Magazine Article | November 1, 2005

Big-Box Strategies

Source: Innovative Retail Technologies

CRM (customer relationship management), data mining can help you gain wallet share.

Integrated Solutions For Retailers, November 2005
Matt Pillar

The Global POS and Store Operations Summit held this fall in Las Vegas certainly didn't lack for the obligatory "How To Compete With Wal-Mart" speech. In fact, there were several such orations from industry leaders. I spoke to a group of retailers at the preceding Island Pacific/RetailPro user conference a day before the Summit began, and I admit that competition from Wal-Mart and its big-box brethren crept its way into my presentation as well.

I was speaking to a group of tech executives from some of the world's leading specialty retailers. To set up the point of my speech, I asked for indication by a show of hands who in the crowd didn't think Wal-Mart made an impact on their business. Among those who rose their hands were a couple of well-branded jewelers, a huge lingerie retailer, and several big sporting goods shops.

I wasn't surprised by the reaction. I talk to retailers of all sizes on a daily basis, and I've learned that denial is not an uncommon reaction when midsized and larger specialty retailers are faced with the prospect of big-box competition. "Wal-Mart attracts a different demographic from the one we pursue," they'll say, or, "Wal-Mart isn't in the [fill in the blank with what you sell] business." My audience was surprised, however, when I shared some statistics. Like the fact that Wal-Mart sells 38% of all sporting goods purchased in the United States, sells more engagement rings than the nation's leading jeweler, and will account for 35% of all grocery and 25% of all pharmacy sales in our country by 2007.

Technology That Thwarts Big-Box Encroachment
The fact is, most of you do lose business to Wal-Mart. Unfortunately, trying to compete with a $300 billion giant that will forever crush you on price point is no easy task. Frankly, I'm not sure you can compete with Wal-Mart any more effectively than my high school football team could compete with the Indianapolis Colts. While increasing your market share in a Wal-Mart world is a tough, albeit not impossible task, you can retain and improve the wallet share of your best customers. Strategic CRM technology decisions are the key to achieving this kind of organic business growth.

In his presentation at the Summit, IHL's Greg Buzek stressed that an IT investment in CRM is the silver bullet retailers need to differentiate them from big-box competition.

Attaining a single view of customers regardless of their shopping channel choice, building loyalty to your brand via consistent and personal interaction, and building close relationships with your top 10% to 20% of customers equates to what Buzek terms "retail nirvana." A central, POS-integrated CRM database, fed by a data mining application that makes good use of the T-log data you're already collecting, are the first two steps. These will help you identify and gain wallet share from the people who make you profitable, which might be your best strategy in the big-box battle. Look for more tips on this topic in this month's Retail Solutions Forum on page 10.