Retail is full of them, in fact if you’re in the industry you can’t get away from them; sales per square foot, Net Promoter Score, footfall, dwell time, conversion rate, abandoned cart, basket size, average transaction value, customer retention rate, customer lifetime value…..I could probably make one up and odds on no-one would notice.
But there’s one which stands head and shoulders above the rest, one which says more about how a retail business is performing and which direction it is heading in than any of the more traditional measures. But before we get to that, we need to understand a little more about the evolution of retail to discover why this metric is so important.
A short history of retail
Retail has been in existence for thousands of years, certainly if we define it as the exchange of goods – some anthropologists claiming to be able to trace it back 40,000 years, other sources to 9,000 BC when sheep and cows were bartered for. Either way, retail has been around for a long time.
And of course, over the millennia it has steadily evolved. Interestingly, customer segmentation and the concept of VIP customers is nothing new. In order to separate the ‘common customers’ from the wealthier ones, from the late sixteenth century it was increasingly popular to invite the wealthier customers into a back-room of the store, where goods were permanently on display (the ‘commoners’ were never allowed in the store). Around the same time it was also not unknown to hold a showcase of goods in the shopkeeper’s private home for the benefit of wealthier clients.
Soon we began to see the emergence of more modern markets followed in the nineteenth and early twentieth century by the growth of department stores such as Harrods (1834), Macy’s (1858), Bloomingdale’s (1861) and of course Selfridges (1909).
How are you feeling?
And this is where the most important metric in retail was borne. Because the department stores which grew up around that time were not simply retail stores in the way we tend to think of them. They were places where customers could go to commune, be entertained and spend their leisure time. Reading rooms, art galleries and concerts were not uncommon.
“Treat [the customer] as guests when they come and when they go, whether or not they buy. Give them all that can be given fairly, on the principle that ‘to him that giveth shall be given'”Harry Gordon Selfridge
And one stands out more than any others. A look at the writing of Harry Selfridge regarding his eponymous store is revealing. Because to Harry, whilst of course sales, stock levels, margin and so forth were of utmost importance, what really mattered to him was, ‘how is my customer feeling?’.
Much is written today about so-called (forgive me) ‘experiential’ retail, but back in 1909 when Selfridges opened, Harry knew the true meaning of it. Today his philosophy of how to run a retail business resonates more than ever.
Because today we have so many resources at our disposal by which to voice our feelings about a given brand or retailer. We have almost unlimited access to reviews, product research, price comparisons, product provenance, ethical standards, anti-slavery and so on.
We switch brands at the drop of a hat and with breathtaking speed. According to Emplifi, 86% of consumers would leave a brand they trusted after just two bad experiences. And from the same research, 61% said that they will pay at least 5% more if they know they’ll get a good customer experience.
So, if you’re a retailer, whilst sales per square foot, basket size and conversion rates are important, when combined with increasingly unpredictable, not to say promiscuous consumer behaviour, wouldn’t you really want to know on that Monday morning sales call; how are my customers feeling? I know I would.