By Joe Bona:
Like novelists intent on creating lively protagonists, today’s retailers love to pen vivid descriptions of the all-important “core customer.” In all likelihood, you have heard or even given presentations that rely on this kind of language: “Her name is Cindy,” says the specialty store executive. “She’s 37, works in the insurance business and has 2.3 kids. Her husband, Dale, is an IT whiz. He hates going to the mall and has just started doing online shopping with his beloved iPad.”
This approach is popular for a reason. By leveraging in-depth data, retailers can figure out exactly what types of shoppers are most likely to make repeat purchases at their stores. Detailed composite characters like Cindy can then be used to help them shape more effective approaches to merchandising, marketing, branding and customer-service. And yet, in its single-minded focus on one type of shopper, the “core customer” concept tends to ignore one of today’s most prominent retail trends: channel-blurring.
Just a few years ago, the retail business was characterized by bright lines between one sector and another: If a place had fueling stations and coolers full of drinks, you knew it was a convenience store. If it had a pharmacy and was located on its own corner, its core business was obviously to sell prescription and over-the-counter drugs. During this (relatively) stable era, the Walmarts and Costcos of the world were always out on the strip by themselves, and tenant lineups at regional malls were eminently predictable.
These formerly bright lines are fading fast. Channel-blurring is occurring to a remarkable degree in many sectors of the retail industry. Malls that once relied on upscale, fashion-forward tenant lineups are now welcoming the likes of Costco and Target to backfill vacated department store spaces. Walgreens, which has been looking more like a convenience store with each passing year, aims to put e-vehicle fueling stations in its parking lots, making that resemblance even more striking.
Convenience stores, once known for that shriveled hot dog of indeterminate age, are transforming into something akin to a quick-serve restaurant, replete with cafés and prepared meals. Even Goodwill is cleaning up its stores and moving into nicer neighborhoods. And as retailers like Walmart broaden their appeal to more well-heeled shoppers, their counterparts on the luxury end are building outlet stores and wooing shoppers from lower tax brackets.
So what is happening here? When Wall Street and the housing bubble collapsed in 2008, consumers’ spending priorities shifted. Relatively affluent shoppers began checking out the likes of Walmart or Big Lots for the first time. Wine aficionados went to see if their favorite brands were cheaper at Costco, which they were. And landlords began welcoming extreme value retailers like Dollar Tree to centers that were once off limits to such tenants.
The net effect is that more retailers now understand that their stores are not necessarily for one type of person alone, no matter what name we give her. Indeed, cross-shopping among store formats and price-points is rare only among the very rich and the very poor. Cindy might be perfectly content to buy her husband an anniversary present at Nordstrom, but then hit T.J. Maxx for a small token of affection for one of her girlfriends. Thus, retailers would do well to think harder about how they can appeal to the heterogonous mix that is their customer base. Walmart did this by ramping up quality and cleanliness while preserving its emphasis on price. Duane Reade, the New York pharmacy chain, has done a fantastic job of reaching out to a broad array of shopper types using everything from organic foods to high-quality cosmetics. Department stores like Nordstrom are making lower-priced goods more visible in their stores, without skimping on atmosphere or top-notch customer service.
In the “new normal” of today’s economy, shoppers will continue to be circumspect about how they spend, and old channels will keep on blurring. This will make cookie-cutter approaches even more outdated. Embracing complexity — or even, at times, paradox — is a must. While your brand might have been founded on other attributes, it is still possible to introduce, say, more value or convenience. But it is also possible to lose credibility by being too heavy-handed with this approach. Your niche, in other words, still has to be your strength. Retailers who try too hard to be all things to all people can overreach, just as those who focus too much on an ideal “core customer” can miss valuable opportunities with the rest of us.
Awareness of channel-blurring also will be more important for some retailers than others. Will a 19-year-old male be shopping at a women’s fashion retailer like Chico’s for any reason other than holidays or birthdays? Not likely. But for a wide variety of less-specialized retailers, it makes sense to see how innovative and creative you can be in broadening your appeal. Indeed, social networking and other technological tools make this more viable today than ever.
Are we saying au revoir to Cindy, then? Not really. Instead, think of it as a bonjour! to all those new classes of customers who will be strolling into the store.