By Quinton Pienaar, CEO of Agilitude.
The first rule of volume is to move product. You buy in bulk, so you must sell in bulk. Your margin is thin, so you can’t spend time wooing the individual customer. Put your proposition on a broadsheet, made attractive by discounts and specials, and then hold your thumbs that the footfall will cross your shops’ thresholds.
That is the system volume retailers across South Africa and the world follow every day. The main lever in that approach is buying power: the more you can absorb up front, the lower you pay per unit and the more you can feed into your margin – providing the product sells. But if it fails, the bulk sales of other items must pick up the slack.
It’s a bit like spinning plates on rods: if one crashes, make sure you have other plates doing ‘their thing’ to entertain your audience.
Buying and selling bulk works well as a system, but it has led to a slight case of tunnel vision. For example, buying power is largely regarded as the only major tool by which to influence the system. This is why many local retailers were fearful and even fought Walmart buying part of Massmart. Nobody in the world can match the big W’s ability to buy and sell volumes.
Yet there is actually a bigger reason to be concerned about Walmart’s presence in South Africa. Sam Walton was not only a pioneer of the volume business model. He was also a notorious efficiency geek and already used computers in the 1970s to link his stores and warehouses. Walmart has long driven the idea that data sits at the core of an effective business and can do magic with that currency.
To see this thinking evolve, we can turn our gaze to a prominent Walmart competitor, Target.
You have likely heard this story before, because it is very popular: in 2012 an irate father approached his local Target for sending pregnancy-related marketing material to his teenage daughter. He thought this to be highly inappropriate, but eventually discovered his daughter was pregnant. Target’s computers figured this out by looking at her recent purchases, which individually said nothing but collectively pointed to a bun in the oven.
I really like this story, because it shows how a bulk retailer could target (no pun intended!) an individual shopper as if they had walked into a boutique. It flies in the face of conventional volume retail wisdom, but there you have it: one angry father proves that the system works.
Hence calling it tunnel vision: despite an event that happened five years ago, many volume retailers still think moving bulk amounts of products requires a similar approach with customers. This is obviously not true: if you have the data, you can appeal to individuals or what is starting to be called the Segment of One.
Let me give an example. Assume I buy all my weekly milk on a Tuesday evening, for whatever reason. Perhaps it’s close to my gym and I have time afterwards. Thanks to data collected through your loyalty card system, app, maybe even sentiment analysis or data mining your CCTV footage, you are capable of recognising this pattern. In fact, using bank cards is enough – Target creates guest IDs for customers that are tied to their credit cards.
So you know I buy milk on a Tuesday evening. Perhaps you can send me a special on milk or even bundle in suggestions for other items on special that evening. Buying milk? Did I know coffee is on special too? Do your homework well enough and you’ll even know which coffee brand I prefer. You could alert me via SMS or email, maybe even offer a special discount code.
Accomplishing this is not difficult, providing you have the data. Plugging that information into a powerful sales and marketing platform, ideally by integrating the platform into your existing back office systems, can deliver those results. My company is a Salesforce provider, so that’s the solution we offer and recommend. It’s cloud-based, thus cost-effective to engage and easy to manage, yet also integrates very well with major business systems.
But I’m not punting Salesforce as such (though you really should talk to Agilitude about what we can do.) I’m saying that there is more to volume retail than volume thinking. You can now engage customers at the most granular level possible, without breaking the model. The thin margins and need to move stock still stand. All that changes is you can augment the shotgun approach of broad-based marketing with the sniper-accuracy of appealing to the Segment of One.
This is the new golden ring of retail and the true differentiator in the future of volume sales. Sell volume, but target individuals. It works, of that there is no question. All you should ask is how you can get it to work in your business.