White Paper: Added Value Retail Services

August | 2014

Research Paper

Added-Value Retail ServicesIncreasing the Value of the Retail Store Channel

Think Blink At Shikatani Lacroix, we design compelling at-purchase

moments that connect in the blink of an eye.

Our philosophy and strategic design approach,

Think Blink, is driven by a consumer’s motivation to make

a purchase decision. Everything we do is geared to owning

the “at-purchase” moment. Our firm has a well-earned

reputation for designing integrated brand experiences that

effectively connect brands with consumers to drive

measurable results for clients. !!About the author Sydney McMurter, Research & Strategy Shikatani Lacroix As a researcher and strategist at Shikatani Lacroix, Sydney

conducts research and analysis for brands such as TD Bank,

PepsiCo Canada, and Tim Hortons. !Prior to joining SL in 2012, Sydney graduated from York

University with an Honours Bachelor of Science degree in

Psychology and a certificate in Urban Studies, where she

researched the connection between psychology and design. !

| Added-Value Retail Services | Research Paper | August 20, 20142

• In an increasingly complex omni-channel retail environment,

the retail store still plays an important role through offering

an in-person brand experience. !• Offering added-value retail services is one strategy that can

emphasize the value of visiting a store. !• These added-value services must be strategically tailored to

specific customer needs in order to cause a significant

impact on customer behaviour. !• There are various factors that contribute to the branding

strategy (new brand or co-branded) of added-value

services, such as service type, project timeline, and overall

objectives.

“The Blink Factor is the

ability to stand out and

effectively communicate a

meaningful and

differentiated offering,

and must be present

during the At-Purchase

Moment to ensure

maximum impact.” Jean-Pierre Lacroix, President Shikatani Lacroix

Summary

The Shikatani Lacroix Think Blink Process


Value of the Retail Store !With the increasing complexity of shopper behaviour, channel

dynamics, and the competitor relations, the task of creating a

distinct competitive advantage at retail and preventing loss of

sales has become incrementally more difficult. Influences and

impacts cannot be completely isolated and business systems

are continuously evolving, with consolidation of major retailers

occurring as a means for growth. This report clarifies the

current role of retail stores and provides insights into creating

successful added-value strategies to grow margins through

physical retail stores. !As online retailers become more dominant and can offer items

at lower costs, one may believe that physical retail stores are

becoming extinct. However, according to a 2013 A.T. Kearney

report, in 2012 60% of the total shopping time (including the

research phase) was spent in retail stores and 92% of sales

occurred in a physical store location. Furthermore, consumers

reported that retail stores still fulfill important needs, such as

obtaining a product or service immediately, providing an

opportunity to test or try products, or as a social event. Retail

stores are also the only channel that can offer a brand

experience to all five senses and allow for face-to face social

interactions. Therefore, this channel cannot be undervalued,

especially when some of the top 2014 consumer trends have

been reported to be instant gratification and in-person

interaction and experiences (Euromonitor International, 2014). !When designed correctly, a retail store can be a place for

discovery, entertainment, social interaction and need

fulfillment. They also provide an opportunity for higher margin

transactions, since in-store visits are more likely to be

unplanned and customers are therefore inclined to spend more

compared to the frequent “mission” trips that occur in the

online channel (A.T.Kearney, 2013). Therefore, the retail store

still plays an important role in increasing a retailer’s ability to

avoid commoditization while increasing margin, a key factor in

the success of a retail operation.


Added-Value Services in the Retail Store !To increase margins in retail stores, it is also important to make

a retail location worth repeated visits. Retailers need to

emphasize their unique value compared with purchasing online

or from competitors and build customer loyalty, especially

since customers can act as powerful brand ambassadors

through online reviews (Euromonitor International, 2014). One

way to accomplish this task is to provide added-value services

that allows the company to build stronger affinity with key

target segments, while helping increase overall store sales

margins. !Although initiatives such as improving customer service are

not new concepts, in today’s hyper-competitive marketplace it

is especially important to develop a strategic retail added-

value plan. This takes service to a new level, evolving from

facilitating a product to providing added-value knowledge that

fits a unique and specific customer need. This strategy must

originate from consumer needs to ensure customer satisfaction

and allows a brand to earn more. Yet, the added-value strategy

must be specific and differentiated since generalized efforts to

improve customer experience will be costly and inefficient

(Booz & Co., 2008). !Identifying the appropriate services and strategy is an added

challenge. Booz & Co state in a 2008 report that retailers need

to identify and focus on the services that would make a real

impact on traffic, conversion and transaction size and that fit

with the existing offering and overall corporate strategy. The

service model must also be adaptable to evolving “competitive

dynamics and consumer preferences”. Furthermore, they note

that traditional survey methods may not yield ideal results for

determining consumer needs since customers often do not

know what they want, and a pilot service offering may be

necessary to determine impact.


Retail Consumer Needs !Research into general customer trends and behaviours can

provide a starting point for developing added-value strategies.

Euromonitor International’s “Top Consumer Trends for 2014”

report states that consumers are currently looking for a

simplified life, convenience and are increasingly value-focused. !Retailers should consider the following when considering

evolving their service offerings:!1. What is the key customer target group to whom new

added-value service offerings would have the highest

appeal?!2. What customer underserved offering is not being met by

the current channel?!3. If the given business category is vulnerable to disruption,

how would the new entry overcome this?!4. How will the organization create value and margin through

these new services?!5. What impact do the new services have on the existing

product mix and offering?!6. What are the current service gaps which will need to be

filled with a new added-value offering?!7. Should the new services be branded, sub-branded or

identified through a descriptor? !8. How sustainable is the new added-value services and how

quickly can competitors match the offering, driving

commoditization and price competition? !Answering these key questions will assist in helping define the

ideal added-value services that are differentiated and

sustainable for the retailer.


Branding Added-Value Services !Once the right service type has been identified through a

review of the various questions and current business model,

the next challenge is to develop the service branding strategy.

Branding is very important because it influences customer

perceptions, trust and awareness. Retailers may choose to use

their own “private label” brand service, bring in a reputable

outside brand through a co-branding partnership, or use a

combination of the two approaches. !Determining the appropriate use of these branding strategies

depends on the type of service and how quickly it needs to

take effect and the role of the service on the overall branding

of the business. For example, offering a service with the retail

store name can help build brand equity. Creating a completely

new brand for a service will take more time to create

awareness and a positive image. Conversely, using a co-

branding store-within-a store partnership is a quicker way to

establish trust of a service. Using a new parent brand

combined with a new brand co-branding strategy is an

efficient way to develop the brand, since qualities of the

former will be absorbed by the latter. In this case, it is

important that both brands are mutually beneficial and are a

natural fit in terms of brand personalities (Leuthesser, Kohli, &

Suri, 2002).!Consideration should also be given to understanding how

branding of the new services can build differentiation and

reinforce the organization’s position and direction. Often, the

introduction of a new brand or sub-brand leads to confusion in

the market place and may undermine the credibility of the

organization. Conversely, if the current organization lacks the

credibility or brand trust to deliver the new services, the launch

or acquisition of a brand may help pave the way for success.

Best Buy likely went through the same process when they

chose to retain the Geek Squad name for their added-value

electronics and upgrade service.


Conclusion

!Providing a new meaning and purpose for bricks and mortar

channels of distribution is a highly topical subject amongst

retailers and their boards. A key opportunity is to provide

added-value services not available as part of an online

interaction, thereby driving greater affinity to an in-store

experience. The challenge is understanding which of these

services bring true value to customers that warrant better

margin and a higher degree of store loyalty. For the retailer, the

second challenge is ensuring their service platform and brand

trust can effectively bridge their current offering with those of

a new added-value service platform.


References!1. Leuthesser, Kohli, & Suri, HENRY STEWART PUBLICATIONS

1350-231X BRAND MANAGEMENT VOL. 11, NO. 1, 35–47

SEPTEMBER 2003. !2. Euromonitor International, “Top Consumer Trends for 2014”. !3. Booz & Co., 2008. “Winning in Retail with a Targeted Store

Service Model”. !4. A.T.Kearney, 2013. “Recasting the Retail Store in Today’s

Omnichannel World”. !!


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