Author
Robin Lewis is the CEO of The Robin Report, formerly the Vice President of Goldman
Sachs. Graduate School for Professional Studies professor
Michael Dart is Director of Private Equity & Strategy, General Manager of Bain & Co.
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The book offers a set of principles any retailer needs to master in order to survive and thrive in a fiercely competitive world.

PART 1

THREE Waves HAVE CHANGED THE FACE OF THE RETAIL INDUSTRY

CHAPTER 1 – THE FIRST Wave: Understanding the Power of the Producer

The first wave (1850 - 1950)
During this period, the communication and transportation infrastructure was very backward; The distribution system is too fragmented and weak. Two commonly used methods are sending catalogs by mail and establishing trade centers.

Due to population growth due to immigration from rural to urban areas, supply is not enough to meet demand. Therefore, the manufacturer and retailer have full control over the price. Consumers are forced to accept what is on the market. The market is segmented by geographical area, mainly in urban areas and small towns. The marketing and offering of products are limited to a certain extent, with few competitors, so shopping centers have taken the initiative and they have reaped huge profits. For example, Sears has developed a distribution strategy, established the first shopping centers, Sears has made spectacular strides. Sears' power and dominance far exceeds that of Walmart today.

CHAPTER 2 – SECOND Wave: Learning to create demand in a marketing-driven economy

After the Great Depression and World War II, the urgent need of American consumers was to improve their quality of life. In the process of industrialization for the war, the development of scientific research, public and private investments brought many advances to the post-war commercial economy. The development of road, water, rail and air transportation has created conditions for countless retail distribution channels. This was the golden age of marketing and advertising. Retail chains grow. Manufacturers and retailers seek to create demand and stimulate consumers to shop. Under intense competitive pressure, brands seek to become more attractive through shaping life style. The development of information, communication and distribution systems has appeared the concept of "mass market" and "mass marketing". Ralph Lauren is one of the typical brands, Lauren is inspired by his dream of the world of luxury and elegance and he has exploited the element of "dream" to create demand for elegant people. , sophistication through stylish products branded Ralph Lauren.

CHAPTER 3 – THE THIRD Wave: The Final Move to an Era of Consumer Domination

As consumer spending continued to increase, shopping malls grew rapidly, overflowing with countless products and services, and supply gradually outstripped demand. The form of retailing on the internet was born, retailing via television, via social networks, selling through catalogs, selling at home. Small-scale stores are opened to help consumers access quickly and easily. Now, consumers are fully equipped and free to choose anything, they can search and compare the price, quality, design and design of goods in just a few minutes. minute. When having full access to the product, consumers' attitudes also change followed, and now shoppers have complete control over the marketplace.

The ability to quickly and unlimitedly access everything you care about, the stronger the power of consumers. The level of satisfaction when shopping for physical goods decreases inversely with the need to find great shopping experiences. As the market is saturated with many similar products, the retailer must now determine how to convey the spiritual experiences to the consumer. Consumers demand something truly different, even individual, to satisfy their own desires. The rise of specific niche markets is the driving force behind brands that shape lifestyles, meeting the individual's need for uniqueness. The desire for new, unique products that are improved every day is rooted in our dream of happiness. This is an era where you have to constantly renew yourself every day.

PART 2

NEW RULES IN RETAIL

CHAPTER 5 – CREATE THE MIND CONNECTION

When a retailer offers value so compelling that it creates chemical reactions in the consumer's brain; The brain automatically produces a significant amount of dopamine, which creates emotional and mental excitement, prompting customers to buy products. Thus, the retailer has built a neural connection with the customer.
The Zara retail store chain always "refreshes" products, building a brand associated with "uniqueness", "selectivity" that has stimulated consumer behavior. Customers are often afraid of missing out on a unique, attractive item, Zara has done a good job of connecting with customers.
The mechanism that creates neural connections consists of several rules: create arousal to stimulate prefer people to spend more, not timid. Set up many similar stores in convenient traffic areas. Towards innovation that creates a change in consumer value.

CHAPTER 6 – REDEFINING THE RULES OF COOPERATION

Consumers expect comprehensive product access, anytime, anywhere. The market consists of countless consumer segments, changes in consumption orientation have prompted retailers to establish proactive distribution systems. Actively distributed systems require a matrix that combines all relevant distribution factors . There are 3 important factors: 1) ensure that consumers ask for when, where and how they expect to receive, 2) this model represents 5 new consumption behaviors: provide a neural-connected experience, create a sense of special care and induce a rush of merchandise, exhibit instant improvement, create a sense of sense of urgency because the product will not be resold, 3) active distribution is not merely a physical initiative, the distribution elements are closely linked together to serve a certain purpose: research, shopping, return/exchange policy and customer service.

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Proactive distribution also means bringing online and offline stores to consumers, so that they can easily access them; opened a chain of regional specialty stores, a chain of specialized retail stores located in an area with convenient traffic
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Another benefit of a proactive distribution strategy is to shorten the product/service lifecycle by delivering new products on a more frequent basis.

CHAPTER 7 – IMPORTANCE OF VALUE CHAIN ​​CONTROL

The main value chain is a perfectly closed cycle with no end point. This process will convey the true value of the brand as well as determine the exact desire of the consumer.

Focus on three core factors that, when done right, help businesses control their value chains more effectively: 1) non-stop cooperation, 2) shortened decision-making time, and 3) create an efficient value chain that is compatible with demand.

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First, understand the deepest desires of the customer, the interaction at the point of sale, where the experience is happening. The close relationship between shopping malls, owners, and exclusive brands is a decisive factor in the effectiveness of controlling delivery time, the introduction process, and the overall environment. surroundings as well as the experiences created. Strategic planning, Research, design, logistics, distribution, marketing, finance and human resources operate under one common principle: understanding the consumer.
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The second factor requires narrowing the product development cycle, ie catching up with market trends, the nature of time shortening is to continuously improve adaptability.
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The last element is to interact quickly, continuously and optimally in terms of cost, build reasonable inventory levels, manage changes in customer needs/taste to maintain, invest in resources to help improve the adaptability of the business. Although controlling the value chain does not guarantee 100% of the success of the business , companies that cannot control the value chain will certainly fail. lose.

CHAPTER 8 – WHAT IT MEANS

Things have changed and the symbiotic relationship between retail and wholesale has become more difficult. It's also really hard to build neural connections with consumers. Because the brand cannot respond fully in the necessary improvement process.

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As consumers become more and more savvy, retailers and brands are forced to change their business models towards cutting costs while adding value. This trend requires an adjustment of existing business models while opening up opportunities for new business models. The world has become "flat", developing countries have actively seized the opportunity to penetrate the US market according to the strategy of vertical integration. China is the market largest consumer of their own products and can pressure competitors to lower prices even further. It is worth noting that they can "fake" famous products at a much lower cost. However, with their remarkable ability to market and create consumer experiences, American brands will soon dominate markets in developing countries, these brands must build globally recognized. Now, businesses no longer have control and control over how information is transmitted. Social networking sites, blogs, other electronic information channels... consumers seem to be trapped in the information matrix, they feel bored. Now is the era of “word of mouth” marketing. Young word of mouth marketers are the soul of the social network and possess countless effective methods of interaction.

PART 3
PROFESSIONALS

CHAPTER 9 – MOST EFFECTIVE MODELS

Since its inception, the apparel retail chain segment has shown a much faster growth than other retail segments. The secret to their success is by focusing on establishing a neural connection with the consumer in the fastest time, getting feedback directly from the consumer at the point of sale, by controlling the entire value chain.

Specialized store chains are designed with their own style to give consumers a pleasant experience, they are willing to buy more, linger longer then return often and become loyal customers.
The chain of specialized stores creates a comfortable, cozy and intimate atmosphere that makes its own mark. They recruit employees from their customer base. If
they can instantly connect with consumers, they share the brand love with consumers as sellers.
Owning a closely linked value chain is a prerequisite for creating neural connections, proactive distribution systems and outstanding value for the entire chain.
However, the abandonment of products for two or more consecutive seasons leads to a decline in sales, and consumers simultaneously leave them to find other partners. Specialized stores become specialized and gradually lose their connection with the general market, where businesses discuss and share new trends, ideas, and materials.
Consumers now seek to be unique and receive special treatment with the help of individual marketing and media outlets. As a result, we are witnessing a transformation in the market with the emergence of numerous niche consumer segments, served by specialized brands.

CHAPTER 10 – TIPS OF THE PROFESSIONALS

VF Corporation

VF Corporation is America's largest specialized apparel company, founded in the First Wave era as a single-brand wholesaler. Today, VF has become a wholesaler and retailer with more than 30 affiliated brands
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VF made a reorganization to optimize interaction with customers, establish a value chain and gain full control, transition to a form of association with manufacturers, suppliers. level worldwide. The new trend of consumers is to look for stylish brands, so in 2004, VF transformed its business model into a world-class fashion company. VF believes that retail businesses that have direct contact with consumers will grow faster than wholesalers. Therefore, developing retail stores is extremely important and at the same time deploying websites to help consumers access products more easily.

The North Face

The North Face is a high-end sportswear brand. The secret of The North Face's success lies in the skillful combination of the three operating principles mentioned above. The North Face improves performance in the value chain of parent company VF Corporation (VF acquired The North Face in 2000). The North Face creates a customer experience at its stores that they are very pleased with. The North Face's biggest challenge was working with VF's executive team while maintaining its own production.

Best Buy

At first glance, Best Buy looks like a traditional mall. Best B is applying three principles of strategic operation to make a difference from competitors. At the same time, Best Buy uses a variety of data about markets, demographics, and lifestyles to determine the fundamental factors that generate revenue in stores: By understanding customers, Best Buy connects continue to provide new products that meet their requirements. Best Buy really understands customers' feelings about the "community" and issues related to the environment. Best Buy also established small-scale regional specialty stores , and has turned to the international market to promote market penetration.

Gilt Groupe

Founded in 2007, Gilt Groupe is an online sales website. When customers are invited to join the premium membership, customers will feel as if they have the opportunity to own “desirable” items that others cannot have. Customers visit the website every day to avoid missing a certain item. The key to this experience is speed and time – customers have 10 minutes to keep items in their shopping cart and must quickly make a decision. Buy now, buy now , or else someone else will. The product price is sometimes only 30% of the retail price. What sets Gilt apart from other websites is the richness of its products thanks to its close relationships with partners. Gilt's motto is to build Build strong partnerships with designers and supply partners and effectively manage relationships with clients.

Amazon

Amazon has built a brand and established a strong position thanks to a rich and diverse product system, the ability to interact with customers. The neural connection is made possible by tight control and efficient administration, quick returns and deliveries at economical cost. Prime subscribers appreciate free or cheap shipping. Amazon has established operations centers closer to consumers and logistics providers, and is constantly updating the ways it brings products to customers ahead of competitors. With Apple's supply of apps for iPad and iPhone along with strong linkage Closely with textbook and textbook manufacturers, Amazon is expected to dominate the market in the next few years. Thanks to the strict control of the value chain, the application of advanced and complex technologies combined with the scientific organization to deliver on time as committed , Amazon has created a strong position in the market. sure, almost "invincible" in the field of e-commerce.

Apple

The decision to launch a retail system is a wise strategy for Apple, thanks to which Apple provides customers with unique experiences and takes the initiative in distribution. By doing this, the efficiency of each distribution channel - via the internet or selling through Best Buy - will be significantly improved, and the connection with consumers will be deeper. Customers are captivated by Apple's professional, friendly, enthusiastic and tech-savvy sales team, when they introduce products as well as explain and advise on product features. Similar to retail stores, products designed with a simple but sophisticated Apple style are the competitive advantage of the Apple brand. Ask for a favor By effectively controlling the value chain, Apple was able to closely manage the development process of all its products. We believe that Apple is a "true giant".

CHAPTER 11 – SPECIFIC RECOVERY

Customer demand for Gap brands is endless. For them, Gap is the epitome of "stylish". With 3,000 stores and $15 billion in annual sales, Gap is the dominant fashion retailer in the US market.
Rapid growth has distracted Gap from its fundamental mission: capturing consumer tastes . Gap has re-directed its strategy, focusing on "the latest" styling, but it doesn't go hand in hand with fashion. Gap massively expands its product portfolio, blurring the core values ​​of the brand. As a result, Gap loses the consumer's mental connection. Finding the past glory as an "impossible" task.
In an effort to revive the cotton brand, Gap revived the popular “1969 Denim” product. Thanks to the ability to control the supply chain, take on many new designers, launch new products on a regular basis, optimize internal labor efficiency, identify and adapt to changing consumer tastes used, many customers return to Gap in search of “new and trendy products”. However, if it wants to succeed, Gap must implement a proactive distribution strategy and, more importantly, create neural connections with consumers.

Starbucks

Starbucks is a "third space" that combines office and home styles, making Starbucks completely change the face of retail. Retailers must create enjoyable experiences at the point of sale. When customers walk into the store, you have to create a strong neural connection with them. Starbucks is a place where people can gather with friends, read newspapers, make friends and enjoy the romantic Italian atmosphere here.
In 1992, Starbucks became a famous brand, by 2005 there were more than 10,000 stores , revenue was always above 5%, stock price in that period increased 5000%. When Starbucks installed the automatic steam coffee machine, it lost its “romantic and subtlety” inherent. And instead of grinding coffee in front of customers, Starbucks started using bagged coffee. Starbucks cafes become monotonous, boring, no longer the same as before.
In February 2008, Starbucks decided to close 7,100 cafes to retrain baristas, how to create a customer service experience, back to the original Starbucks orientation.
In 2009, when it announced a 69% drop in first-quarter profits, customers started creating websites, spreading the message "Save our Starbucks" encouraging customers to contribute ideas to rescue Starbucks. Customers do not abandon Starbucks, if the experience remains attractive to customers, the overall growth strategy of Starbucks
Starbucks will succeed. Let's see.

CHAPTER 12 – LESSONS FROM SEARS

Founded in 1886, Sears' catalog strategy has given them a huge advantage. Customers are always looking forward to seeing the new catalog so as not to miss the exciting new products of Sears.
Sears promotes product research and development, so they constantly bring new products to consumers. With the product localization strategy, they create a clear competitive advantage.
In the early '70s, Sears made important transitions that later went awry. Sears' activities span many fields: financial services, real estate, insurance. The conflict between stores and management, the increase in expenses costs, cultural degradation. Customers began to doubt Sears' ability, not knowing what Sears was representing? Sears also had to deal with competition from Walmart, discount stores, and "big box" specialty stores that pushed Sears to the edge. Sears made three critical mistakes:

  • Focus on external activities instead of paying attention to your basic function.
  • Bureaucratic culture with many cumbersome procedures, making it difficult to make decisions.
  • Sears has stopped investing in the development of new distribution channels.

Sears has created a chasm between them and consumers, consumers have lost patience with them. However, Sears still has a chance to exist in the future if they can look back on their original version as a retail legend, have to create interesting experiences for customers, create a perfect connection. The neural connections re deep enough to entice customers. Build a proactive distribution system and control your entire value chain.

CONCLUSION: Models of the future

Today, consumers can easily find thousands of similar stores, websites, products and services, and they have easy access to information sources thanks to the Internet and pocket electronic devices.
Therefore, capturing a “nice” retail location has become obsolete. Too many choices make customers more difficult. Therefore, businesses must create a particularly enjoyable experience that makes customers "addicted". Enterprises should restructure based on five changes in consumer tastes: From the need for physical goods to the desire for spiritual experiences, from synchronization to personalization, from monopoly to democracy, from the need for The demand for new products comes from the demand for new products immediately and from the individual to the community. Enterprises must remember that three strategic operating principles determine success: Neural connection, proactive distribution system and value chain control. The transformation of business models makes no sense without the corresponding development of technologies, including the Internet and globalization. And, in the third wave, consumers equate it all into a single concept: “Brand”.

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