Adapt to changing customer behaviour or die
By Pavlo Phitidis
A 159-year old icon of retail in South Africa closes shop on 01 August. Failing to evolve in a changing world means extinction. On this week’s The Money Show with Bruce Whitfield, we dissected the failure of Stuttafords and what types of lessons, or opportunities, can be discovered from the way this iconic retail giant fell:
How It All Went So Very Wrong
According to a recent Financial Mail article, the failure of Stuttafords can be directly linked to a shareholder spat. This disagreement delayed the implementation of emergency actions that were purported to be plans that intended to rescue the business from failure. My analysis of those plans revealed, however, that the rescue strategy amounted to not much more than “more of the same”, so perhaps the strategy led to the spat. Disagreements between shareholders often lead to opportunities for developing businesses, as large companies are most often dismantled, or fall apart. But it’s important to remember that no business – big or small – is immune to disagreements between its owners, partners, and shareholders, so actively working to resolve these issues is vital, to ensure your company’s longevity and success.
The Business Model
Stuttafords has the added complication of being in business, within a dying industry: the retail department store. During its heyday, Stuttafords set the bar in style, and brought international brands to South Africa. It was revered and admired. That business model was hugely successful when Stuttafords first opened, but in the past twenty years, it’s become more and more irrelevant, and the company did not, or was not able to, evolve. The world of retail is rapidly changing, and failure to evolve is a death knell to any business in this sector.
A Changed Business Environment
As the business environment has changed, so too have customers’ needs and the problems they need to have solved. Stuttafords became too expensive for the everyday customer, and are looking for a more authentic experience that goes beyond the experience of shopping for specific products. The company’s view that credit is valuable to a customer base that can’t access credit and has been burnt by it is such an example. Its inability to make shopping at Studaffords cool (which it was in 1950) contributed to its failure too - saying you shopped there on social media would make you look uncool! The sum of these and other similar 'parts' that were missed makes the whole and led to Stuttafords becoming South Africa’s Kodak. Kodak remained defiant against change, despite their customers moving quickly away from their products and towards digital photography, and yet, the company did nothing to stop them. Kodak refused, or was unable to evolve, and their products ended up irrelevant, with their customer base completely decimated.
Retail Models of the Future
Just recently, Amazon purchased Whole Foods and there’s been reports that Amazon has patented a piece of technology that will disable online shopping services on mobile devices, so that in-store customers won’t be able to perform price comparisons. That move will not be met with approval by customers, as our mobile phones have become convenient companions for shopping. But looking at retail models for the future, growing businesses need to keep in mind the following:
• People’s priorities have changed – time is viewed as even more valuable, so having their problems solved quickly and efficiently, is integral
• Niches offerings are more valuable and attractive to customers – offering focused services or products, creates a more valuable experience for your customers, and attracts more foot traffic and more attention.
• Direct to public models - combining a physical presence, like a store, with an online experience, is essential.
• Extend the customer experience – go beyond credit, and move towards building customer relationships that solve their problems, in refreshing ways.
What Leaders Should Do
This new environment demands entrepreneurial leadership, where risk-taking is part and parcel of everyday operations. Learning to lead with incomplete information, a constantly changing landscape and never having enough resources will lead to your success. That sounds like the everyday life of an entrepreneurial business owner. Corporate leaders, come spend time with us; well show you how to do it!
How can you ensure your business remains relevant in changing world? Aurik can help. Get in touch with our team and let’s build your business into an asset of value.