Customer Service: A Key Differentiator in Retailing

Customer Service: A Key Differentiator in Retailing

Amit Gupta (JDA Software, India)
DOI: 10.4018/978-1-4666-9894-9.ch005
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Abstract

Customer Experience Management is a strategy that focuses the operations and processes of a business around the needs of the customers. Retailing is a huge industry (45% of the U.S. economy and the largest employer) that has consistently been an incubator for new business concepts. The retailing business, in today's world is focussed on the customer's buying experience. Focus on customer experience and understanding their needs can solve many retailers' chronic problems such as stock outs and markdowns. This chapter focusses on following major themes: assortment and inventory planning, markdown and store execution of retailer and their strategies for next couple of years. In today's Omni-channel world it's important for retailer to enhance customer experience, be it in brick and motor store or online.
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Introduction

Customer is King; it is true in real sense for the Business success in today’s competitive markets as it requires a high understanding and respect of the customer. Customers are demanding, have more money to spend and have a wide collection of goods and services to choose from. To satisfy the customers, retailers must be able to listen to their feedback and improve services and goods to keep of clients. Customer satisfaction gives an indication of how much successfully the organization is meeting the demands of customers. All activities of the retail chain stores are directed towards customer satisfaction which leads to customer retention--a pivotal factor for business growth. The principle agenda of this research paper is to illustrate the importance of customer satisfaction in the retail industry. The retail industry being the highly competitive field, being able to fulfill customer expectations and demands becomes the most essential element in order to get sustainable growth and profit margin.

Retail Industry

All businesses that sell goods and services to consumers fall under the umbrella of retailing. For starters, there are department stores, discount stores, specialty stores and even seasonal retailers (Anderson, Fornell & Mazvancheryl, 2004). Each of these might have their own little quirks; however, for the most part the analysis overlaps to all areas of retailing (Anderson, Baggett, & Widener, 2006), Over the past couple decades, there have been sweeping changes in the general retailing business. What was once strictly a made-to-order market for clothing has changed to a ready-to-wear market. Flipping through a catalog, picking the color, size and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was standard practice (Moinzadeh, 2002). At the turn of the century some retailers would have a storefront where people could browse. Meanwhile, new pieces were being sewn or customized in the back rooms.

In some parts of the world, the retail business is dominated by smaller family-run or regionally-targeted stores, but this market is increasingly being taken over by billion-dollar conglomerates like Wal-Mart and Sears. The larger retailers have managed to set up huge supply/distribution chains, inventory management systems, financing pacts and wide scale marketing plans (Denove & Power, 2006).

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Customer Satisfaction

Customer satisfaction is a measure of how a retailer’s total product performs in relation to set of customer’s expectations. Customer satisfaction depends on the product’s perceived performance/value relative to a customer’s expectations (Babakus, Bienstock, & Scotter, 2004). If the product’s performance is not up to the mark, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied and happy. Most of the companies make a big mistake, when they are not paying enough attention to their customer satisfaction. Satisfying customer need is the best competitive advantage against competitors. Customers are loyal, prepared to pay more and are good external marketers. Customer satisfaction is an asset that should be monitored and managed just like any physical asset (White & Dahl, 2006).

Here is a list of the reasons for developing long-term relationships with customers:

  • Loyal customers tend to spend more and cost very less to serve.

  • Acquiring new customers can cost 10 to 15 times more than the costs involved in satisfying and retaining current customers.

  • Satisfied customers are likely to recommend products and services Advocates of a company are more likely to pay premium prices to a supplier they know and trust.

  • Retaining exiting customers prevents competitors from gaining market share.

Key Terms in this Chapter

Hypermarket: According to the Webster dictionary (1993) a hyper market is a superstore which combines a supermarket and a department store (where usually are sold products like apparel, furniture, appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photographic equipment, jewelry, toys, and sporting goods), being the result a very large retail facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise.

Backup Stock: Backup stock is the buffer stock or the safety stock which retailer holds to guard against stockouts, when there is a mismatch between supply and demand.

Buyer: Buyer is the retailers’ decision maker to decide on the products of a category to be bought and decides up on the quantity of the merchandise that should be delivered and displayed at the retail store.

Cross Merchandising: This refers to the practice of displaying or putting together products from different categories to drive add-on sales. Picture this: You’re at the grocery store browsing the liquor section when you see a pack of lemons tacked to the tequila shelf. This is cross merchandising in action. Groceries know that people often take lemons with their tequila shots, so they strategically placed the two items together.

Category Captain: Category Captain is the retailer preferred vendor, who advises the retailer on a certain category of merchandise offered by them.

Gross Margin: A way to measure gross profit calculated as the difference between selling price and cost price.

Softlines: Softlines is the retail store department or the product line which primarily consists of merchandise such as clothing, footwear, jewelry, linens and towels.

Supermarket: According to the Webster International dictionary (1993), a Supermarket is a self-service store or independent retail market offering a wide variety of food and household merchandise, organized into departments. It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket or superstore.

Assortment: Assortment is the number of SKUs within a category. It is also called depth.

Point of Sale Activation (POSA): POSA is a process by which software becomes activated, useable, at the point of purchase.

Stock Keeping Unit: A stock keeping unit (SKU) is the smallest unit available for keeping inventory control. In soft goods retailer, for instance, a SKU usually means size, color, and style. For example, a pair of boys’ size 10, navy blue color, boot-cut Levis is one SKU. In some cases, a buyer is responsible for several classifications.

Dead Stock: Sometimes called dead inventory, this is one thing no retailer wants to have, ever. Dead stock pertains to merchandise that has never been sold or has been in inventory for a while. Sometimes this is because a particular item is just seasonal, but other times it’s because the product simply isn’t in demand.

Variety: Variety is the number of different merchandising categories within a store or department. It is also called breadth.

Point of Purchase (POP): POP refers to all materials and physical setup in a retailer, in and around where the product is displayed.

Category: The category is the basic unit of analysis for making merchandising decision.

Space Management: “Management of selling space, based on consumer demand and shopping habit in order to achieve enhanced business results”.

Markdown: The difference between the original retail price and the reduced price.

Out of Stock (OOS): Also known as Stockout. It is a situation where the retailer does not physically possess a particular product category, on its shelf, to sell to the customer. It can be estimated from store inventory data.

Click and Collect: This is a service wherein retailers enable shoppers to purchase items online and pick them up in their physical stores. Like Bricks and Clicks, Click and Collect stores put the best of two channels (ecommerce + physical retail) together. And it’s convenient for consumers, too. They can make a purchase from the comfort of their own home, and just pick up the item whenever it’s convenient for them, instead of paying for shipping or waiting for the mail to arrive.

Private Label: Private Label brands are the retailers store brands which are developed by retailers and available for sale at only that specific retailer.

On Shelf Availability: One of important metric every retailer’s performance is measured is using On Shelf Availability (OSA). OSA is defined as availability of product for sale to a shopper, in the place he expects it and at the time he wants to buy it. It is impacted by a host of different factors, all along the supply chain.

Point of Sale (POS): POS refers to materials, brochures, signs at point of sale, or can refer to point of sale or cash register.

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