On Starpower’s Success - Twice

On Starpower’s Success

Customer lifestyles take center stage
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The following is in response to“Have You Heard The News?”a recent letter by TWICE VP/publisher Ed Hecht.

The real question that has haunted many retailers: Is retail dead? The answer is clearly “no,” but that doesn't really address the fact that many retailers are getting “killed.” Retailers stuck in 2008 are no longer relevant. Those that haven’t changed or don't know what to do are certainly headed for extinction. 

Take a look at RadioShack (or any consumer electronics retailer that has closed its doors in the last few years). Despite having an incredible brand, built over decades with millions of loyal customers, they ultimately fell. This is in spite of a most competent new management team led by Joe Magnacca. But this was too little, too late.

Some will say they relied too heavily on cellphones; others may point to a weak e-commerce platform — all of which may be true. However, I believe the real reason that RadioShack fell was a failure to look at its customers and relying too heavily on the products themselves.

I don't allege that that the failed retailers didn't study their customer base or even understand their customers’ wants and needs. I am sure they did. In fact, the last couple of years at RadioShack there were massive changes in merchandising. However, the failure by RadioShack (and many other retailers) was a failure to redefine their business by their customers’ lifestyles, thus abandoning the people that loved the brand the most.

The concept of defining a business by customer lifestyle is a hard concept to grasp for those of us that were brought up in retail. I grew up in a family furniture business and watched how customers flocked to retail stores based on "loss leaders" or recognized products sold at "value" pricing. The formula was fairly simple: Take products that customers will recognize, mark it cheap, advertise like crazy, line customers up at the doors, let salespeople find the right product for their customer and offer great service after the sale. Consumer electronics retailers had the additional advantage of selling the latest "must-have" electronics, adding to the frenzy. This worked for decades as consumers sought out retailers to guide them and become the primary source of information necessary to make a purchase. 

But the economic crash compounded with the Internet, millennials, home building and anything else you want to throw into the mix changed everything. Today, many "utility" brands took over and soaked up precious shoppers seeking out a traditional retail purchase. Think Walmart, Amazon, Home Depot or Costco. These companies have become very successful and very strong. The consumer knows the strength and appreciates the value derived from doing business with these companies. However, they only do business with these retailers because of the utility — no real connection to one's lifestyle. It is likely that these companies will continue to shift to a multichannel strategy where web presence and store fulfillment will become even more important. I am pretty sure that these brands will successfully navigate the challenges at retail and continue to eat away at businesses trying to compete for a traditional retail product sale.

The world’s most remarkable retailer, Apple, is massive but not a utility by connecting with a lifestyle first. It is cool to be an Apple customer and that not only enhances the brand, but brings people that want to identify with the brand. But it is not only Apple. Premium upscale brands such as Sub Zero/Wolf appliances, Rolex, Victoria's Secret and even automaker Tesla have performed remarkably well in recent years because they appeal to the "lifestyle" of their target. While these brands benefit from the economic success of the wealthy, it is important to note that their growth has been much stronger than their competitors selling in the same category.

Retailers such as Restoration Hardware proved the importance of connecting by lifestyle when they revamped their merchandising from hardware and knobs into home furnishings. Williams-Sonoma opened to sell French cookware and created a cult following based on a lifestyle. Victoria’s Secret, well, let’s just say they aren't selling undergarments. These companies and many others thriving right now are doing many things right. But the most important thing these retailers do is define their business by their customer, not their products. They are bucking the trend.

There is a lesson Starpower learned from all of this, including some tough conclusions. First, Starpower is not and will never be a utility. Second, we must recognize that consumers looking for consumer electronics don't love the traditional retail experience. Third, the shopping patterns for consumers have shifted (at least partially) away from physical retail and will likely not return.

There is no real magic to Starpower's recent success. It was a paradigm shift. We adjusted our company from every angle. We stopped referring to ourselves as an "electronics retailer." Our leadership committed to engaging our clients not by the products, but the "lifestyle" our products offer. Displays were changed. We created a new education platform (StarU); surveyed our clients for suggestions; looked outside our industry for answers; purchased an upscale appliance company; added even more upscale consumer electronics; offered construction services; worked to constantly add more products in our stores that are currently "out of our comfort zone" and, finally; practiced the patience to allow our people to thrive under this new direction.

We now look at what our particular client "wants" vs. new products we think are important. We push our team to constantly look at the lifestyle of our customer, not just our industry or traditional products. This has opened our eyes to a larger world with bigger opportunities.

Starpower faced (and continues to face) the large challenges associated with consumer electronics retailing. And while we have not "figured it out," Starpower is well on our way. We had a record sales year last year and a promising start in 2015. But this was not by accident and we didn't "wait it out" to get our business aligned. We took action. We started by defining what success looks like, and know that this journey may never have an end. That is how we will stay alive.

Daniel Pidgeon is chairman of Dallas-based Starpower, an award-winning luxury lifestyle retailer selling premium CE and appliances.

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