Moving Tribes - the blog

Can small be beautiful?

Wandering the harbour towns and villages of Cornwall last week provided some more retail food for thought. Yes, we picked the week with all the rain to go on holiday, but at least it presented a good excuse to duck into shops and browse.

What surprised me most comparing these small towns with the bigger retail centres of the south-east was the number of independent stores. That includes the obvious tourist-facing craft, fudge and souvenir shops. What really caught my eye, though, were the regional and local fashion chains, independent bookshops and other unfamiliar retail brands who seemed to be doing well (or at least surviving). By comparison, many of the national chain outlets (even those who pride themselves on their surf-dude brands) looked corporate and tired.

Of course, there are some structural reasons why this layer of independent retail might be doing well in Cornwall. Some of the harbour towns are too small to have hit the radar for the big-boys.

More than that, however, there is also some really good retailing being done. Service with a smile (remember that?), interesting ranges of product and a clear effort to build a local customer community as well as selling to the transient tourists.

I worry, though. In a tough economy, just being a good traditional retailer may not be enough. A properly integrated e-commerce channel will be a must-do. That’s not only important for your local customers but also to maintain a relationship with those tourists when they get home.The value of building a relationship with every customer, which we’ve been talking about here at Moving Tribes, is just as critical to these businesses as to national chains.

Delivering that kind of end to end retail experience, beyond the walls of the store, is a huge challenge for a small business. Checking up on some of my favourite of these small stores once I got home, I have found semi-transactional and frankly half-baked websites, limited social network engagement and no evidence of any real CRM effort.

And that’s not a surprise. Where do you turn, as a small retail business, for this kind of support? There are a million people who will build you a website, but few who understand why you are doing it and how to integrate it with your store. There are even fewer who understand retail CRM – even the leading retail textbooks don’t go much beyond “why not build a spreadsheet listing your customers and send them emails?”.

Independent retailers and small chains have attracted a lot of attention this year, as a key component of the re-invention and rejuvenation of our high streets and also because they play a big role in re-energising our wider economy. I can’t help feeling, though, that as much as we invest in cheaper parking and more attractive high streets (which we certainly should), if we allow these small business to try to survive with such limited support in digital retailing and customer marketing, we are sending them onto a battlefield tilted in favour of the big guys.

Helping small retailers with these new challenges is both a business opportunity and a benefit to our wider society. Are you ready to get involved?

Short term / long term

Too often, businesses which could unlock huge value by changing the way they manage their relationships with customers don’t seem to want to listen.

Test this for yourself. As I said a couple of weeks ago, if you can go into a retailer, spend a lot of money and come out without them asking you for your email address, then that business is not managing its customer database properly. That’s an experience you can have the length and breadth of our high street.

And away from retailing, even consumer services businesses are not immune. Several years ago I wrote here about how the insurance industry seems to have developed a business model which is actively designed to drive customers away.

I came across another great example only this week, when a friend told me about their mobile phone bill. They’d taken a contract with no mobile internet data allowance on the perfectly reasonable basis that they never used the internet on their phone anyway. Unfortunately, and unknown to them, their iPhone used a tiny amount of data each day to manage itself – just enough to trigger the minimum £1 charge from the network. This is an issue which will be well-known within the network, but at no stage did they look to manage their customer relationship by pre-emptively avoiding the billshock which inevitably arose. Presumably they preferred to grab that lovely revenue despite the danger of an angry customer cancelling when they noticed what was happening.

So why does the world work this way? Why do retailers forgo the obvious benefit of asking their customers who they are? Why do services businesses cloak themselves in commercial policies which frustrate their customers and cause churn? I think the answer is that too many businesses are structured today to manage only the short term – they want jam today, not tomorrow.

Many of the examples I’ve given above happen because they appear to those businesses to be perfectly rational. The cost of launching a loyalty scheme is easy to quantify precisely, the benefit less so. The revenue from the data charges is real money, whereas the benefit of helping the customer avoid them seems less tangible and a long time away. This is the “tyranny of the spreadsheet”. Short term costs drive out long term benefits.

The result is short termism, and a focus on continuity rather than change. A short term culture focussed on this quarter’s numbers is not going to create investment in extending customer lifetimes.

 That’s an observation which raises profound implications for how we run both public and private companies, which I will return to in another post. In the meantime, watch out for these symptoms in your business. If you want customers to invest in their relationship with you, you need to be prepared to invest in your relationship with them.