EST Retailing - PowerPoint PPT Presentation


Title: EST Retailing


1
  • EST Retailing
  • McMillan/Doolittle Retail Positioning Concept
  • Presented by
  • Mike Hegener
  • General Motors Corporation

2
What separates retail winners from losers?
  • Why do some stores win big, when others that
    appear to be dead ringers down to the last detail
    fall flat on their faces?
  • How do customers pick and choose their favorite
    stores, leaving certain ones behind and thus
    making them losers?
  • Why do so many prototype stores fail so miserably?

3
One way to find out Build lots of test stores.
  • One way to prove your new retail concept is to
    build a test store, correct and improve the
    model, then add a few more and a few more -- then
    wait for the cash to roll in.
  • Trouble is, it costs too much if youre wrong to
    begin with.
  • Indeed, most are wrong to begin with -- the 5
    year success rate for new stores is less than
    25. Remember HQ, Builders Square and Builders
    Square II?

Home Depot remodels former Builders Square site
for store By GREG ROHLOFF Globe-News Business
Writer Home Depot, the nation's largest chain of
home improvement stores, will open a store in
Amarillo by the end of the year at the former
Builders Square location. The building at 2500
S. Soncy, has sat vacant since the...
4
Development of EST Theory
  • In the mid-90s, McMillan/Doolittle, a retail
    consulting firm in Chicago, attempted to
    understand the operating results of supermarket
    chains.
  • Only a few chains had pre-tax profits in the 5
    range.
  • There was no single key to their success in
    fact, there seemed to be many ways to win with
    customers.
  • And many ways to lose.
  • The supermarket industry paradigm had long
    included only upscale and price-based formats (at
    least thats what many believed) but that didnt
    begin to explain the success of the 5 club.
  • The search quickly broadened to other kinds of
    retailing, and lead to the EST Theory with wide
    applicability.

5
There are at least 5 ways to win
  • Be CheapEST. Dont be squeamish about the word
    cheap. That is the word customers use, so if
    thats your strategy, get used to it.
  • Be BiggEST. This doesnt refer to square
    footage, it refers to the number of items you
    carry in a given category compared to other
    stores customers visit.
  • Be QuickEST. Were talking about getting in,
    getting what you need, and getting out.
    Anything you can do to move things along for the
    customer, you should do.
  • Be Easy-EST. This is the store that helps
    customers solve problems. Most of these
    customers dont know what they want or need, and
    the store helps them figure it out and gives them
    confidence.
  • Be Hot-EST. These stores have the most wanted
    merchandise, the most fashionable items. This
    applies to every category, even hardware and food
    (not just apparel).
  • NOTE EST derives from the word best. There
    are at least 5 ways to be best.

6
EST Model
EST retailers are those that exist furthest out
on the dimensions, and customers regard them as
great.
Cheap-Est (Lowest Prices)
Wal-Mart Costco
Black Hole
Easy-Est (Service)
Nordstrom Saturn
Hot-Est (Fashion)
Sea of Mediocrity
The Gap Starbucks
Quick-Est (Speed)
McDonalds Walgreens
The Sea of Mediocrity is where pretty good
stores die slowly. This is also where most
stores live, running on inertia until EST
competitors come along and pummel them.
Big-Est (Selection)
Home Depot Barnes Noble
7
EST Theory Rules of Thumb
  • FIRST -- Profit success begins with customers --
    you cant get there unless you place solving
    customers problems at the top of the list.
  • Probably the most abused rule retailers make when
    developing new stores. The paradigm of most
    retailers is to solve the problems THEY have when
    designing prototypes.
  • Customers talk about merchandise, price, products
    they cant find, hot products, ease of shopping
    certain stores, etc.
  • In sharp contrast, retailers think and talk about
    things like square footage, fixtures and formats.
  • Second -- You cant make it to the top of the
    profit list unless you are seen as clearly and
    obviously THE BEST at something. Better yet, be
    best at a couple somethings.
  • In a market with many shopping alternatives
    (which is the case in virtually every merchandise
    category everywhere in the country), being seen
    by customers as pretty good means your
    long-term future is murky and doubtful.

8
EST Theory Rules of Thumb - continued
  • Third -- When developing a new store, about 75
    of planning time and energy should be devoted to
    solving customer problems (e.g. price, in-stocks,
    fashion, the whole experience).
  • If you spend more that 25 of your planning time
    on the companys problems, youve got it
    backwards.
  • Fourth -- Dont try to be four-EST or five-EST.
  • Some retailers declare that they are going to be
    the best at all This is noble, but ridiculous.
    Dont even think about it. By definition, if
    you go off in four or five directions, youll end
    up in the middle, the Black Hole.
  • So, pick one dimension to be best at, and you can
    win. Pick one more to be also damn good at,
    and now youre really talking.

9
A word on choosing too many dimensions...
  • We can think of only one retailer who appears to
    have EST status on three dimensions, and that is
    Nordstrom (easy-EST, big-EST and hot-EST).
  • Some may argue that easy-EST is really the key
    for them, and they are also damn good at
    big-EST and, to a lesser extent, hot-EST.
  • Further, there are only a handful who win on two
    EST dimensions in their respective categories.
  • Home Depot -- big-EST and easy-EST (Lowes is now
    challenging)
  • Toys R Us -- big-EST and hot-EST (arguable)
  • Certain regionals, like Harrys in Atlanta, or
    Larrys in Seattle
  • The point is, pick something and be the best.
    Pick something else and be among the best.

10
Evolving EST theory -- Are Category Killers still
killers?
  • For years, the big-EST idea held up well, as
    stores like Blockbuster and Home Depot swallowed
    markets. However, several disturbing trends have
    emerged.
  • Toys R Us still has the most toys, so why are
    they struggling?
  • PetsMart went from stock market darling to
    troubled company.
  • Computer superstores are struggling. What gives?
  • Sure, some of the struggling companies just
    executed poorly. However, there has also been a
    fundamental shift in customer purchasing habits.
  • Customers are under time pressure, and retailers
    must remember this. PetCo surrounded PetsMart
    with more locations. While PetCo doesnt have as
    much selection, they have what most customers
    need.
  • Discounters have expanded in certain categories,
    harming cat-killers. Consider the toy department
    at Target or Wal-Mart. Good stuff cheaper.
  • Micro Killers. Cat-killers tend to be
    generalists, which leaves them vulnerable to
    specialists who can carve out a niche. Consider
    Zany Brainy, which takes a chunk of Toys R Us
    educational toy business.

11
Evolving EST theory -- Cat-killers, continued
  • For these reasons (and others), it is likely that
    a retailer can no longer win by just being
    big-EST.
  • The reality of EST is that you must own one
    dimension AND at least be very good in one or two
    others.
  • With less time to shop, consumers want more help
    from retailers. More products can actually be a
    negative, making shopping more difficult than it
    has to be.
  • Retailers must be trusted merchants, offering
    carefully edited selections.
  • Solution selling helps customers solve their
    problems, rather than just presenting a huge
    array of product choices.
  • Pottery Barn and Restoration Hardware cross
    product boundaries to sell whole solutions.
  • Office supply chains have evolved into solution
    stores for small businesses by offering such
    things as furniture and printing services.
  • Home Depot has reached more do it for me
    customers through (for example) greatly expanded
    floor coverings and comprehensive installation
    services.

12
Pretty good -- Words to Dread
  • Most customers use the words pretty good to
    describe unexceptional stores. These words sound
    vaguely reassuring, but carry with them a whole
    different, negative meaning.
  • The term mediocrity also applies, and this can
    be interpreted as You are in the process of
    dying. Slowly, perhaps, but dying just the same.
    You need to begin the process of renewal before
    it is too late.
  • If your store is rated only as pretty good, on
    all dimensions, that means customers have better
    choices and will sooner or later find them.
  • Your customers are telling you that small
    adjustments to the current strategy wont get you
    where you need to be. You need to figure out how
    to win on at least one EST dimension.

13
Steps toward becoming EST
  • First, you have to admit you have a problem.
    Recognition of where you really are is where you
    must start.
  • Start with a formal strategic audit. This is
    the bedrock of reality upon which to base future
    strategy. (Hint -- get help from specialists in
    this area).
  • Understand what your company is good at, and
    lousy at. This means studying your core
    competencies.
  • A company with high break-evens, for example,
    should not pursue being the cheap-EST.
  • You must choose one of the EST directions where
    you intend be the best, and at least one other to
    also excel in.
  • This will be the key plank in your companys
    strategy. Your vision is that customers will
    recognize this strength and talk about it to
    others.
  • Develop a plan of many actions which, if you
    stick to it and are disciplined enough, will
    break you out of the ranks of the mediocre.

14
Beware the Black Hole
  • This is where stores, even multi-billion dollar
    chains, go because they didnt get it right with
    customers in some significant, relevant way.
  • They are not the best at anything they arent
    particularly hated or loved, just ignored by too
    many people.
  • Black Hole stores sometimes get a favorable
    mention on location by customers, but this is a
    very fragile base upon which to build a future
    (or make an investment).
  • While customers may rate the stores positively on
    convenience due to location, a more brutal
    truth is that they only shop there because they
    lack the energy to go someplace they really
    prefer!

It is hard to be the hottest, the cheapest, the
biggest and the easiest all at once.
15
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EST Retailing

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Home Depot -- big-EST and easy-EST (Lowes is now challenging) ... Home Depot has reached more 'do it for me' customers through (for example) ... – PowerPoint PPT presentation

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Title: EST Retailing


1
  • EST Retailing
  • McMillan/Doolittle Retail Positioning Concept
  • Presented by
  • Mike Hegener
  • General Motors Corporation

2
What separates retail winners from losers?
  • Why do some stores win big, when others that
    appear to be dead ringers down to the last detail
    fall flat on their faces?
  • How do customers pick and choose their favorite
    stores, leaving certain ones behind and thus
    making them losers?
  • Why do so many prototype stores fail so miserably?

3
One way to find out Build lots of test stores.
  • One way to prove your new retail concept is to
    build a test store, correct and improve the
    model, then add a few more and a few more -- then
    wait for the cash to roll in.
  • Trouble is, it costs too much if youre wrong to
    begin with.
  • Indeed, most are wrong to begin with -- the 5
    year success rate for new stores is less than
    25. Remember HQ, Builders Square and Builders
    Square II?

Home Depot remodels former Builders Square site
for store By GREG ROHLOFF Globe-News Business
Writer Home Depot, the nation's largest chain of
home improvement stores, will open a store in
Amarillo by the end of the year at the former
Builders Square location. The building at 2500
S. Soncy, has sat vacant since the...
4
Development of EST Theory
  • In the mid-90s, McMillan/Doolittle, a retail
    consulting firm in Chicago, attempted to
    understand the operating results of supermarket
    chains.
  • Only a few chains had pre-tax profits in the 5
    range.
  • There was no single key to their success in
    fact, there seemed to be many ways to win with
    customers.
  • And many ways to lose.
  • The supermarket industry paradigm had long
    included only upscale and price-based formats (at
    least thats what many believed) but that didnt
    begin to explain the success of the 5 club.
  • The search quickly broadened to other kinds of
    retailing, and lead to the EST Theory with wide
    applicability.

5
There are at least 5 ways to win
  • Be CheapEST. Dont be squeamish about the word
    cheap. That is the word customers use, so if
    thats your strategy, get used to it.
  • Be BiggEST. This doesnt refer to square
    footage, it refers to the number of items you
    carry in a given category compared to other
    stores customers visit.
  • Be QuickEST. Were talking about getting in,
    getting what you need, and getting out.
    Anything you can do to move things along for the
    customer, you should do.
  • Be Easy-EST. This is the store that helps
    customers solve problems. Most of these
    customers dont know what they want or need, and
    the store helps them figure it out and gives them
    confidence.
  • Be Hot-EST. These stores have the most wanted
    merchandise, the most fashionable items. This
    applies to every category, even hardware and food
    (not just apparel).
  • NOTE EST derives from the word best. There
    are at least 5 ways to be best.

6
EST Model
EST retailers are those that exist furthest out
on the dimensions, and customers regard them as
great.
Cheap-Est (Lowest Prices)
Wal-Mart Costco
Black Hole
Easy-Est (Service)
Nordstrom Saturn
Hot-Est (Fashion)
Sea of Mediocrity
The Gap Starbucks
Quick-Est (Speed)
McDonalds Walgreens
The Sea of Mediocrity is where pretty good
stores die slowly. This is also where most
stores live, running on inertia until EST
competitors come along and pummel them.
Big-Est (Selection)
Home Depot Barnes Noble
7
EST Theory Rules of Thumb
  • FIRST -- Profit success begins with customers --
    you cant get there unless you place solving
    customers problems at the top of the list.
  • Probably the most abused rule retailers make when
    developing new stores. The paradigm of most
    retailers is to solve the problems THEY have when
    designing prototypes.
  • Customers talk about merchandise, price, products
    they cant find, hot products, ease of shopping
    certain stores, etc.
  • In sharp contrast, retailers think and talk about
    things like square footage, fixtures and formats.
  • Second -- You cant make it to the top of the
    profit list unless you are seen as clearly and
    obviously THE BEST at something. Better yet, be
    best at a couple somethings.
  • In a market with many shopping alternatives
    (which is the case in virtually every merchandise
    category everywhere in the country), being seen
    by customers as pretty good means your
    long-term future is murky and doubtful.

8
EST Theory Rules of Thumb - continued
  • Third -- When developing a new store, about 75
    of planning time and energy should be devoted to
    solving customer problems (e.g. price, in-stocks,
    fashion, the whole experience).
  • If you spend more that 25 of your planning time
    on the companys problems, youve got it
    backwards.
  • Fourth -- Dont try to be four-EST or five-EST.
  • Some retailers declare that they are going to be
    the best at all This is noble, but ridiculous.
    Dont even think about it. By definition, if
    you go off in four or five directions, youll end
    up in the middle, the Black Hole.
  • So, pick one dimension to be best at, and you can
    win. Pick one more to be also damn good at,
    and now youre really talking.

9
A word on choosing too many dimensions...
  • We can think of only one retailer who appears to
    have EST status on three dimensions, and that is
    Nordstrom (easy-EST, big-EST and hot-EST).
  • Some may argue that easy-EST is really the key
    for them, and they are also damn good at
    big-EST and, to a lesser extent, hot-EST.
  • Further, there are only a handful who win on two
    EST dimensions in their respective categories.
  • Home Depot -- big-EST and easy-EST (Lowes is now
    challenging)
  • Toys R Us -- big-EST and hot-EST (arguable)
  • Certain regionals, like Harrys in Atlanta, or
    Larrys in Seattle
  • The point is, pick something and be the best.
    Pick something else and be among the best.

10
Evolving EST theory -- Are Category Killers still
killers?
  • For years, the big-EST idea held up well, as
    stores like Blockbuster and Home Depot swallowed
    markets. However, several disturbing trends have
    emerged.
  • Toys R Us still has the most toys, so why are
    they struggling?
  • PetsMart went from stock market darling to
    troubled company.
  • Computer superstores are struggling. What gives?
  • Sure, some of the struggling companies just
    executed poorly. However, there has also been a
    fundamental shift in customer purchasing habits.
  • Customers are under time pressure, and retailers
    must remember this. PetCo surrounded PetsMart
    with more locations. While PetCo doesnt have as
    much selection, they have what most customers
    need.
  • Discounters have expanded in certain categories,
    harming cat-killers. Consider the toy department
    at Target or Wal-Mart. Good stuff cheaper.
  • Micro Killers. Cat-killers tend to be
    generalists, which leaves them vulnerable to
    specialists who can carve out a niche. Consider
    Zany Brainy, which takes a chunk of Toys R Us
    educational toy business.

11
Evolving EST theory -- Cat-killers, continued
  • For these reasons (and others), it is likely that
    a retailer can no longer win by just being
    big-EST.
  • The reality of EST is that you must own one
    dimension AND at least be very good in one or two
    others.
  • With less time to shop, consumers want more help
    from retailers. More products can actually be a
    negative, making shopping more difficult than it
    has to be.
  • Retailers must be trusted merchants, offering
    carefully edited selections.
  • Solution selling helps customers solve their
    problems, rather than just presenting a huge
    array of product choices.
  • Pottery Barn and Restoration Hardware cross
    product boundaries to sell whole solutions.
  • Office supply chains have evolved into solution
    stores for small businesses by offering such
    things as furniture and printing services.
  • Home Depot has reached more do it for me
    customers through (for example) greatly expanded
    floor coverings and comprehensive installation
    services.

12
Pretty good -- Words to Dread
  • Most customers use the words pretty good to
    describe unexceptional stores. These words sound
    vaguely reassuring, but carry with them a whole
    different, negative meaning.
  • The term mediocrity also applies, and this can
    be interpreted as You are in the process of
    dying. Slowly, perhaps, but dying just the same.
    You need to begin the process of renewal before
    it is too late.
  • If your store is rated only as pretty good, on
    all dimensions, that means customers have better
    choices and will sooner or later find them.
  • Your customers are telling you that small
    adjustments to the current strategy wont get you
    where you need to be. You need to figure out how
    to win on at least one EST dimension.

13
Steps toward becoming EST
  • First, you have to admit you have a problem.
    Recognition of where you really are is where you
    must start.
  • Start with a formal strategic audit. This is
    the bedrock of reality upon which to base future
    strategy. (Hint -- get help from specialists in
    this area).
  • Understand what your company is good at, and
    lousy at. This means studying your core
    competencies.
  • A company with high break-evens, for example,
    should not pursue being the cheap-EST.
  • You must choose one of the EST directions where
    you intend be the best, and at least one other to
    also excel in.
  • This will be the key plank in your companys
    strategy. Your vision is that customers will
    recognize this strength and talk about it to
    others.
  • Develop a plan of many actions which, if you
    stick to it and are disciplined enough, will
    break you out of the ranks of the mediocre.

14
Beware the Black Hole
  • This is where stores, even multi-billion dollar
    chains, go because they didnt get it right with
    customers in some significant, relevant way.
  • They are not the best at anything they arent
    particularly hated or loved, just ignored by too
    many people.
  • Black Hole stores sometimes get a favorable
    mention on location by customers, but this is a
    very fragile base upon which to build a future
    (or make an investment).
  • While customers may rate the stores positively on
    convenience due to location, a more brutal
    truth is that they only shop there because they
    lack the energy to go someplace they really
    prefer!

It is hard to be the hottest, the cheapest, the
biggest and the easiest all at once.
15
(No Transcript)
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