Magazines Archives - 2008 March

Evolving business model: Sell solutions, not products
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RETAIL is undergoing a huge transformation, from selling merchandise to selling services or, perhaps, “solutions”. This was raised at the session, Successfully Evolving Your Business Model from Selling Products to Selling Solutions, presented by a group of Brazilian retailers at NRF 2008. The key presenters were Gouvea de Souza & MD’s founding partner and CEO, Marcos Gouvea de Souza, and senior partner Alberto Serrentino. Their company operates retail stores in 56 countries.

Changes in consumption habits, noted the presenters, are seeing consumers express greater demand for convenience, solutions and services at a time when goods are being commoditised. They highlighted the growing importance of services to retailers in both mature and developing economies.

In Brazil, for example, a survey showed that more than 90% of consumers under study have a positive opinion of retailers offering services with their store names made known. Customers take comfort in knowing the retailer’s name, finding it convenient and time-saving.

Top services, or solutions, that retailers across the globe offer, and are garnering more revenue from, include financial, travel and medical services as well as “troubleshooting” services in the area of technological products, installation or do-it-for-me (instead of do-it-yourself) services. Even pure e-tailers, like Amazon.com, are moving more in this direction. Amazon now offers travel, financial and telecommunications services.

In France, where retailing is highly regulated, Auchan, Carrefour and Monoprix all offer financial and travel services, with Monoprix even providing third-party gardening services. Other service providers cited were Nivea, for its spa services; Costco, for its car- and truck-rental businesses; Procter & Gamble, for its move into car wash;Best Buy, for its Geek Squad programme of at-home servicing of users’ electronic products.

The supermarket business, the session noted, has been revolutionised by the offer of fresh, fully-prepared ready-to-eat meals that can be heated at home.

Opportunities also exist in catering services, with a number of companies offering on-site dining experience. The growth of in-store health clinics at drug stores in the US, where affordable health care has been a political issue, is growing into a major trend in the service arena, the session reported.

Opportunities for retailers in the “problem-solving” services area are especially strong where there are no dominant relevant brands, the speakers said.

They identified as the newest wave stand-alone services provided by retailers outside their traditional venues.

Delivering solutions requires new sets of skills, Sorrentino said. The old merchandise-oriented organisation is not appropriate. “Branding” a retail operation, he said, is increasingly important for success in the solutions environment.