the newest one probably in this whole matrix is to compete on customer experience by taking away the pain naked, convenient, naked, frictionless. And the way to do that is to collect customer data. So you can identify all the pain points and remove the friction at every one of those pain points and really draw customer loyalty by making it as easy and as convenient to purchase from the retailer is possible and along the way you make it personalized and who does that better than anyone? Probably in the world but amazon. So that's the retailing success matrix and those are the four leadership quadrants. Now, how does this work? Let's simplify this matrix and I'm going to tell you this matrix in the context of retailing. But frankly, this matrix is so generalizable based on basic principles, the principle of customer value and the principle of differential advantage that it holds for any industry. It's not just true in retailing, it's true in any industry, but let's stick to retailing for the moment. Think about these as the generic boxes. What does brand mean in your particular industry? What is customer experience going to be or experiential shopping mean in your industry? So think about what those boxes mean. I gave you examples, specific examples, but generalize it and then bring it back to your own company. Now put the origin in the center and draw axes out in each one of these boxes. Okay, so what does it mean in each one of these boxes? And then kind of think of this as a vector of what you're going to march along and try to win at this victor. What you have to figure out is where is fair value or table stakes in each one of these boxes? On these dimensions? So what is the minimum threshold that it's going to take? Where you're going to need to compete in this box? Okay. So the first principle of my matrix is that you have to be good enough, not the best, but good enough in each one of these boxes in order to succeed. Okay, so when I talked about the retail apocalypse or we talk about the retailers that don't make it during Covid, it's because they're not good enough in each one of these boxes and what Covid did was accelerate what good enough is. So let's just look at frictionless because that's the one people pay most attention to during Covid, you expect products to be delivered to your door or you're expecting curbside behavior that didn't exist before, but you're expecting it now. Right. And so what's happened is your expectations or what's good enough is has been ratcheted up in Covid. So for example, I saw Some data that said 90 of people think that if you're going to get a delivery of a product that you've bought online, it better be delivered within two or three days where it's unacceptable and you won't shop from that retailer. Before Covid, I would say as much as a week or two weeks might have been okay for delivery but during Covid, the expectation was ratcheted up. So just table stakes good enough. It's 2-3 days delivery and a third of the people were thinking, I need to get it today. So you're really seeing very, very high to just compete in this friction list. That's happening in all these categories as the economy has gotten tighter. What's a fair price? A minimum price, not the cheapest price, but just a good enough price. That price has been lowered in order to reflect economic realities. What the kind of brands are then I'm expecting. We're going to talk about that in more detail later, but that's changed and what I expect in terms of a safe environment and experiential, that's changed too. So what Covid has done is changed what good enough is. But the implication of this matrix is in order to not be part of an apocalypse, you've got to be good enough in each one of these boxes, but to win to be the market leader, you've got to be the best in one of these boxes. Find your leadership advantage and then build on that leadership advantage to be the best in a second quadrant. And I call that the two quadrant winning strategies. So bottom line, what does it take to win as a function of what I'm telling you in this success matrix, be the best at something, leverage that to be the best in a second quadrant. And then be good enough in the other two quadrants in the matrix, but recognize that what good enough is constantly being ratcheted up when you're in a competitive environment. And any two quadrant winning strategies can work. So what is amazon? Amazon is the best and frictionless and we'll talk about that. They leverage their position and frictionless to also offer the best in low price. Okay, so that's their quadrant and then they're good enough and experiential and brand Walmart competes head to head. They are the biggest retailer in the world. They are operationally excellent. They can offer the very best cost position. They can offer low price, everyday, low price, they leverage that operational excellence to also be the best and frictionless and they say good enough and branded and experiential. So that's a head to head competition between Walmart and Amazon but their strategies are different. The vertical brands, the Director consumers, the digitally native vertical brands compete by being an amazing brand that really delivers customer value and and answers to the values of their target segments. But because they don't have intermediaries, they can offer a fair price and sometimes the lowest price. Costco, which has been an amazing winner during Covid, even without a very strong digital presence, has very low price with a different strategy than Walmart does. But they also offer a phenomenal in store experience just for the record. I love Costco, my favorite retailer because I love shopping at Costco. To me that's a vacation. The in store experience is phenomenal Luxury, an amazing brand, amazing product but the brand is not enough. They have to deliver a customer experience now and we'll talk about what's happened to Luxury and Sephora. I told you they have fantastic stores that are really customer focused. But why do they? Because they have an amazing loyalty program. They have an amazing online presence. They have good YouTube, they know what their customers want because they are collecting data continuously from their customers who by the way, are very fickle and change what they like all the time. But they build on that customer data to be, to give you amazing in store experience. And they're really building an omni channel experience.
