How often do you find yourself lost in a super shop? How about the disappointment of finding the right design but not the right size? These instances exemplify the retail experience of Bangladesh, exposing a large room for improvement. The organized retail sector is yet to thrive in Bangladesh as people are accustomed to their shop-around-the-corner experience and intimidated by mega shops, which constitute only 1% of the total retail sector. pi STRATEGY research identifies a number of critical success factors (CSFs) that could help improve the retail sector in Bangladesh. Three of them are discussed below.
CSF #1: SELL THE EXPERIENCE, NOT THE PRODUCTS
The Lego Group was on the verge of bankruptcy around 2002. Physical toys were not gaining as much traction among a customer segment whose preferences are forever changing. Jørgen Vig Knudstorp, the former CEO, turned the company around and 10 years later, Lego became the biggest player in the industry. This success is attributed to the correct identification of a key driving force of innovation: understanding the customer first. The innovation team within Lego, known as Future Labs, believes that ‘’if you want to know how animals behave, you don’t go to a zoo, you go to a jungle.’’ While the company continued its traditional mission of making toys, Future Labs was in charge of inventing Lego’s future—in a world where play is increasingly digital. But Lego’s foray into toy world did not stop at just product innovation. Lego decided to push retail stores across the world in search of giving the customers an experience which were built upon some key principles, the first one being ‘The Experience Wheel’ and the second one being ‘all-under-one-roof’. By analyzing each component, Lego designed Legoland – a unique offering that synthesizes all the learnings in one specific physical store.
CSF #2: FASTER CYCLES
Zara, a global fashion brand, has pioneered faster cycles in an industry where supply chain management was an unsolved riddle. The company prioritized on speed and responsiveness over cost. The success story of Zara was built on two factors. One is the synergy between business and operations strategy, and the other one is just-in-time (JIT) inventory management system. Zara employs a lean strategy, achieving growth through diversification and vertical integration. It ships its designs from fashion shows to retail outlets within 2 weeks. The company hones its supply chain and delivers its promise of speed to market, literally embodying the idea of “fast fashion”.
CSF #3 : PE-COMMERCE
In Bangladesh, the e-commerce industry and organized retail industry converge at a point of confusion rather than cohesion, unable to decide where to draw the line between physical and online presence. A retail chain cannot achieve success today by relying solely on either a physical or an online presence. A healthy mix of the two can unlock a successful business model that satisfactorily caters to customers, giving them both the experience of a physical shop and the ease of access of an online portal.
Amazon adopted this philosophy, creating a hype in November 2015 when it opened its first brick and mortar extension – a bookstore in Seattle’s University Village. This was initially met with skepticism from industry experts. But Amazon is only among the latest, if not largest, e-commerce players to take a stab at traditional retail after starting life online. In the last few years, more than 20 “online” companies in the US have launched a physical presence to better market their wares, forge closer customer relations, and boost online traffic and sales. The trend also reflects the broader industry imperative around “omni-channel” retailing and has also dawned the age of “pe-tailers” i.e. retailers with both a physical and online presence.
These examples may come from worlds apart, but can bring about a dramatic shift in the organized retail sector of Bangladesh. Our retail sector has much to learn from Lego’s user-experience based thinking, Zara’s lightning-fast cycle and Amazon’s adoption of pe-commerce. While these changes will not help achieve overnight successes for Bangladeshi retailers, any company willing to invest in the retail sector would benefit from considering these CSFs as a starting point. The fact remains that design-driven companies that truly understand customer needs have outperformed S&P 500 companies by 219% over the past 10 years.
This article was written in 2018.
pi STRATEGY 