Forrester's 7 Rules for Profit and Growth

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Forrester's 7 Rules for Profit and Growth

By Tim Denman - 09/10/2015
Forrester Research's VP & principal analyst Sucharita Mulpuru shared her unique take on the current state of the retail industry and her seven new rules for profit and growth at Engage! 2015.

Retail continues to evolve and there are numerous technology solutions available, but retailers need to pick and choose their deployments wisely to avoid wasting valuable investment dollars on unsuccessful deployments.

To help retailers develop a successful innovation strategy Mulpuru shared the following tips for the Engage! 2015 audience:
  1. Find your profit pools. It is not about just making money off the margin of your product, it is about finding new revenue streams. For example, Amazon losses money on most transactions, but it is wildly successful thanks to a slew of side businesses: marketplace, advertising, web services.
  2. Reinvent your loyalty program. The idea of a customer for life is going the way of the dinosaur and the churn on customers is very high. Loyalty programs don't make shoppers more loyal – shoppers belong to eight or more loyalty programs on average and join just for special offers and promotions. Retailers need to create differentiated services and creatively look at other businesses that have put a new spin things. For instance with Starbucks auto reload pre-paid card, shoppers always have an incentive and the ability to stop in for a quick cup of Joe.  
  3. Adopt a new approach to store labor. With minimum wages on the rise and retailers like Gap and Walmart increasing hourly rates it is important to begin thinking differently about your in-store staff and to grow and promote from within. As Kip Tindell, CEO Container Store said "one great person can easily do the business productivity of three good people." You get what you pay for.
  4. Embrace older shoppers. Retailers are obsessed with Millennials, but the consumers that are spending the most are the older ones. Retailers can't ignore shoppers aged 25-34, but the under 35 set have lost a lot of their overall spending share, while those 55 and over have increased their spending. Don’t discard direct mail and don’t overgeneralization about demographics, look for the most promising sub-segments and incorporate older customers into your research personas.
  5. Rethink same-store sales. Every $1 spent online corresponds to $5 worth of sales influence in the brick and mortar environment. Typically same store sales are the key metric, but the truth is there is a significant amount of money on the web and a major portion of sales are web influenced.
  6. Change the way you merchandise. Merchandising is due for a massive overhaul. Pricing is being reinvented: more dynamic pricing with digital displays, elasticity testing of prices for long-tail items, integration of factors like returns into pricing, better pricing for new items, etc.
  7. Question hype. There is so much hype around technology that retailers can get easily distracted and caught thinking that they are falling behind. There are no shortcuts to long-term sustainability and retailers need to do their due diligence before embarking on any flash in the pan customer engagement initiative.