One size does not fit all: Localization vs. standardization in retail
Photo by iStock.com
By Sarah Kampman, VP of product, Square Root
Beyond navigating constantly-changing customer preferences and the continued focus on the omnichannel experience, one of the biggest areas of transformation in retail today is the relationship between corporate and store leadership. A national survey of more than 1300 store and district managers revealed that misalignment and poor communication are major sources of both frustration and disconnect. In fact, unhappy managers reported they are four times more likely to feel misaligned with their corporate objectives.
The good news? 88 percent of surveyed store managers feel they can have a positive impact on store performance. Many simply want the chance to advocate for their store and share how brand standards need flexibility for their use cases. But when looking to empower store managers to drive local performance, corporate teams often struggle with a key question: How do you give stores the autonomy to adapt locally without weakening your brand standard?
Striking a balance
In a perfect world, a single brand strategy would be successfully executed point-by-point at every store. In reality, however, stores located in a beachfront tourist town, in the suburbs, and in an urban center experience dramatically different challenges — from weather and seasonality to customer preferences and store format. Local store managers may be at odds with corporate about what changes are appropriate in their stores, and, while both sides are motivated to delight customers and drive sales, corporate must also ensure a consistent experience across stores.
What happens when retailers are tasked with the balancing act of brand standardization and localization? The proportion of autonomy and centralized control depends on strategies that won't endanger the brand. For example, adjusting pricing models for specific markets is tempting, but our connected world makes this more dangerous than effective, posing real risks to brand transparency. Additionally, local operations changes are often impractical, as large brands typically depend on the cost efficiencies of consolidated buying and deliveries. Considering many stores are only beginning to provide a truly consistent omnichannel experience, those processes are still maturing and not yet ready to be localized.
Instead, assortment and marketing tend to be more effective localization strategies. To balance economies of scale against local store needs, some have instituted a 5 percent rule, meaning that although the majority of products are common across locations, each store manager is able to choose 5 percent of the products for their store. They are encouraged to use specific endcaps and other strategic placement of those products to play up the local angle. Additionally, participating in special, local marketing events and partnerships can give stores the distinctiveness they need to enhance the customer experience and drive sales.
Communication is key
Local learnings and insights can generate timely data that other similar stores — and the whole brand — may benefit from. For example, if a beachfront store sees store performance spike after implementing a new program, the same program can likely benefit other beachfront stores.
Sharing data and communicating initiatives that do and don't work can save time and resources, while also facilitating alignment between stores and corporate teams. When store leadership is equipped with tools to easily communicate, and is encouraged to act on incoming data, store and brand performance benefit. But communications challenges still plague many of today's retailers, with 78 percent of store managers reporting that their store would benefit from improved communication between corporate offices and stores.
When corporate communicates too slowly, the disconnect can leave store managers unsure how to proceed; some will follow the standing brand protocol, and others will consider themselves free to experiment. Likewise, when information lags from the stores, corporate is left with information gaps and may fail to capture share in unique markets. Corporate teams that build two-way communication channels can make rapid, small adjustments based on data from each store.
Carole Lynn Duffy, an independent consultant to the retail industry, equates this to listening to customers: "It's not just voice of the customers, it's voice of the organization and the climate. What's getting in the way of people being successful? Better tell me today instead of next Monday after I've already made all the decisions. This idea of speed, not just speedy messaging but speedy awareness, is the only thing that's going to help some of these organizations survive."
When it comes to balancing localization and corporate standardization, communication is vital to ensure brands and store leaders are leveraging the resources available. This, in turn, increases store leadership satisfaction, performance, and growth. With the right tools and a happy leadership, brands can improve agility and enable localization efforts that resonate with their customers, providing a tailored, memorable in-store experience.