The future of retail survival will require more precision than ever before
By Chris H. Petersen
Most consumers simply don't think about retail models and strategies. In today's omnichannel world, consumer shopping is now any time and everywhere. But for retailers, the landscape has never been more challenging and competitive! Survival in the retail world is boiling down to increasing chasm two fundamental models: long tail and curation. Consumers really like unlimited choices, but also highly value specialty, service and personalization. The real question of retail survival is not who wins the sale of the product today, but who earns the right and loyalty of the customer relationship long term.
Why this is important: The future of retail survival with require increasing precision to differentiate customer value within the core fundamentals of retailing in an omnichannel consumer world: long tail, curation, or a unique blend.
Long tail versus curation
The concept of "long tail" grew out of the rise of ecommerce players like Amazon. Since etailers do not stock products in store, they can offer far deeper and broader inventory selections. The roots of Amazon was the ability to sell copies of books that would only be purchased by a few customers, very infrequently.
In a very real sense, the limits of physical store space dictate that retailers must be very selective in choosing or curating the products to stock. Even the vast hypermarkets, like Walmart, cannot carry every brand, style, color and size. Retailers, like REI, have in fact been successful by selectively "curating" both product assortments and services in ways that appeal to customer segments.
Amazon epitomizes the Power of the Long Tail
Amazon is often described as having the "Earths Biggest Selection". And increasingly in an omnichannel world, consumers are turning to the one place where you can "find, discover, and buy anything". While even Amazon cannot cover every single product, Amazon's marketplace of vendors brings together more etailers creating an ecosystem of products unmatched anywhere else in retail, especially in traditional bricks and mortar.
The long tail selection enables a compelling value proposition in attracting new customers, and retaining existing ones. For example, if a cook is looking for a special spice for a new recipe, they might not find it in their local grocery store, since they cannot economically stock every possible spice or flavor. Here's the power of the long tail strategy:
- We know from experience we can go online and find most anything
- Thanks to Amazon's premier search presence we will likely end up there
- 98% chance will find it on Amazon or in the marketplace, why search further?
- Order the spice, and potentially other things recommended/needed
- Offered Amazon Prime with free shipping and one day delivery
- BAM – once information and credit card are entered, Amazon customer acquired!
- Even if Amazon makes no money on a transaction, it has a new customer relationship
- Amazon markets new products new customers and upsells existing customers
- As new a customer increasingly experiences the value to vast selection with the convenience of home delivery, Amazon becomes the "top of mind' retailer
The long tail is not just about selling more volume across a broader selection, but using that vast selection to create choice and convenience consistently, so that the customer just expects Amazon to have what they need. Why go anywhere else and settle for a curated assortment?
The Power of Curating to Differentiate
The old cliché is still true … successful retailers know their customers. Since traditional retailing was store based, merchants had to make seasonal selections of merchandise that most appealed to their customer demographics and purchase patterns. Large national chains have the added complexity of curating assortments seasonally – customers in the cold northern climates require different clothing than those living in places like Florida.
The power of unlimited choice can be overwhelming, even paralyzing. Yes, you can go online and try to read all of the reviews, many of which are conflicting. There is great value in being able to go to a store to view the most popular brands, and touch the merchandise. However, the real winning formula for curation in stores goes beyond products. The best retailers are curating a collection of products and services that create a unique value add solution that you can't purchase online.
Long tail versus Curation – Which wins?
A vote for the ecommerce long tail model
In the world of ecommerce, everyone competes with Amazon, Alibaba or their regional ecommerce powerhouse. One of the most important fundamentals of the ecommerce model is the long tail assortment. In the long tail commerce model, the retailer does not need to carry multiple units or redundant inventory across stores. The cost of carrying another SKU in the long tail model is small, but the marketing value of attracting and retaining customers is very high. Given the established long tail execution excellence of players like Amazon, it will be very difficult for traditional retailers to challenge them, even if they try to offer more on breadth of assortment online.
A vote for the ecommerce curation model
A much smaller, more focused assortments products sold online is a much more difficult and riskier proposition. It is possible to have a deep, specialty assortment in a focused category. In my local area, Licorice International sells over 160 types of licorice from one store and a website with sales from countries around the world. The key to curation success online is that the retailer must become the trusted source of information with value services, not just a source to buy product. Specialty online retailers share the ability to lock in customers with unique curated offerings, and win their loyalty through valuable expertise and service.
A vote for curation in stores
A curated assortment in stores is not a choice, it is a reality. Yet, traditional stores are increasingly competing for customers who are turning to online retailers "who have it all". Best Buy is a good example of a survivor (where as Circuit City and Radio Shack failed) who created a "curation" of value added services through the Geek Squad, who installs and actually makes the solutions work in your home.
The paradox of Scarcity and Differentiation
The more retailers can focus on products that are scarce, the more they can differentiate from the competition selling everything. However, the more focused you on the rare and scarce products, the smaller your target audience becomes.
Paradoxically, the more retailers can differentiate, the more they can offer something to the world that's rare, scarce and, therefore, highly valuable.
The key is not limiting differentiation to nature of products sold. It is almost impossible for retailers to catchup with the long tail excellence of Amazon. But, what they can do is create differentiation through omnichannel execution that wins over customers by;
- Curating both products and services to create solutions
- Supplementing store curation through the virtual shelf choices online
- And delivering great, differentiated, personalized service at the same time
The winners in the future of retail will have to do more than "walk and chew gum". They have to simultaneously juggle long tail and curation to create omnichannel differentiation.