The folks at Deloitte recently released, The Next Evolution: Store 3.0,  a report on the readiness of retailers for the store of tomorrow.  Although the report offers a somewhat limited and biased perspective since it is based on a survey of only 39 current retail executives, it raises some important questions about the requirements of the future store.

One point caught my attention: the role of the sales associate.  “As customers’ purchasing behaviors evolve, the sales associate role must evolve with them,” the report rightly stated. It laid out primary salesperson tasks/skill sets:

• POS assistance
• Purchase selection assistance
• Specialized product knowledge
• Technology savvy
• Brand ambassadorship

“Today the top three most important responsibilities and skills of the sales associate are POS assistance, purchase selection assistance, and specialized product knowledge,” reported the survey respondents.  “As we look to the next three to five years, survey respondents pushed specialized product knowledge and brand ambassadorship to the top of the list, ahead of POS assistance, as a store employee’s most important roles.”  And the report predicted that, “Five or more years from now, the sales associate is expected to become a technologically-savvy brand ambassador with specialized product knowledge.”

While this direction is absolutely on-target, there are some key tasks/skills missing from the report’s list of qualifications of the sales associate of tomorrow:

salesmanship – Retail salespeople need to be skilled in the art of selling, i.e., establishing rapport, explaining value, overcoming objections, etc. This may seem like a no-brainer, but with the current trends like reductions in training and moves away from commissioned sales, salesmanship at retail is becoming a lost art (see another post of mine on this subject.)

customer relationship building – In retail, salespeople are a critical piece of a company’s customer relationship management program.   A robust customer database is only valuable when it’s used, and not only by corporate folks.  Salespeople on the floor need to understand who their customers are, what their specific needs/wants/preferences are, how to provide personalized service, how to foster continued loyalty, etc.

customer ambassadors – Salespeople glean valuable insights about customers since they’re interacting face-to-face with them every day.  As such, they can serve as customer ambassadors to the company.  Fast fashion retailers like Zara use input from salespeople to inform product design.  Store layout, service policies, product quality, and assortment are other areas where salespeople’s perspectives are invaluable.  Companies need to train salespeople so they know how to integrate customer insights with company priorities when giving input, and they need to develop processes for incorporating salespeople insights into the company’s strategies and plans.

Rising labor costs are squeezing already thin margins and so retailers may feel a need to scale back on sales floor coverage, salesperson training, and infrastructure enhancements that help salespeople do their jobs effectively.  And with shiny new objects like mobile devices, augmented reality, and social shopping apps, retailers may be tempted to favor technology investments over people ones.

But it would be shortsighted to discount the importance of sales associates in the store of tomorrow.  The Deloitte report closes with a strong exhortation for retailers to revive their talent management strategies:

“As customers increasingly demand a more personalized experience, your sales associates become even more critical in achieving that goal. That means investing in your employees by providing the necessary skills, training, education, compensation, and career-development options to increase product and technical knowledge, among other skills. It also means equipping them with the right technology so they can easily and conveniently provide customers with instant product information, purchase history, or customer preferences. The renewed investment in the sales associate as a brand ambassador will bring back the confidence in retail as a profession, and convert browsers to buyers.”

In other words, a skilled salesperson could quite possibly be the final bastion against the showrooming trend that looms large over brick-and-mortar retailers.

related posts:

• retail tensions
• 12 truths to guide retailing in 2012
• retail evolution

Bryan Pate, Co-Founder and Co-President, of ElliptiGO has set some aggressive growth goals for his $2MM company which manufactures and sells a fitness apparatus that provides a low-impact outdoor running experience – it’s essentially an outdoor elliptical machine.

He laid out his plans at a recent MIT Enterprise Forum, a unique educational seminar-type business gathering in which a company leader presents his/her organization’s challenges and hears advice from a panel of experts, while attendees of the seminar get to listen and then offer up their own feedback and questions.

In less than a year, ElliptiGO has gone from selling its first product to distributing through 85 doors nationwide and even more internationally.  They’ve benefited from the endorsement of running greats like Dean Karnazes and good PR exposure on shows like Good Morning America.  And the company has an experienced, committed leadership team.  So Pate’s vision to grow the channel mix to 75% retail (from 5% today) and to add 3 models and a host of accessories to the current single product line-up doesn’t seem that unreasonable.

However there are a few things he should think about – they are points that every entrepreneur with a bold goal would benefit from considering.

And it all starts with who is ElliptiGO’s best target.  Currently ElliptiGO is primarily targeted to injured runners. It makes sense – most runners reach a certain point when their bodies can’t keep up with the demands of running.   These people want a way to replicate all the things they love about running (being outdoors, getting an intense workout, covering some distance, etc.) without the problems caused by impact.  ElliptiGO solves the issue brilliantly.

Pate also talked about other target groups like fitness enthusiasts who love elliptical trainers, recreational bicyclists, and cross-training athletes – but I would caution him from pursuing these groups.  The product’s price tag ($2,200) limits its appeal to a relatively narrow target.  And, the product is far too geeky-looking and –feeling to appeal to the mainstream.

Pate may have a vision of “building elliptical biking into a sport and industry like mountain biking,” but his company must first get to $50MM and it can do so by focusing on injured runners as the target. (According to Running USA’s State of the Sport 2010 Report, nearly 467,000 finished a marathon in 2009.  If we count that as the true “core runner” population, less than 5% of that market would need to purchase a ElliptiGO to get to that $50MM milestone.)

In 3-5 years, it may make sense to broaden the target, but right now it’s best to focus on the near-term potential market opportunity of those who are highly committed to running but who are limited by current or past injury.  Focusing on a single, niche target is important because:

• when sales and marketing resources are limited, it’s easier to reach a smaller market and you get a stronger ROI on your spend.
• a solid base must be established for an innovative product before it has any chance of crossing the adoption chasm (see related post).
• decisions which need to be made now must be guided by the reality of now.  For example, if the company is willing to focus on this target, then the right distribution approach becomes clearer:

Pate asked how best to manage the shift from online sales to a retail model and explained that he’s been retailing through bike shops and fitness equipment retailers.  But I question whether either of these are the right fit.

Runners – especially hard core ones who would spend over $2,000 on a single product to support their passion – are a special breed.   Salespeople who are used to selling bikes and home gyms can’t properly relate to them.  Case in point:  Pate described how one fitness equipment retailer reported 400 people came into the store after seeing a news segment about the product – but only 20 people ended up buying one.

ElliptiGO’s current distribution strategy suggests that Pate and his team are approaching their channel strategy through the lens of existing retailers instead of the target and their lifestyle and behaviors.  Injured runners are most likely using doctors, physical therapists, and/or trainers to help them with their injuries – and they probably place a lot of trust in these experts. The company should get these players to prescribe or recommend the ElliptiGO.  An aggressive, robust affiliate program may be very productive – and far more cost-effective than a mainstream retail approach.

Other runners are another affiliate source.  Runners are always sharing tips and recommending products with each other.  Since Dean Karnazes has bought 4 or 5 ElliptiGOs, why not sign him up to recommend the product and allow him to get a cut of the sales?!  The company should develop a network of athlete-affiliates who can credibly demonstrate the product, explain the benefits, and ultimately facilitate sales.

Finally I’m not sure why Pate and his team don’t keep their focus on direct sales – especially with online communities and commerce so prevalent and influential now.  They can develop a strong event participation strategy to increase awareness and trial and then drive prospects to the web or phone to order.

At this point in the company lifecycle, they don’t need retailers (the retail channel does provide a venue for repairs and service, but it seems an authorized service provider network would suffice for the expected sales volume.)  And by foregoing the channel, they avoid the issues and costs involved with setting up a sales force and managing cash flows to support working capital – while maintaining control over a highly-educational sales process.

I’m sure there are nuances about the business which we didn’t have a chance to get into at the Forum so my recommendations are probably best viewed as initial reactions from a dispassionate observer.  I do hope they’re helpful to Pate and other entrepreneurs who are searching for a path to achieving their bold visions.

related posts:

• nine lessons from the mit enterprise forum
• the business of managing tensions
• crossing the protein chasm

The holiday season is upon us and retailers are gearing up for the increased sales volume.  One way they’re doing so is hiring more salespeople.  In a piece in the Wall Street Journal, Karen Talley reported the retail industry added 28,000 positions in October, according to figures from the Labor Department.  Macy’s Inc. is reportedly adding 65,000 seasonal employees nationwide to stores, call centers and distribution centers, while Kohl’s Corp. will hire over 40,000 seasonal staffers.

I sure hope these retailers adequately train these new salespeople.

Based on experiences I’ve had in recent years, it seems the art of selling has been lost.  And I’m not the only one.  Last month the McKinsey Quarterly featured research by the firm’s practice group which indicates “that, at most, 45% of frontline employees across multiple retailing sectors have the personality and attributes to be effective sellers” (common traits of effective sellers include being motivated by helping customers, having extroverted personalities, and being passionate about their work). But, “few retailers provide training with the specificity and quality to effectively support sales associates in their mission to sell more.”

I wonder why.

Is it a lack of resources?  I’m sure the recession has caused retailers to cut back on expenses like sales training.

It might also be that retailers don’t think selling is a priority.  The McKinsey piece reported, “Many retailers assume that customers walk into stores for purely transactional purposes: they know what they want and just need to buy it.”  (If this is the case, they’re greatly mistaken — McKinsey research indicates that as many as 40% of customers remain open to persuasion once they enter a store.)

Or maybe retailers don’t provide adequate sales training because selling has earned a bad reputation.  A few months ago I had the privilege of hearing Garrett Boone, co-founder and Chairman of the Board, of The Container Store speak at a conference for senior level retailing executives.  The topic:  “Selling is NOT a Four Letter Word.”  When I first got the agenda for the conference, I was surprised to see his topic.  This was an event which attracted executives from some of the country’s preeminent retailers like Target, Best Buy, and Foot Locker!  And they need to hear an evangelistic message about selling?!  Apparently so.

Regardless of the reason, it seems that retail sales training needs a shot in the arm.  I think companies can learn a lot from The Container Store.  They employ a sales philosophy called  “man in the desert selling”.  It’s one of the chain’s Foundation Principles (TM) and they use it “to illustrate how we astonish our customers by exceeding their expectations:”

Imagine a man lost in the desert. He’s been wandering for weeks. He stumbles across an oasis, where he’s offered a glass of water, because surely he must be thirsty. But if you stop to think about what he’s experienced and what his needs really are, you know that he needs more than just water. He needs food, a comfortable place to sleep, a phone to call his wife and family, maybe a pair of shoes and a hat to screen the sun’s rays.

When a customer comes to our store looking for shoe storage, for example, we equate her to a “Man in a Desert,” in desperate need of a complete solution. We start asking questions about what her needs are. “How many shoes do you have?” “If shoes are a big problem for you, how does the rest of the closet function?” By anticipating her needs, we know that she needs an organization plan — a complete solution — for her entire closet.

Most retailers are pleased with helping her find a shoe rack — that glass of water — but not at The Container Store. We don’t just stop with the obvious. Providing our customers with a complete solution through our Man in the Desert selling philosophy has been key to achieving one of our main goals of having our customers dancing in their organized closet, pantry, home office, etc., because they are so delighted and thrilled with the complete solution we provided them.

Anyone who has been in a Container Store has surely experienced this kind of selling – it’s helpful, service-oriented, and tailored to my needs.  In fact, when I walk out of the store, it doesn’t even seem like I’ve been sold – I simply feel like I’ve been well taken care of.

Above all, it seems their salespeople embrace the attitude Mr. Boone shared at the conference:  “Selling is the highest form of customer service – the best thing we can do for the customer.”

So perhaps rediscovering the art of selling is really about rediscovering the art of serving.

related posts:

• the magic of selling
• ode to black friday
• six best practices in retail

Several weeks ago Bloomberg BusinessWeek published an article about Steve Jobs entitled, The Last Pitchman.  It documented Jobs’ seemingly inexplicable ability to sell practically anything, as evidenced by his glorious pitch for the iPhone 4, a “new” product which the news media had already gotten hold of and detailed weeks before.  I tore the pages out of the magazine as is my habit with content which proffer good fodder for blogposts.

Although the article was fascinating, I struggled with how to make sense of it — until last Sunday when I read a New York Times interview with Aaron Levie, co-founder and CEO of Box.net.  Levie used to do magic shows as a teen, and he says some of his most important leadership lessons come from the hobby:

“…it’s all about getting in front of people and telling a story, something that people buy into that is hopefully entertaining.  It’s all about capturing people’s imaginations and getting them excited about what’s possible.”

I realized that’s exactly what makes Jobs such an effective pitchman – magic.   Let me break this down a little.

Levie says magicians “tell a story.”  Jobs creates his own narrative.

Jobs’ story usually involves naming an enemy and fighting fiercely against it.  The BusinessWeek article reports that Jobs describes the iPad as “a weapon of freedom – ‘freedom from programs that steal your private data…freedom from programs that trash your battery…Freedom from porn.’”

By using an enemy to create a dramatic storyline in which the Apple product is the hero, Jobs ignites his audiences’ passions.  They’re rapt as they await the climax of the tale – the unveiling of the product or a specific feature – in the same way that great magicians get their audiences on the edges of their seats in anticipation of the “ta da!” moment.

Levie says magicians “capture people’s imaginations.”  Jobs inspires people with the promise of what’s possible.

At the risk of overstating things, it seems Jobs gives people hope.  With the deft of a skilled evangelist, he paints a picture of an almost utopian-like world his products can produce.  In the Times article Kelly O’Keefe, executive director of the Virginia Commonwealth University Brandcenter, comments, “We need something to believe in.  People believe in Apple.  They believe in Jobs.”

Levie says a magician is “entertaining” and “gets [people] excited.”  Jobs uses theater to entertain and excite.

Jobs’ version of theater isn’t flashy like what you’d experience at, say, a Sony presentation.  But it’s no less a staged spectacle.  Just like a magician who can use a simple hand gesture to spark a collective gasp among his audience, Jobs’ uses simple techniques like dramatic lighting, provocative language, and Spartan slides to create excitement.

None of the above is intended to diminish the value of what Jobs is selling – Apple’s products are truly remarkable, so he certainly has great raw material.  But his selling technique is what really fascinates me – and challenges me to think differently about the way I sell.

Whether it’s selling my ideas when speaking to an audience, selling an engagement when meeting with a prospect, or selling a point of view when making a recommendation to a client, I find so much of what I do is sales. Maybe you can relate?

I think using the approach of a magician might help us sell better – we will be able to do what the BusinessWeek piece says is Jobs’ forte:  channeling desire.

Consensus Advisors just released their 2009-2010 Retailer Health Ratings (RHRs) report.  The RHRs measure and compare retailers over a five-year period on:

• healthy growth
• asset utilization
• pricing power
• balance sheet strength

The report and webinar were really interesting and so I thought I’d share some of the insights and my reactions.

1.    weaknesses of comparable store sales as a measure of retail performance

I wrote a post about this awhile ago and so I was pleased to discover Consensus shares my concern with comp store sales, which indicate the growth or decline of sales of stores that have been open for a year or more compared to the same period the year before.

Although they are the primary means of reporting retail results, “’Comps’ are short-term focused and potentially misleading when viewed out of context as they can be driven by unhealthy margins, inventory levels, advertising spend and consumer credit practices. Comps also say nothing about a retailer’s financial leverage, brand strength or ability to manage efficiently the assets on its balance sheet.”

The RHRs, in contrast, provide a more balanced and longer-term evaluation of a retailers’ performance.  Consensus uses 15 different measurements and weights them according to their correlation to the retailers’ results on commonly used financial metrics such as return on assets, net income margin, total investment return and return on invested capital.

For example, they don’t just look at the sales growth of a retailer – they also take into account sales volatility, cannibalization, and sales momentum.  And then they adjust that result to reflect operating profitability.  With this more detailed view, I find the strengths and weaknesses of a company relative to its competitors become much clearer.

2.    pricing power as a measure of brand strength

By looking at change in gross margin as well as gross margin volatility, Consensus claims they assess the strength of a company’s brand.  They explain, “As a brand distinguishes itself first from commodity competitors and then from branded competitors, its desirability to its customers can command a price premium.  Sometimes this premium is reflected in an increased price to the consumer; sometimes it is reflected in a stable selling price which does not go down as costs are reduced. Healthy companies enjoy brands that command steadily improving gross margins.”

I agree pricing power generally reflects brand strength from the consumer point of view – I’ve made this point myself.  But I wonder about how the Free economy changes this.

As Chris Anderson points out, “Virtually everything Google does is free to consumers” and yet one could argue that Google is one of the strongest brands today.  (BusinessWeek/Interbrand’s 2009 Best Global Brands report ranked Google as the #7 brand in the world and estimated its brand value at nearly $32BB — an increase of 25% from the prior year.)

For free offerings, user preference, perceived differentiation, esteem, etc. are probably the best measures of brand strength – and publicly available financial metrics such as the ones tracked by the RHRs may be limited in their ability to fully or accurately reflect brand strength.

3.    brand focus vs. product focus

Pointing to the recent struggles of youth apparel brands Pacific Sunwear, Hot Topic, and Zumiez, Michael O’Hara, Chief Executive Officer of Consensus, remarked about the risk associated with too specific of a focus.  After I submitted a question about this, he clarified his point saying that retailers need to have a flexible store concept that gives them the ability to migrate away from something that once was not but is no longer.

“Pac Sun,” he explained, “will always have to be about the beach, but to the extent that the beach goes out of style, then I wouldn’t want to be Pac Sun.”  He contrasted this with lululemon athletica which he perceives is more flexible because they’re associated with exceptionally high quality, high performance fashion apparel.  And so while right now they are into yoga apparel, he argues, if women suddenly got into ice hockey for example (but let’s hope they never do), lululemon can go there too.

While I don’t necessarily agree with him because I believe yoga defines lululemon, I do think he makes an important distinction.  In my mind the difference between these two examples is brand vs. product.   If your brand is tied to too narrow of a product assortment, it’s harder to evolve your offering as trends come and go.  But if your brand is defined more by values and personality attributes, you have more flexibility.

This is a particularly important point for apparel retailers where product demand changes so quickly.  Brand focus is indeed important but so is the ability to shift product focus — within the brand context — between categories and types.

There are lots of other juicy insights in the report so I encourage you to take a look (purchase required) or at least download the webinar presentation.

related posts:

• free to be free
• six best practices in retail

T’was the day after Thanksgiving and all through the mall
Shopkeepers and sales staff had prepared for it all

They’d hung their over-sized sale signs and filled all their racks
“Shoppers start your engines,” they suggested, “not a moment to relax.”

Windows were a sea of red posters, red tags, and red decorations too
Promoting not the color of Christmas but the more common sale hue

Advertisers had stuffed local newspapers with flyers and FSIs
Featuring deep discounts, limited quantities, and other special buys

E-tailers stuffed my in-box full of promotional emails
Every subject line was announcing a deal or a sale

The signs of sales desperation were everywhere I looked
Even TV ads eschewed entertainment and went straight for the sales hook

Instead of enjoying shopping and having some holiday fun
Finding the best price seemed to be job number one

Looking for good gifts and their trimmings lost its appeal
Since I wasn’t sure each offer I would find was the absolute best deal

I got tired just thinking about shopping before I headed out the door
All the talk about prices made it seem like a chore

And so I decided to pass on Black Friday and just stay home
In feeling overwhelmed I’m guessing I wasn’t alone.

(the image above is a partial view of all of the FSIs from my local Thanksgiving day newspaper — the stack was almost 2 inches piled high)

Just a heads up I’ll be speaking in the Sales and Marketing Management‘s Virtual Trade Show webcast this Thursday, 10.02.08 at 2:00PT/5:00ET, on “Aligning Your Remote Salesforce.”  My main point will be that integrating and aligning salespeople with the company’s brand is an effective solution to the struggle of motivating, training, and coaching remote salespeople.  I’ll explain why salespeople serve as a critical brand touchpoint and how important it is to engage salespeople with the brand – and I’ll introduce several tools that companies can use to achieve brand integration and alignment.  Approximately 1,000 people are expected to participate in the trade show — registration is free.