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Profit Shifts: Learn from the Masters

Clichés may be trite but they are not typically false. In our industry we have heard that, as pertains to quality, “uniforms need to be uniform.” Yes there needs to be color and fit consistency as well as performance reliability. A few of us may be selling the same product to the same markets. How can a company differentiate for dynamic success? Certainly mastery of the supply chain is crucial and establishing relationships of integrity and credibility will enhance your chances. But how does one go above and beyond the competition? The opportunity here is to learn to benchmark based on successful behaviors of those outside our particular industry.

It seems like we have been “Searching for Excellence” since Tom Peters awakened our consciousness years ago by writing that historic book. Enter a modern classic also focused on best practices of highly successful companies: “The New Rules of Retail” by Robin Lewis and Michael Dart. It delivers wisdom that can be applied to any business. The book discusses the new masters of business based on branding and control of the value chain, not just competency in the supply chain. We’ll review an outline of these principles in general, focus on one of the masters, and then discuss how the ultra-successful lessons can be utilized in your business to align for sustainable profits.

“The New Rules” gives a great overview of the history of supply for consumer demand through three main waves of U.S. commercial history. The authors describe the trend starting with “producer power” based upon insatiable demand and growth from origins of this country until 1950. With the opening of our interstate highway system, the explosion of suburban population led to the building of 70,000 malls. Now the challenge was to create demand by ever more sophisticated marketing, which produced market saturation. Technology via the power of websites is more commonly used for uniform management programs and this supports the ability to perform the supply function more efficiently and effectively.

The current delivery capability in the uniform business parallels the saturation in retail apparel distribution. Both retailers and uniform suppliers are able to capitalize on the benefits of properly managed branding that supports differentiation. In the retail realm, the essence of branding was catapulted by the vision and genius of Ralph Lauren, for example.

The book describes that “Using the power of dreams, he created a lifestyle brand compelling consumers away from single-product driven demand like Levi jeans,” to the Polo brand which defined a “Gatsby-like” lifestyle. Many product categories were encompassed from men’s, women’s and children’s apparel to accessories and home goods. With all the retail choices available to consumers, the power shifted from “needing stuff to demanding experiences. The changes include the shift from conformity to customization, from new to ‘new and now’ and from self to community.” Enter as well the concepts of sustainability with green awareness and corporate social responsibility.

The current and final shift to consumer power, which has been exacerbated by the internet and e-tailing, portends a new challenge for marketing. The key to winning the consumer’s heart and mind is, according to Lewis and Dart, based upon “creating a particular value offering so powerfully satisfying that it actually changes the consumer’s brain chemistry.”

This concept is one of the three imperative strategic operating principles required for success in this century. This first principle is “known as ‘neurological connectivity’ whereby at the mere mention of a brand, retailer or service, dopamine is released in the consumer’s brain and triggers an instant desire to get or go to that brand.” It’s very powerful stuff, and here are some of the current masters accomplishing this feat: Apple, Costco, Polo Ralph Lauren, lululemon, VF Imageware, Starbucks, Gilt Groupe, Amazon, Zappos and A & F.

The second principle is “preemptive distribution,” which is managing to gain access to consumers by being available “precisely where, when and how the consumer wants your product or service. This concept relies on speed, agility and the ability to reinforce the neurological connection or brand promise.” This is exemplified by use of smartphones for lowest price and availability for products.

And thirdly, value chain control which must be complete control from creation of the product through consumption. Think about the masters mentioned above and the close contact they have with their customers to assure that the value conceived is being delivered and enjoyed by the ultimate consumer. Ralph Lauren convinced Macy’s that he have control over the Polo department so that products are arrayed and merchandised with total understanding of the perception of the retail customer. He didn’t want to rely on any retailer to independently affect the consumer’s experience and thus risk his success.

Steve Jobs didn’t want just any retailer to determine the experience of a customer purchasing Apple products, so he created his own stores with an attention to all details until he got it right. One may not agree with all of Jobs’ corporate behavior, but you must respect the genius in his work. Jobs learned from his dad, who made furniture in his spare time, that the right materials and workmanship need to be utilized even when the consumer cannot see them. This Zen concept of paying attention to details was one of the principles that enabled Jobs and his team to change the world of computers, music, tablet computing, mobile phones and motion picture animation (think Pixar). The control of the value process catapulted Apple to the most valuable company by market cap in the world. I highly recommend the book “Steve Jobs” by Walter Isaacson. Jobs also behaved with what Isaacson called “reality distortion” whereby Jobs would envision a result or product he wanted despite the fact that the engineering had not yet been developed to enable the realization of his concept. Not everything worked, but enough projects did to create a few billionaires.

So what can we do to emulate the masters of these concepts? In the olden days – ten years ago – mastery of the supply chain would be considered adequate to assure profitability and success. To be certain, ensuring reliable delivery of a quality product at a competitive price is key but no longer alone sufficient for today and tomorrow. In addition we must learn how to manage and successfully control the “value chain.”

Recognize these five major shifts and determine where you can spur development and create amazing value:
1) From needing “stuff” to demanding experiences. Starbucks is not the only retailer selling coffee, but the experience it creates and delivers draws very loyal customers.
2) From conformity to customization. This includes mass-customization by delivering the right fit and comfort at an attractive price.
3) From plutocracy to democracy. Customers crave accessible luxury such as Vera Wang at Kohl’s or Mossimo, Cynthia Rowley and others at Target.
4) From wanting new to demanding new and demanding it now. Global fashion titan Zara’s delivers on average two new lines in its stores each week. Their performance to accomplish this fast fashion creates excitement and neurological connectivity such that the typical Zara customer has been trained to not miss a new trend. The average Zara customer visits the store 17 times per year versus four times for other retail store customers.
5) From self to community. This includes transparency, corporate responsibility, sustainability and environmental initiatives, which are no longer just public relations projects. These trends will win consumers.

Patagonia is one such company that has reached the fifth shift. It makes available on its website the opportunity to purchase used Patagonia products by connecting customers who want to sell the previously purchased products in acceptable condition at a reasonable price to a consumer who doesn’t need to spend for a new item. Patagonia makes no money from this transaction and sacrifices sales of new merchandise. But think about the value created by this culture and the long-term benefits for this brand.

Understanding and deploying these successful contemporary concepts in the retail industry are worthy goals. I imagine there are uniform suppliers who have already adopted some of these traits. Are you one of them? You can be. Think about how you can collaborate with your associates, vendor partners and customers to create incredible value, leading to sustainable profits and growth. Put this concept on the agenda for the next strategic ideas meeting.