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Owning the Retail Value Chain like Lululemon and Ralph Lauren
I talk about it all the time because success in the retail value chain starts with truly and authentically knowing the customer. If you’re going to deliver value to the customer, you really need to understand the customers’ values and what they want from you. And I don’t mean from a cursory, perfunctory perspective. I mean really, truly understanding the customer.
What stops retailers from owning the value chain? Is the organization really built around the customer or is it organized around channel silos that have been built up over time? And for those that are trying to become a true multi-channel company, are those silos blocking the development of a true customer-centric focus?
The first step is being able to maximize, or at a minimum, hone, the key components of the retail value chain. Retailers need to own the way that they deliver their brand to the customer. If they have that approach, that orientation, then they’re positioned to fulfill their brand promise to the consumer.
Now in writing, that comes across as kind of obvious. For example, you would think that most retailers should know their customers by this point, wouldn’t you? Why would a retailer be falling short in this day and age on that?
It comes down to owning the value chain. There are product companies out there that are not in a position to control the interaction of their brand with the customer. The retailers that are doing well can claim that their success is based on being able to own their value chain.
So let’s talk about two retailers that do this well and own the retail value chain. While not all retail brands sell direct to their customer, brands that do sell directly to their customer are in a much better position to own and manage the experience and thus, the value chain.
There are some retailers that are getting positive press because they are serving a very specific customer, and they know it very well. Lululemon comes to mind. Lululemon customers are specifically interested in apparel that goes with a certain healthy lifestyle, combined with doing exercise and yoga. Their position is that they sell clothes you can sweat in. But beyond apparel, they offer programs and special events related to what their customers want, and not just to purchase apparel. From day one, lululemon been able to understand the lifestyle of healthy people and meet their needs, not just with apparel, but with seminars, advice, information, and ancillary offerings. It’s a uniquely customer-centric retailer where you don’t need to buy something every time you walk into the store and you’ll still feel welcomed and satisfied when you visit.
A retailer who mostly sells through department stores vs. direct – but still owns the retail value chain – is The Men’s Shop of Ralph Lauren. What Ralph Lauren was able to do as an apparel manufacturer and name brand was to become a lifestyle brand, similar to lululemon. The difference here with Ralph Lauren is that you don’t always find their products in a Ralph Lauren store. Most department stores sell Ralph Lauren, so the biggest challenge that that retailer had was finding a way to control the customer’s experience. There are very strict guidelines that Ralph Lauren dictates that all department stores have to display that product. And so Ralph Lauren has been able to maintain its strong value chain as it depends upon the relationships that are set up with the large retail department stores such as Macy’s and Dillard’s. While Ralph Lauren does not own the point of sale, it’s still very much in control of the brand, how the brand is displayed, and thus the retail value chain.