By: Hutch Carpenter | January 11, 2012
Online retailers had a heck of 2011 holiday season, up 15%. Whew, in a tough economy no less. But the news wasn’t as good for some physical retail stores. Sears Holdings announced disappointing sales and will be closing over 100 stores. Best Buy same store sales dropped, and some have expressed their sentiment that the retailer is on a long downward slide.
Digital disruption. Coming to a store near you.
That online and mobile commerce is increasing its share of business really isn’t a surprise. The Internet, as promised in the 1990s, is turning over many industries.
Retail being another such industry, although it’s a much slower process of disruption. Which means the physical retailers have time.
Time to take their natural advantages and build on them.
Given the retail industry’s importance to the global economy and its periodic restructuring, it should come as no surprise that there’s plenty of advice for the industry. Three of the larger, well-known consultancies weigh in.
Booz and Co.’s Karla Martin sees a need for retailers to reduce selections and assortments. Bain’s Darrell Rigby sees omnichannel engagement with customers as the path for physical retailers to re-assert themselves.
In both Booz’s and Bain’s advice, there are elements of incorporating the jobs for which a customer hires a retailer. In the Booz piece, it’s a curation job: “Help me navigate an increasingly overloaded product landscape!” In the Bain piece, it’s a…well, not entirely sure what job is being satisfied. It appears to combine several customer jobs to be done. It is also a good thought piece about future industry infrastructure requirements.
These advice pieces raise the question of how to drill deeper into customer needs. Go beyond the meta trends and get specific around customers. Consulting firm McKinsey offers this thought:
“One way that manufacturers and retailers can investigate these trends is through consumer surveys designed to identify ‘purchase drivers’ – meaning those factors that are decisive in the decision to buy a product or shop at a certain retailer. This survey should not only cover conventional topics like price, quality, and service but also such factors as corporate responsibility and traceability of product origin.”
Survey fatigue notwithstanding, McKinsey starts down the right path. Get the customers’ input. McKinsey talks in terms of purchase drivers. An example of such an influence is convenience, deemed to include shopping ease and practicality.
But does that go deep enough? The risk here is that only surface-level influences are elicited, while the real drivers are buried deeper. A case of “what they say” vs. “what they do”.
A good alternative to get deeper into customers’ minds? The jobs-to-be-done approach.
To create a jobs-to-be-done structure, I’ve followed the work of Strategyn’s Tony Ulwick and Lance Bettencourt, and Re-Wired Group’s Bob Moesta. They’re practitioners who have been working with organizations for years.
Ulwick and Betterncourt have defined the structure of a desired outcome statement (pdf link):
As example, he gives:
Minimize…the time it takes…to verify the accuracy of a desired outcome…with a customer…e.g. its meaning, completeness, exactness, etc.
Bob Moesta has identified four influences on how a customer decides what product will satisfy a job to be done.
Pull (F2): The promise of a new solution that can satisfy the need. As customer’s consider a new solution, how well does it map to their needs?
Allegiance (F3): The familiarity of an existing solution is a risk mitigator, leverages already learned usage and known benefits.
Anxiety (F4): The unknown characteristics of the new solution, and the potential missteps that await. Would if the new solution isn’t all it’s advertised to be?
I like both forms of analysis, they are quite complementary. So I combined Ulwick, Bettencourt and Moesta’s work to use as an analytical tool.
There are many jobs that retail must fulfill for customers. Below, I’ve picked four of them for analysis. Four that are ones you’d probably see as well. Each job has a defined outcome statement, and a listing of drivers which influence the retailer selected for the job. These aren’t actual customer insights I’ve surveyed, they’re from me. But they address the right type of analysis needed.
The analysis is done from the perspective of switching from a physical retailer to an online one. This is the disruption which is occurring. This perspective was chosen to illuminate possible innovations for physical retailers, or to point out the long term trend they will need to accept.
Frankly, this job is one that will be challenging for physical retailers to fulfill. As has been noted, Amazon – and other online retailers – don’t have the overhead of physical stores. They can and do price lower. And you can see the differences, right there, on your screen.
The anxieties that consumers feel about online retailers providing this job – retailer performance, shipping delays – are there, but don’t rise to the level of overturning the pull of the online retailers. Too many online retailers have proven themselves over the years. They’ve overcome these anxieties.
Physical retailers competing to fulfill this job need scale to overcome their higher infrastructure costs: physical plant, distribution systems, inventory, in-store personnel. Kmart, for instance, is losing the scale war to Walmart, and the online retailers are generally able to outprice it.
Verdict: Long term, this job will be fulfilled by mega-stores and online retailers. But only in categories where it makes sense. Groceries, for instance, are tougher for online fulfillment of the Low Price job, due to the delivery costs of home delivery.
There’s times when you just have to have something today. Even now. Something needed for a home project. Last minute gift. Car maintenance. The list goes on and on. The Immediacy job occurs when the unforeseen happens, or the unplanned realize they need something.
So what’s the pull of online here? Well, you can see the item from your comfortable home. See, it’s right there on my screen! And even better, I can buy it right now! Hmm…not quite the same as actually having it in hand, is it?
Actually, the online retailers are working to provide the “holy grail” of e-commerce, same day delivery. There are different strategies here, although working with physical retailers is a core part of several initiatives. But the costs appear prohibitive: one start-up, Postmates, charges $10 to make short deliveries inside cities.
Verdict: The physical retailers have a distinct advantage here. That expensive distribution system that hurts them with the Low Price job? It’s a distinct advantage here. Physical retailers should play the immediacy game full tilt. Develop an app that tells customers whether something is available, and make it easy to pay for the item. Create a drive-through pick-up experience.
As a general observation, people desire with the ability to select from distinct offerings when making a purchase. For instance, when buying a shirt, isn’t good to see a variety of colors, patterns, cuts, etc.? You’re looking for something that fits your style. If you’ve got a home repair, don’t you want the right tool for the job? Purchasing for your kids, and it’s great to see smaller sizes of an item.
Online retailers can fulfill the Selection job nicely with their ability to provide a long tail inventory. If one retailer doesn’t have what you want, the next retailer is a click away, thanks to Google search and dedicated shopping engines. Online sites can also “own” a category with a larger selection by accessing buyers globally, not just in the local market.
Physical retailers have competed to fulfill this job by offering a wide selection of categories (mass merchandisers) or by going deep in a single category (electronics, books, pet supplies, etc.). One advantage the physical retailers have is the ability to hold and touch items, useful when considering a large number of options.
Verdict: Physical retailers will eventually cede most of the Selection job to online, due to online’s distinct advantages.
With so many options available to us, a distinct #firstworldproblem, it can be daunting to navigate the product landscape. You’ve got a personal style, but could use some help in finding items to match it. There are multiple philosophies for raisi9ng baby, what items fit the one you’re following?
Shoppers want information to help them in their purchases. Beyond information, they want advice. Because a low price on something that misses the mark is just throwing money away. The Help job relates to what a products are being purchased for, not for how complex the product is.
Online commerce offers shoppers great amounts of information. With a click, detailed product information – the kind not available in-store – can be found. Ratings by other shoppers are aggregated, helping distinguish between good and bad products. Online retailers who can specialize in a more narrow category can offer expert advice.
But…and it’s a big but…it’s hard to replicate the give-n-take, the weighing of trade-offs with a live person in front of you. That’s the advantage physical retailers have. There are just times when you really want to talk to someone.
Verdict: This is the physical retailers’ job to lose. With local presence and real live people, they’re positioned to do well here. The best opportunities lie in cases where the outcome of the product has a fairly high degree of emotional or monetary value for the customer.
For physical retailers, the customer job to fulfill should be a natural extension of their strengths. A company’s assets lead naturally to addressing a particular job the customer wants fulfilled. You really can look at industry structure based on the jobs to be done. And see that some long term trends suggest where retail is heading.
Keep in mind that a larger set of real customers could well describe the jobs they’re seeking fulfilled. My four above are drawn from own experience. But it’s getting input from multiple customers where this methodology comes alive. I’m sure there are some additional jobs that aren’t being fulfilled very well right now, which are opportunities for the future.