Guns…Killing machines..or..defensive essentials?

No I am not going to write about guns. ‘Cheap shot’ maybe ! Just a quick way of getting your attention. Or at least I hope it is. What I do want to talk about is perception. However, guns are what got me thinking after the recent shootings in yet another school in the USA. How is it that virtually the entire world thinks the Americans attitude towards firearms is completely bonkers ? Yet (most)Americans think the rest of the world’s attitude is bonkers. And what is this to do with retailing, High Street, consumers, Internet and the machinations of running a commercial enterprise?

Perception is the answer. Or at least in part. So I remembered an article I wrote for a trade magazine about three years ago. I don’t think I am an idle git, but others may have a different perception of me ! If they only read this one post there maybe a reasonable rationale behind such thinking, as I have reproduced it for the rest of this blog(with some minor changes)

Sir Dave Brailsford (Team GB & Team Sky cycling Head Coach) examined the effect of perception on the performance of world class cyclists. Gary Zukav (American spiritual teacher, former Vietnam special ops vet and advisor to the American security services) says

‘….what we believe is based upon our perceptions….what we perceive depends upon what we look for….what we believe determines what we take to be true…what we take to be true be our reality….

Ah well! That’s great stuff. So what has it got to do with every day life on the High Street? Back in ‘lala’ land, and talking about a bloke who probably assassinated more people than Attila the Hun and another who is responsible for a dubious explosion in lycra wearing , at this stage, probably not a lot, but hopefully, all will become clear or at least clearer . The initial relevance is that both of them need to have a very good understanding of the human psyche.

Pre 2000 , the only interesting comment about the car, Skoda, was the joke that the way to double its value was to fill the petrol tank. In 2000 it was taken over by VW. VW invested money, engineering ’know how’, tough quality control measures, and set about the enormous task of changing perceptions. Part of the strategy was the simple technique of model names eg Superb, Rapid and other seemingly daft names. A little like calling a garden shed ‘boutique’ or ‘deluxe’, it is still a garden shed. However, combined with a VW reputation, perceptions did start to change. Now, the cars regularly win ‘What Car of the Year’…’Best Car of the year’….’Motor Mechanic Nerd Award 2014..’(no it doesn’t exist). Sales are strong, there have even been waiting lists at times, yet our roads are not flooded with them. There are still perceptions. This time some of it relates to the way in which the potential buyer believes they will be perceived by other road users. Tough nut to crack.

Poundland do a very good job in telling everybody that everything is £1(actually it is no longer just a £1). They don’t claim to be the cheapest, sometimes they are, and sometimes they are not. However, Aldi and Lidl try and create the perception that they are the cheapest. December 2014 , Waitrose sold a Gressingham duck breast for £5. Lidl sent out flyers shouting about an offer for one day only that the very same piece of duck was £5.99.

Apple could be considered the masters of ‘perception ‘. They not only create a product that the consumer perceives as being the ‘best’. They create a metaphorical club to which the consumer, wittingly or unwittingly, wants to belong. Though they occasionally get it wrong. a couple of years they said that they believed the consumer did not want a large screen phone. Samsung did and introduced a model, which sold well. Apple now sells load of large screen phones.

The inevitable question is what has this to do with any of us, unfortunately everything. Everything is perhaps a slight over exaggeration, but it is critical to any retailer, in whatever format to try and have an understanding of how the consumer perceives the product and the outlet from which it is bought. Unfortunately, because our industry does not have the resources of Apple, nor for that matter does it have any spare resources least of all financial, it is a tough ask.

As to how important it is to the independent retailer, perhaps we can consider two major retailers that have the resources but may have got it wrong in the past. For years, Marks & Spencer’s dominated their market sector. They did not perceive they needed to accept credit cards, they did not perceive they needed to advertise. They were wrong on both counts and paid the price. They lost market share and they lost shareholder confidence. Consequently, they started with their own credit cards, then they accepted all the major cards. They are now one of the highest ad spending retailers on the High Street. The second retailer up for the award of not understanding their customer, could be Tesco. Dominated the grocery market for so long, thought they knew and understood their customer base, and then pop it all goes south.

Once again, if there are no resources to investigate and react to perceptions, what is the point in writing about it?

With no financial resources, perhaps a little time and thought could be expended. The First thought would be accepting that maybe the retailer’s perception of itself is different to that of the consumer. Discovering any difference, could be a pleasant surprise, equally it could be unpleasant. Either way, it is perhaps worth investing a little time to find out if your concerns are unwarranted or are some changes needed.

A suggestion would be to try and step outside of your business, whether it is retailer or internet , and try and look it at from your customers point of view. It maybe even worth a shot at asking a few friends or relatives , who have no connection to, or knowledge of, the business, to visit your store or site and make purchases(you may have to fund this !)ask questions, seek advice and generally be a purposeful yet needy customer.

Whatever the results, it would be a useful exercise, as it will confirm you are, either,on the right track, or you are way off beam. The likelihood is that you will find opportunities for change and be somewhere in the middle. No matter what industry we work in, we all work in a slightly cosseted environment. The majority of independents are always looking to improve their business, but not always sure of how to do that. The areas that first come to mind, are store refits, staff training, new product, product display, and pricing policies. For online operators change store refit to redesign of web site. Yet how many can really say they know what their customer expects when they come in store and what they feel like when they walk out. Even with the regular customer, who you assume is happy with everything because they keep coming back. Are they buying some stuff elsewhere as well because you don’t stock it? Or maybe they perceive you to be expensive in some areas? This being a perfect example of perception.

Simplistic, perhaps, but because of the word limitation of these articles, simplistic it has to be. So back to the King of Lycra and the Trained Killer. What do they know that is of interest the retail market? Well, with the King of Lycra, he is evaluating how his team can best understand and alter their perceptions, when necessary, in order to beat their rivals and create the best performance. Which surely is what most retailers aim for in one way or another. The Trained Killer makes for a more exciting start to this article.

If you don’t like the results of any research you may conduct with your customers, you can always shoot them…..

Do I think the American President ‘s view of having pistol packing teachers is just a different way, of looking at things ? Do I ‘eck!

I think that the short piece below, taken from a web site about English language and its usage , sums up perception in everyday lingo..

When I used to work as a florist, by the end of a busy holiday there would be only mismatched dregs to make arrangements out of. So, we had a little game: Someone would make the ugliest flower arrangement possible, and we’d put a giant mismatched bow in the middle of it, and we’d watch to see who bought it. Invariably, a customer would pick it up, deem it “exquisite”, and buy it. And, invariably, an older woman we worked with would say,“There’s a seat for every ass.”

Why the dive… the bottom?

Image result for cartoon images diving to the bottom

No matter what the market, no matter what the product , no matter what part of the chain , and for the most part it does not matter where in the world, eventually organisations follow the same self imposed self -destruct mechanism of the pursuit margin reduction.

In a climate of overinflated high end salaries, and obscene wealth, profit, in itself has become a ‘dirty word’. Yet no matter how philanthropic an organisation a clear margin of profit is essential even if it is only   ‘to philonthrangate’ (I’ll save you the time-it doesn’t..).

Image result for graphs showing reducing profits

Yet we are all guilty of, at some point, chasing the ace to the bottom of the pack. The image above shows profit reducing as the demand declines.However, my issue is with declining margins before demand hits maturity. In many market places we have the strange habit that the higher the volume, the market chases the price down, even at times when the supply is not great. History constantly repeats itself with playground crazes . As the demand starts to fly, the price starts to plummet. Then supply starts to exceed demand and most players end up with stock and no profit . The trick here is always to get out just before the top (like any commodity) the general principle is do not place that last order ! Or as one (sanctimonious) customer said back in the days of the millennium

I had a great year for the millennium celebrations…

How so? When everyone else had such a terrible time….all being left with unsold stock

I replied…

I didn’t buy anything!

Was the rapid retort ….

Crazes ,are unique in their behaviour patterns and perhaps not the best example. so put them to one side, I will also avoid cliches involving the words ‘profit and sanity’. Invariably those who most quote it are the biggest offenders. And we can comfortably ignore the mega brands such as Apple, as they tend to be the exception to every rule.

Take some of the U.K’s High st giants : M&S and Tesco.

In the early part of the 21st century M&S started to suffer from more agressive competition. one of their initial responses was to introduce lower priced and poorer quality product . This failed dismally, rapidly and just as importantly, continues to fail, shown in poor sales figures and lower profits. Of course there are other factors involved , but in essence they got involved in a game they could not play and still cannot. Don’t get me wrong they still make healthy profits but not to the level they had been in the past. It may seem rather arrogant, but I firmly believe they did not really understand their own brand or at very least they misunderstood and misread consumers perception. Against this backdrop competitors such as Uniglo and Zara have blossomed. Yes, agressive pricing but very acceptable margins and constant product development.

Tesco, when suddenly faced with the likes of Lidl and Aldi tried to fight back on price alone (as with other major supermarket chains) and failed to capitilise on their own USP. Only now are they all starting to reaffirm their positions but they have lost a lot of time and margin in doing so. Now I have just read that they are starting their own discount chain!

Carillion (aka Tarmac – didn’t know that !) is one that baffles me. Once again a monster that could not have known what it was doing . Pitching for government contracts at presumably very low margins in order to grow their turnover. Yet, they knew their debt levels, they knew their costs, they knew  what their immediate commitments were (the contracts they had won) and they knew virtually to the penny their cash flow situation ….and they still screwed up….commercial madness.

For small independent organisations, whose resources are far smaller , the rationale is far more understandable. Yet, unfortunately, the consequences are similar if not quicker and more final. I come across businesses in our market place who are sinking under the weight of decreasing margins plus decreasing turnover. They are relying on trying to stem the fall with price alone. They tend not to look for alternative and new product, new routes to market and additional service levels .

Major airlines such as British Airways decided to pursue the budget operators on a price to price basis. The result are lower margins and a damaged reputation , consequence of cost cutting .

And then of course there are the online traders, the ‘divers’ extraordinaire ‘. They can do that standing on their head – (diving is easier that way). Well at least those selling on the Amazon market place as the system drives the price down to lowest acceptable price by any particular seller. This is an over simplification, but as Amazon is the world’s second biggest (Walmart is still king) retailer, this has a huge impact on prices.

Within our own industry we have examples of the perfect response to the ‘dive to the bottom ‘. About seven years ago,every independent retailer (entirely uncoordinated) decided they could compete with discount operators and supermarkets at Halloween . They decided to select, stock and sell product that the consumer would not find in the multiples at margins , both cash and percentage, which provided healthy returns. Yet there appears to be a reluctance to repeat this with everyday operations. Some may say, justifiably, it ain’t that easy….no it’s not, but it has to be better than diving to the bottom.

To enjoy being in the sea you don’t have to dive under it . And if you do, you have to know what you are doing ……