Purpose is the foundation on which retail innovation is built.
Updated: Aug 16, 2019
Purpose is the foundation on which retail innovation is built. Without solid alignment on purpose, innovation will always be on shaky ground (tip: customers and team members are motivated by a purpose that goes beyond a return to shareholders).
What is your purpose for being in a retail business? By purpose I don’t mean making money because that just gives you the right to keep going. I mean why do you exist? Twenty-five years ago, it was an easy question to answer. Retail stores existed to make goods and services available to customers at a price they were willing to pay in places they were prepared to visit. Some retailers focussed on a unique range while others focussed on more generic ranges at best prices. The internet has changed all that. Today Amazon alone has over 150 million products online and the best price is as close as your nearest search engine. The traditional reasons for retail to exist have gone and that has left retailers with a genuine existential problem.
With the old problems of retail solved the successful retailers of the last decade have sought to develop new reasons to exist. Traditionally price-based retailers like Wal Mart and IKEA have added sustainability and fair trade to their purpose. In Ikea’s case that’s expressed as, “a better everyday for all people impacted by our business”.Traditionally product led retailers like NIKE and Starbucks have focussed more on emotional purpose. Nike's purpose is to "bring inspiration and innovation to every athlete.” While Starbuck’s is, “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time”. Retailers like The Body Shop, who were born out of social purpose, now see their stores developing in to overtly political “activist hubs” where you will be able to sign a petition, listen to a speaker or donate.
Having a modern retail purpose that goes beyond range, price and proximity is an essential foundation for retail innovation. BCGhave recently published an article on the reasons why purpose is important to businesses and I would like to relate those reasons to retail innovation. The first reason that purpose is important is it helps build organisational alignment. Alignment is essential if you are embarking on a programme of retail innovation. If the team doesn’t have a clear articulation of where they are headed how can they be expected to all move in the same direction? Alignment around purpose will also help when the time comes to make key innovation decisions like what ideas to adopt and which ones to filter out. Part of Body Shop’s purpose is to “Enrich not exploit” which means their sourcing strategies are designed to support communities in poorer countries. Body Shop’s recent decision to deploy a digital media network in their stores was taken, in part, to tell customers the story of the products on range, made by African communities, supported because of Body Shop’s purpose. Without alignment around purpose the biggest risk is that sceptics have a chance to opt out and do things the way they have always done them potentially killing your innovation programme before it even gets started.
The second reason that purpose is important is that it can, and should, be a stimulus for innovative thinking. A purpose statement should cause the team to think about the difference between how things are today and how they could be tomorrow. IKEA’s purpose of creating a better every day and reduced impacts has led to many innovative changes in their business. The most recent initiative is a trial of renting products which not only gives customers a lower acquisition cost but extends the life of products, reduces waste and moves IKEA towards a circular business model. H + M ‘s purpose of, “…leading the change towards a circular and renewable fashion industry…”has set them on a similar course with used clothing collection in-store, designers trained in circular practices and 35% of its materials sourced from recycled materials.
The third reason purpose is important is that it creates resilience. Innovation is particularly hard for retailers. The things our industry values most are the ability to execute and short-term results. Innovation requires a lot of test and learn and long term thinking so there will inevitably be disappointments. A clear purpose reminds everybody of the big game, that this will be worth it in the end.
The final reason for the importance of purpose is that it creates inspiration. For retailers this is perhaps the most important reason of all because we rely on inspired customers and team members for our existence. Customers and team members have plenty of choice of where to shop and where to work. An inspiring purpose can make the difference. Doug McMillon, has spoken about the positive effect of Wal Mart’s environmental and fair trade purpose on customers,” ...(they)expect us to make decisions that are good for the planet and good for the people that make the products in our supply chain…. And the companies that provide it better than others will win”.For retail team members an inspiring purpose can be the difference between joining and not joining, staying and leaving or giving 100% or just enough. At &Pizza stores in the USA the purpose statement is more prominent than the menu. The team member “tribe” are so inspired by it they are likely to have “&Pizza”tattooed on their arm. Wouldn’t we all like to have team members that engaged!
If you want to inspire customers and team members the substance of your purpose is important. Neither group are likely to be inspired by a purpose that is to maximise shareholder value. A recent study has shown staff are between 17% and 33% more motivated when business purpose de-prioritises corporate profits.
There are many benefits to having a clear purpose before embarking on a programme of retail innovation, but a final tip is developing that purpose is not a job that can be contracted out. Purpose needs to come from the heart and soul of your business. It’s not something you should select to meet a marketing objective. Customers and team members will smell a rat if the purpose is at odds with your actual behavior. What’s worse you are quite likely to end up on one of the purpose parody web sites that abound on the web.