Even before the advent of our current economic woes, a correction in the retailing industry seemed inevitable. From clothing to general merchandise, electronics to furniture, too many similar-seeming outlets were offering the same goods at roughly the same prices in the same way. But with an economy in overdrive and consumers feeling flush thanks to rising home values, there seemed to be enough business to go around for almost everyone.

No longer. Some firms, such as Circuit City, have ceased to exist while the vast majority of others are faced with the task of reevaluating nearly everything they do.

A select few have been able to chart a different course. A report by Kurt Salmon Associates, a New York-based management consulting firm, details how companies such as Apple, Recreational Equipment Inc. (REI), Trader Joe’s and Aeropostale have created product and service offerings that resonate with consumers and have also oriented their internal processes to better respond to shifts in consumer demands and market realities.

“Competing on a Unique Offering and Distinctive Experience: The Rise of Act Vertical Retailers” explores how these firms marry a clear retail and brand strategy with competence in seven core capabilities:

•   use of market research to identify emerging customer needs;

•   product design and development that balances creativity and commercial appeal;

•   consumer testing that shapes the offerings and customer experiences;

•   sourcing relationships that accelerate manufacturing but also delay key product decisions until the most advantageous time;

•   assortment, allocation and replenish ment that rapidly shifts products to places of greatest demand and maximized pricing;

•   design and execution of an engaging and consistent brand experience across all channels;

•   marketing that communicates the brand promise across all channels and showcases how the retailer’s offering and experiences enhance customers’ lifestyles.

Less tolerant

Beyond the down economy, the study says the main driver of the retailing shakeout is a shift in the historic relationship between retailers and customers over the past decade. Aware that there are abundant sources from which to buy products, consumers are less tolerant of bad shopping experiences and can more easily avoid them by using the Web to determine where they should and shouldn’t shop - whether or not they make the purchase online. Thus, as the report says, “Today’s consumers demand much more of the retailers they choose to deal with: products they can’t get anywhere else, the ability to shape those products to meet their needs, more product information and much different ways of interacting with the retailer, i.e., the customer’s retail experience. Retailers that ignore this shift risk sliding into irrelevance with obsolete models.”

Do research differently

Of course, the best way to stay in touch with customers, determine their needs and wants and understand how to forge a bond with them is through marketing research. Though just doing the research isn’t enough, says Cari Bunch, a partner at Kurt Salmon Associates who co-led the research study and report. “Part of the research side of this is that we need to do research differently and use different types of research, so that that information becomes part of the decision process from beginning to end. The traditional research will still be very supportive but we have to find new ways to connect the research findings and quantification into processes in new ways,” she says.

Bunch isn’t advocating for one type of research over another - qualitative and quantitative both have their places. The key is for the researchers and analysts to help their internal clients make sense of the information. “So many merchants get the research data and then don’t do anything with it, or they come up with all of the excuses why it’s wrong. Or they look at it and say it’s conflicting: ‘This group loves it and this group hates it so I just have to go with my gut’ and they just discount the interpretation.”

Not all of the research has to be of the formal, organized type, Bunch says. “The first thing companies need to do is go talk to their customers. Work the registers, go to a store, help a customer find something on a shelf. Get connected to them in a way that you haven’t before.”

Grassroots level

While it’s key to have buy-in from those in the C-suite to get a company more customer- and innovation-focused, Bunch cites examples where departments within client firms have started the effort at the grassroots level. “I have seen functional areas in organizations that believe the company needs to be operating in a more customer-focused way, such as the store and channel teams, bring some of these tactics and concepts into their daily process and then to the executive team and that sometimes starts the momentum. It can’t change completely without the sponsorship across the organization but there are absolutely things you can do within areas to elevate the thinking.”

Again, offering guidance on how to interpret and take action on the information is critical. “Just handing that information over to someone isn’t going to help support change. The missing piece is understanding what the processes are to add insights to the information and help the company turn great data into great decisions.”