For retailers, two out of five isn't bad

To attract a loyal consumer following, U.S. retailers must dare to be ... average?

That prescription, along with the fact that shoppers prefer well-marked prices to low prices, and will select "good enough" merchandise over the "very best," stands out among the findings of a new study by AlixPartners.

The study's results, due to be released Thursday, reveal shifts in consumer desires regarding the five key retail attributes of price, product, service, access and overall shopping experience. As new priorities have emerged for shoppers, many issues that weren't previously on consumers' radar are now lighting up the screen, according to research conducted by Alix, a corporate turnaround and financial advisory firm based near Detroit.

Consumers across the U.S., according to Alix, expressed frustration with such retailer missteps as restricted access to merchandise, cutbacks in staffing, difficult return policies and confusing pricing.

Fred Crawford, managing director at AlixPartners, said that, among the attributes associated with the industry, retailers should put their time and resources into excelling in two areas, advising them simply to meet expectations in the other three.

"If you're spreading precious assets, peanut-butter style, evenly across all five attributes, you're either wasting money or, worse, condemning all five to mediocrity," Crawford said. Investors should also take heed, Crawford said, because the companies that scored the highest on his "consumer sentiment index" also created the greatest shareholder value.

Companies getting it right include Wal-Mart Stores Inc., which exceeds expectations in price, product and access, allowing shoppers to "chore stack."
"People might not enjoy shopping at Wal-Mart, but they can get so many things done there, they tolerate it," Crawford said. "Love them or hate them, Wal-Mart really dominates the consumer psychology."

Target Corp., meanwhile, has excelled by offering higher-end products, better service and a more pleasant shopping experience.
Kmart, owned by Sears Holdings, fell below expectations on all counts.

"For retailers, the margins on providing services to consumer are very attractive. People have less time, more disposable income, and they want to invest in their homes," Crawford said. "They also don't want to spend three Saturdays in a row assembling an entertainment system."

There is also room for small players to succeed, Crawford said. Some smaller standouts include True Value and Academy Sports & Outdoors
"If it were my money, I'd invest in a market basket of companies that exceeded expectations," Crawford said. "If I were a private-equity company or a hedge fund, I'd look at (convenience store operator) Wawa and Academy Sports; both are private and both have scalable models."

Crawford said that a private-equity investor seeking a turnaround project might look at BJ's Wholesale or OfficeMax

source:http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B42E929F7%2D787E%2D4957%2DA78C%2D8B342EA4EAE2%7D&siteid=mktw&dist=&print=true&dist=printTop

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