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One Size Does Not Fit All: The Balance Retailers Face with Localization vs. Standardization

FEBRUARY 06, 2018

Brick-and-mortar retail is in transition and every brand is working with its stores to transform itself. Behind this transition are a lot of Store and District Managers, or Store Leadership, who feel unheard by their corporate leaders. After surveying these leaders for our 2018 State of the Store report, many cited alignment and poor communication as the source of their frustrations.

Corporate leaders often struggle with the same question: How do you give stores the autonomy to adapt to locally without weakening your brand standard?

This disconnect shows an untapped resource in the retail chain, as 88% of Store Managers surveyed feel they can have a positive impact on store performance. Many simply want the chance to advocate for their store and share how the brand standards need flexibility for their use cases. However, in providing this, corporate teams often struggle with the same question: How do you give stores the autonomy to adapt locally without weakening your brand standard? We spoke with several leaders in the field to understand the choices they have made.

BALANCING STANDARDIZATION & LOCALIZATION

In a perfect world, a single brand strategy would be executed point-by-point at every store and drive success. In reality, stores located in a beachfront tourist town, in the suburbs, and in an urban center experience dramatically different challenges. Local Store Managers may be at odds with corporate about what changes are appropriate. While both sides are motivated to delight customers and drive sales, corporate must also ensure a consistent experience across stores.

Although both corporate and stores are motivated to delight customers and drive sales, corporate must also ensure a consistent experience across stores.

So, then, what changes are (and aren’t) good candidates for local control? Pricing models are tempting, but our connected world makes them more dangerous than effective. Libby Chennell, an Austin-based retail consultant, explains: “There’s nothing that can’t be looked up or called around about. If Market A is addressing a local need to price key products aggressively, and Market B isn’t, you risk brand transparency and satisfaction.” Local operations changes are also often impractical, as large brands typically depend on the cost efficiencies of consolidated buying and deliveries. Additionally, many stores are only just beginning to provide a consistent omni-channel experience, and those processes are still maturing and are not ready to be localized.

Assortment and marketing tend to be more effective localization strategies. To balance economies of scale against local store needs, some have instituted a 5% rule: Although the majority of products are common across locations, each Store Manager is able to choose 5% of the products for their store and they are encouraged to use specific endcaps and other strategic placement to play up the local angle. Brands may also encourage their stores to find local partners for special marketing events.

Of course, the need for localization increases as the differences between markets grow. A regional franchise operations leader at a global quick-service restaurant shared an experience from expanding in South America. Early franchise partners raised concerns that Brazilian customers would not want to eat food with their hands. The cost of providing plates, utensils, and in-facility dishwashers was weighed against the potential lost revenues, and the numbers showed a clear need to adapt. But within the market, few additional adaptations were considered. As the regional leader explained, “It’s not as much for cost reasons as it is for customer experience. It has to be consistent. Other brands may vary, but that can disappoint customers and we want to avoid that.”

COMMUNICATING IS THE KEY

When corporate communicates too slowly, Store Managers are left unsure how to proceed; some will follow the standing protocol, others will consider themselves free to experiment. When information lags from the stores, corporate lacks the data to adjust and may fail to capture share in unique markets. Particularly where Store Leaders have experimented, their individual performance data will tell a misleading story about how to repeat success or to avoid failure.

With communication often coming from the top, corporate teams can forget they need information from their stores to be maximally effective.

With communication often coming from the top, corporate teams can forget they need information from their stores to be maximally effective. Carole Lynn Duffy, an independent consultant to the retail industry, equates this to listening to customers: “It’s not just voice of the customer, it’s voice of the organization and the climate. What’s getting in the way of people being successful? Better tell me today instead of next Monday after I’ve already made all the decisions. This idea of speed, not just speedy messaging but speedy awareness, is the only thing that’s going to help some of these organizations survive.”

Corporate teams that build two-way communication channels can make rapid, small adjustments. This is supported by our research, as well. Seventy-eight percent of Store Managers surveyed believe their store would benefit from improved communication between corporate offices and stores.

IMPROVE EXECUTION THROUGH COMMUNICATION

District Managers are the pivot point between Store Managers and corporate teams. Of those we surveyed, 90% of District Managers agreed can have a positive impact on their territories’ performance. We at Square Root believe District Managers are underutilized. They could be an effective tool for corporate teams to ensure Stores Managers are executing consistently, as well as provide advice and authorization on when to localize certain strategies.

The key to this balance is constant conversation and communication. As a follow up, we are looking to write a piece on how to identify best practices that allow room for autonomy and localization. If you are interested in talking about this issue, please email me (skampman @ square-root .com).

ABOUT THE AUTHOR:

As our VP of Product, Sarah finds solutions for customers that they didn’t even realize they needed. With almost 15 years in product management and more than 20 years in technology overall, Sarah specializes in creating long-term focus groups with valued clients, helping them use technology to meet their business needs. She understands that building relationships through empathy leads to the most dynamic ideas and strategies. Driven by a passion for behavioral economics and a desire to study how people make decisions, Sarah received a BA in Cognitive Science from University of California at Berkeley.