Q1 Retail Roundup: Customer-centric Changes in BigBox Retail
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Q1 Retail Roundup: Customer-centric Changes in BigBox Retail

March 3, 2015

John Phillips

The past couple weeks for BigBox Retail has been, well…BIG. From social pressure to soul searching to new alliances, change seems to be in the air as some of the most significant players in the retail space have announced a variety of major shake-ups. Though these changes run the gamut, the common thread is an increased emphasis on putting the customer first. Or at very least, putting them in a position to likely come out ahead.

The past couple weeks for BigBox Retail has been, well…BIG.  From social pressure to soul searching to new alliances, change seems to be in the air as some of the most significant players in the retail space have announced a variety of major shake-ups.  Though these changes run the gamut, the common thread is an increased emphasis on putting the customer first.  Or at very least, putting them in a position to likely come out ahead.

  • In headlines that surprised many, in mid February Walmart revealed a plan to boost pay – finally – for half a million low-wage workers.  This is significant for a number of reasons, but as a Salon article reminds us, “Isn’t Walmart a private company, boosting worker pay of its own volition? Yes, but…the wage increase comes after years of political pressure on the retailer, with workers and their advocates noting that Walmart is straining the public coffers because so many of its poorly compensated workers are on public assistance.”  Though perhaps not readily apparent, there is an implication for Walmart customers:  the overwhelming propensity for Walmart employees to also be Walmart customers means the move is in effect a boon to their average buying power at Walmart (as well as at other retailers).
  • Target announced this week the company plans to cut “several thousand” jobs from its Minneapolis headquarters as part of a dramatic cost-cutting initiative.  The announcement, though surprising in its scope and swiftness, should surprise few who’ve been watching the retailer over the past year.  Following the unprecedented digital security breach during the 2013 holiday season and a subsequent change in leadership, Target appears to have had something of a “come to Jesus” moment.  In the past couple months new CEO Brian Cornell has revealed a significant tightening of the belt.  The shift in tack has included a complete exit from the Canadian market, refocusing investment in certain “signature categories” and online, and rapid phase-out of management layers deemed cumbersome.  Together these moves reveal a high-level pivot back toward Target’s true customer base, the design-at-discount value proposition that initially attracted them, meeting customers where they are and an organization nimble enough to respond to them quickly.
  • After a 16 year exclusive relationship, Costco is severing ties with AMEX as its exclusive credit card payment partner and replacing it with a new partnership with Visa.  Though details of the decision have been murky beyond an inability for the long-time partners to reach a mutually agreeable deal, the move means consumers will have more flexibility in terms of payment options.  Visa dominates market share, boasting five times the circulation of AMEX and countless issuing organizations.  As a result, the switch is likely to be mutually beneficial for consumers and Costco as it eliminates a key hurdle for membership.  In continuing with the theme of customer-centricity, it’s safe to assume the shopper reward structure will remain similar or even get better.  As WSJ points out, “It isn’t clear yet what it all means in terms of rewards, which is a key reason why Costco shoppers like having a Costco-branded card in the first place. Costco didn’t provide many details…saying only that it would provide generous rewards to Costco members.”
  • This week Best Buy has impressed again by continuing its apparent turn-around from red to black.  Fresh off a holiday quarter whose success surprised even them, Best Buy is keeping the momentum by announcing a billion-dollar stock buy-back.  Similar to Target, Best Buy is also aggressively trimming the fat with plans for half a billion dollars in cost-cutting and streamlining.  But it’s not all about shoring up the holes while the ship rides a little higher.  Importantly, Best Buy appears to have recognized that the best way to stay above the waves is by moving full steam ahead.  “The electronics retailer…outlined plans to spend millions more to ensure it can maintain that growth rate. It will spend more to improve the customer experience in brick-and-mortar retail stores and online, as well as on marketing and information technology. Supply chain and the way Best Buy handles returns and damaged goods are other areas of focus,” writes Fortune.  If the bet is right, this translates into a differentiated offering that embraces customers’ experiential showroom wants and ease-of-purchase needs.
  • The “consumer wins” trend extends across the pond, as well.  This week, Carrefour (France’s largest retail chain and the fourth largest retail group globally by revenue) announced plans to re-launch their ED brand, a discount chain iconic in France since the late 1970s.  The dated-feeling ED had faced internal turmoil and a short-lived rebranding in recent years, but Carrefour’s announcement outlines a roadmap illustrative of a turn toward modern customer centricity.  The path forward is actually several paths – a strategic divergence that moves away from a one-size-fits-all approach in favor of greater tailoring to the nuances of specific consumer segments.  Plans call for about 1/3 of the 900+ locations to return as updated versions of ED, a brand with ingrained equity in low–income areas, while the remaining stores will return under the more upmarket “Carrefour” label as either a “Market” (large floor plan), “City” (urban center) or “Contact” (convenience) format.  A greater focus on in-store experience and thoughtful merchandising seems likely.

John Phillips

Senior Director, Design Research

With a background in product and service design, John provides a different perspective on design research and strategy with an emphasis on tactical implementation. As Senior Director of Design...

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