Retail Hell Redux

The airing of CBC’s Marketplace on Friday night highlighting the appalling customer service in Canada’s retail stores highlights what we here at Anderson, Lyall Consulting Group have known for several years: retailers have lost all touch with their customers and what they value.

While Marketplace was useful in detailing examples of poor customer service, the program showed the symptoms, not the causes.

After viewing Marketplace we ask, how can firms like Wal-Mart, Canadian Tire, and Zellers so lose touch with their customers and what they value that they are prepared to risk the very sustainability of their businesses? The blame for this must be laid squarely at the feet of top management. If top management does not care how it creates and keeps customers, there is little that lower-level employees can do.

This is a strategic issue. Poor customer service results from a firm’s top management failing to define and embrace the firm’s purpose and translate that into an effective business strategy that aims to create and retain customers. Too many retailers are pursuing a race to the bottom by competing with each other on price without having in place a value chain that enables the low-cost structure that in turn enables low price. Under such a simplistic strategy, customers must suffer because firms must trim costs directly related to customer service in oder to price with the industry cost-leader.

What the Marketplace program showed is that there is a limit to how much a retailer can cut costs before directly harming customers. Due to the uniformly low-level of customer service, customers are seeking value other than low price. Retailers need to think through what the differentiated value is that they need to innovate and provide to create and retain customers. Low prices achieved through non-existent customer service is no longer good enough.

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