Live from NRF: Good News for Midsize Merchants

New York–Midsize merchants can still successfully compete with discount superchains such as Wal-Mart, Target, and Costco. According to Sherif Mityas, vice president of Plano, TX-based A.T. Kearney’s retail practice division, several strategies are key.

During a Tuesday session at the National Retail Federation Convention and Expo, Mityas recommended that companies “carefully cultivate and manage a brand portfolio… You need a unified brand strategy,” But he also explained that midsize merchants could take the example of a big-box chain such as Target and apply its strategies on a smaller scale to their own business.

Midsize businesses, for example, could learn from the way in which Target promotes seasonal sales, such as Easter, by coordinating nearly everything in the store in terms of color, display, and merchandise to the customer’s needs pertaining to that holiday. More important, he said, midsize companies should note Target’s clear understanding of its customer’s mindset. Target’s ability to stay true to its brand image while diversifying its offerings is exemplified by the company’s creation of a line of discount clothing by designer Isaac Mizrahi. “The brand can’t be disparate,” said Mityas. “It has to stand for something that customers come there for.”

Smaller companies should “uniquely differentiate product and format assortments,” Mityas continued, so that they show in their offerings that they understand the distinctive qualities of its customer base better than the discount chain behemoths. For example, it is not enough to plan merchandise around regional demographic information, such as selling a wide variety of winter coats because the majority of your customers are based in the cold-weather climates; rather, the midsize company needs to gather and plan merchandise in response to psychographic data, such as which colors most of its customers are drawn to and what sizes they most need. One way to show your very specific understand of the customer’s preferences is to launch a private label, created with your buyers’ demographics and psychographics in mind, offering merchandise they would have a tough time finding anywhere else for the same price.

Another critical strategy is to “relentlessly focus on optimizing gross margin,” by paying attention to which products you can benefit from not marking down. He said to keep in mind the consumers’ growing tendency to engage in “selective luxury” shopping, in which it is not the amount of money spent that the buyer focuses on, but what the product means to him and his lifestyle. An individual may not be willing to spend $1,000 on a pair of designer jeans but may eagerly spend that same amount of money on a diamond ring or a Louis Vuitton purse for “that special occasion.”

Midsize merchants that want to compete with the big boys must pay attention to their most expensive and least costly offerings, Mityas said, because those are the products that make the difference between making and losing money. “How do you manage [products] on the edge? Some are killing you, and some are profitable that you are not exploiting. Optimize the edges.”

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