Thoughts on Retail from Paco Underhill

Posted by Marty Brochstein on September 24, 2012

In advance of his luncheon keynote speech at the upcoming LIMA Retail Symposium, (Wednesday, Oct. 10, at The Yale Club in New York City) retailing guru Paco Underhill offered thoughts on some of the forces at play in retailing today.

Assessing the closely watched attempt by JC Penney to move from an overwhelming reliance on coupons and sales to a model driven largely by everyday low pricing, Underhill — founder and CEO of Envirosell, and author of the seminal study, “Why We Buy: the Science of Shopping” — observes that “one of the things that we know from our research is that it is easier to go with the behavior you know and try to modify it than to actually change it…. Understanding what the patterns of how somebody shops, and working with those patterns, is easier than abruptly trying to change the entire flow.”

He says that retailers should look in the mirror for creating a shopping mentality so driven by price-cutting and specials. “Sales are like heroin,” he says. “ If you use it occasionally, it is a terrific high. But the more you use it, the less high you get from it, and the more you use it, the more you need to use it. And therefore there are some diminishing returns for it. Part of what this has confronted the American consumer with is a basic bewilderment as to what is the value to start out with.”

But he wonders if the Penney answer is an overly hardheaded solution that misses a basic truth. He calls it a “male solution to a female issue.”

“A man walks into the situation and says, ‘Too much discounting, we’re just going to do away with all of them,’ not recognizing that one of the things that often makes the female customer feel good about [shopping] is finding stuff. What drives TJ Maxx, what drives Century 21, what drives fast fashion, is a sense of discovery. And one of the challenges that middle tier department stores have is ‘How do I keep the magic of treasure hunting while being true to the concept of everyday low pricing?’”

Asked about the interplay between brand owners/suppliers and retailers, Underhill says that the dynamics have changed in the past several years. “In the 20th century, most brands were concerned about brand image, and the issue of the mechanics of selling something inside the store were the [responsibility] of the merchant,” he points out. “Certainly, those lines are nowhere near as clear and as separate as they used to be. I think that’s the reason why shopper insights is one of the hottest topics within the CPG world. Because it’s only in understanding what happens at the point of sale that the manufacturer is better able to understand how to leverage what their brand is, both in execution at the point of sale, but also what the implications are in the broader world of brand management.”

Underhill says that American retailers and suppliers must broaden their horizons to keep ahead of the pack. They need to recognize “that we in North America are no longer the cutting edge of retail. The cutting edge of retail is often in places where money is young. And certainly one of the things [that’s important] for an American merchant is gaining some global awareness, because that’s where you get new ideas and a fresh perspective.”

And that “fresh perspective” is constantly evolving. “One of the things that I love about my job is that there are parts of retail that are remarkably constant. Some of those are the biological constants in terms of how we see, the fact that 90% of us are right handed, etc.

“But what I also like is that retail is often a reflection of the changes that are happening to us as a species. What made a good store in 1990 and what makes a good store in 2012 are different, and those differences are a reflection of the differences between who we are now, and what we were 22 years ago.”

Paco Underhill will deliver the keynote address on “The State of Retail and Industry Trends,” at the 2nd Annual LIMA Retail Symposium, Wednesday, October 10 at the Yale Club in New York City. During the full-day program, a host of retail experts will explore issues critical to the industry, shed light on successful strategies and dispel myths about what it takes to build programs that resonate at retail. Attendees will gain valuable insights into the new collaborative models that are driving program longevity with key retailers and consumers.
For information on the Symposium, including a full agenda and speaker bios, and to register, go to www.licensing.org/events/2012-lima-retail-symposium/