Retailers Are Winning by Focusing on Customer-Centric Systems -- Not Whining About the Economy

CIO — The recent economic evidence was overwhelming and distressing: gas prices hitting new highs, rising food costs cutting into average Americans' wallets, a depressed real estate market, a seemingly intractable credit crunch and persistent job worries. The retail industry would surely be in trouble. March had been bad, as had February before it.

But April's sales reports from many of the nation's retailers, released this week, were surprisingly better than expected, despite the mounting economic despair. Wal-Mart, Saks, Costco, BJ's Warehouse, TJX Stores (T.J. Maxx and Marshall's), Family Dollar and J.C. Penney either met or exceeded Wall Street's expectations for same-store sales for the month, which is a critical retail metric. According to an early tally from Thomson Financial on Thursday, as reported by the Associated Press, 19 retailers beat estimates, while nine missed.

Of course, it could be said that the successes of many of those retailers was due, in part, to U.S. consumers' shift to low-price discounters and wholesale food stores. And retailers like Wal-Mart, T.J. Maxx and Family Dollar deliver that every day—though that would not explain the respective months of Saks and J.C. Penney. (For more on Wal-Mart's technology initiatives, see "Did IT Help Wal-Mart's Quarterly Financial Results?" and "How Wal-Mart Lost Its Technology Edge.")

To Paula Rosenblum, a managing partner with Retail Systems Research (RSR) and former retail CIO, these lean times for retailers are what she calls "the thinning of the herd" in the retail segment. "That's healthy for the industry," she says. "This country and Western Europe have been over-retailed for decades."

Given the state of the economy, logic would dictate that bargains and big sales would be the sole focus of both consumers and retailers now—a sort of "slash the price and they will come" mantra for retailers facing tough times. According to Rosenblum's latest research, however, low low prices aren't the only draw for consumers. They want good customer service as well.

"Much to our surprise, we found that customer centricity remains in the forefront of the minds of both retailers and consumers," Rosenblum writes in a May 2008 RSR benchmark report, called "The Customer-Centric Store."

What was noteworthy about the RSR research was how the different classes of retailers—winners, average and laggards, as defined by RSR—have reacted to the downturn in the economy. For example, retail laggards (which RSR defines as those whose year-over-year comparable sales performance lags their peers and inflation) are seriously concerned for their own futures and survival in the down economy. (See "How IT Systems Can Help Starbucks Fix Itself" for more on IT's ability to help retailers.)

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