3 Secret Ingredients of the Fast-Growing Retailer Recipe
What’s the common factor between Sprouts Farmers Market, lululemon and Michael Kors?
They’re all currently the toast of the retail world because of their remarkable growth stories. While there are definite advantages to standing taller than the crowd, fast-growing retailers often find themselves struggling to deal with the success and eventually lose sight of the big picture. After all, with great power comes great responsibility. How can fast-growing retailers make sure they don’t stumble off the path to success?
These following retail success stories have one thing in common – a well-defined value proposition. Though their success may seem like it happened overnight, constructing and articulating a strong value proposition isn’t so easy. It requires paying attention to a whole bunch of details that are the first to be sacrificed when it comes to playing the bigger stakes. One of these is a retail marketer’s understanding of customers and why they choose to shop at particular brand. This focus on customer understanding often takes a backseat because of the focus on scaling up the retail business (which involves bringing in newer customers). To keep up the promise of a well-defined value proposition, marketers at fast-growing retail businesses should stay in-tune with customer needs, wants and preferences. This understanding needs to be absorbed across all retail-related activities, whether it’s how sales reps interact with customers or what products the retailer decides to carry. More importantly, this understanding needs to be reflected in the tone, content and messaging of marketing campaigns that the retailer runs.
So let’s deconstruct the strong value proposition that Sprouts Farmers Market, lululemon and Michael Kors bring to the market.
They’re laser-focused on creating value for customers
The first Sprouts Farmers Market was established in 2002, and is one of the hottest growing retailers around. Headquartered in Phoenix, it holds the top spot on the NRF 2012 HOT 100 RETAILERS list. In 2011, Sprouts Farmers Market recorded an impressive 71.9% growth in sales since 2010.
According to Doug Sanders, President and COO of Sprouts Farmers Market, “Sprouts Farmers Market was founded as a fun, indoor farmer’s market concept”. The retailer has made it its mission to supply fresh and natural produce as an affordable food option for a healthier lifestyle. The natural foods retailer makes sure it’s constantly meeting the needs of its core group of customers, and stays true to its promise. This means making a conscious decision to:
- Avoid selling price-sensitive items like Coke and Tide, which in turn doesn’t weigh heavy on customers
- Purchase directly from local produce growers, which keeps pricing competitive and items fresh
- Stock pre-seasoned and/or partially cooked dishes, which are both convenient and affordable
At every step, Sprouts Farmers Market thinks about a) what impact every decision has on its customer and b) if it’s in line with their offering promise. This decision-making ability relies heavily on the understanding of Sprouts Farmers Market customers. The retailer also demonstrates this total understanding of customers by integrating private-label brands from Henry’s and Sunflower, both of who have similar product offerings.
Ultimately, retail marketers from Sprouts Farmers Markets understand that the chain’s stand against preservatives, artificial ingredients, colors, flavors or additives is the key value prop. The customer base comprises individuals who make between $45 -100k a year — so it’s an understatement to say that it’s quite a broad base. But as Sprouts Farmers Market has realized, all of these customers are united by common concerns related to health and wellbeing.
They cultivate a fiercely loyal customer base
Another fast-growing retailer to watch out for is lululemon athletica, who occupies spot #4 on the NRF 2012 HOT 100 RETAILERS. This yoga-inspired athletic apparel company makes high-end yoga and running apparel for women.
One of the keys to lululemon’s success? The retailer’s fanatically loyal customer base. Its customers literally feel as though the brand is filling a particular niche need for luxury yoga apparel. What else do customers love? The apparel doesn’t just happen to fit women, but is made with women in mind rather than just an afterthought. According to Mary Brett Whitfield, senior vice president of retail analysis firm Kantar Research, this fast-growing apparel retailer is “among the best at creating true brand advocates who are willing to pay full retail prices and/or who have a business model that doesn’t rely on discounts to drive traffic and appeal.”
Lululemon is well-aware of its ‘cult-like’ status among its luxury-appreciating customers. Many feel the quality justifies the price tags — on an average, customers pay $50 for a lululemon athletic top.
But lululemon knows exactly how to put its money where its mouth is — literally. The retailer is one of the finest examples of succeeding with word-of-mouth marketing with its concept of brand ambassadors. When every other sports apparel retailer is bleeding millions on expensive endorsement deals with celebrities, lululemon turns its attention on its customers. According to the WSJ, lululemon recruits local athletes who influence active women. These include fitness instructors for yoga, spinning, Pilates and running classes. The receive apparel stipends from the retailer, and in turn model lululemon clothing when teaching their classes. The result? Well, any recommendation from a yoga guru is never taken lightly!
They stay relevant with social media activities
Michael Kors is a fast-growing global luxury lifestyle brand. The brand markets two lines — Michael Kors luxury collection and the MICHAEL Michael Kors accessible luxury collection.
Michael Kors also happens to be the most searched for fashion-brand online.
Michael Kors himself is a fashion favorite, but his brand does some interesting things with social media to reach the right audience. This strikes the right chord with customers because it makes the brand accessible without diluting the luxury feel. As luxurydaily.com notes, “affluent consumers are more likely than non-affluent to afford smartphones and tablets, so it is important that luxury brands develop social media strategies to fit these devices”.
The Michael Kors team consistently run promotions and contests on different social media platforms, such as the hipster favorite Instagram. Participating users were encouraged to upload images of “their favorite way to rock” a watch with the hashtag #MKTimeless on Instagram. Up for grabs were three New York Limited Edition Runway Watches. The contest caught on and the brand reportedly saw a 50% increase in activity on Instagram. The retail marketing team at Michael Kors understands the necessity for the brand to connect with customers online without resorting to clichéd gimmicks that negatively affect the brand image. The watch contest, for example, clearly states “No Purchase Necessary. A Purchase will not Increase Your Chances of Winning.” This makes the interaction more believable and generates genuine submissions. This opportunity to win a designer watch is both tempting yet real.
Retail customer analytics helps fast growing brands stay on track
All of the examples discussed above highlight the need for the right information and analytics.
These retailers are leading the pack because of their ability to stay relevant to the interests of their target audience. Their rapid growth largely depends on their success at using customer analytics and customer information to take decisions that are consistent with their brand identity. All three fast-growing retailers focus on understanding their customers: Sprouts Farmers Market knows people come for the fresh produce at affordable prices; lululemon knows that its honest approach at building a healthier community is what attracts its fans; and Michael Kors understands that its target audience is socially-savvy and solicits social media interactions that propagate the luxury brand’s image without looking too ‘cheap’.
Fast-growing retail brands need to build their growth strategy around the things that make them unique. Often, growing brands lose sight of what made them appealing in the first place and stray too far from their original promise. Using customer analytics to constantly stay updated on the needs and preferences of shoppers helps retail brands stay focused.
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