Identifying the Retail Industry Differentiating Business Processes

Within Softlines, aside from the different types of clothing sold, there are different ways these companies bring their products to life, attracting different types of consumers. Let’s have a look at a business example to discover ways companies can attract different consumers.

There are manufacturing companies whose products bear the manufacturer's own name – these are called "Brand Manufacturers." Branded manufacturers include Nike, Chanel, Under Armour, and Coach. These are examples of companies which design and manufacture their clothing in-house.

Then, there are segments of companies, some of which are brand manufacturers, who sell more than just a product, such as luxury designers and active wear.

• Luxury Designers- The idea of a luxury brand is not necessarily a product or a price point, but a mindset where core values that are expressed by a brand are directly connected to the producer's dedication and alignment to perceptions of quality with its customers' values and aspirations. However, most of those brands have high price points because they are targeting high-income customers.
• Active Wear - Anyone can produce leggings and sweatshirts. Active wear brands are about promoting health that only begins with the clothing you wear. Years ago, workout clothes consisted of an old t-shirt and shorts. Yoga wear is now an expectation at traditional sportswear retailers, such as Nike, Adidas and Under Armour. There are ,of course, many other types of fashion retailers, such as children's clothes and fast fashion retailers that focus on speed and price point.

As for Hardlines, these are specialty retailers that mostly focus on one segment, for example:

• Furniture and Home Furnishing
• Electronics and Appliances
• Sporting Goods, Toys, Hobbies
• Books, Music, Video
• Office Supplies and Stationary
• DIY/Building and Garden Materials
• Auto Parts and Accessories

Food, Drug, and Convenience stores sell food, medicines, and other goods. The different segments include:

These are stores that sell a general range of food products, both fresh and packaged. Some people might call these hypermarts or supermarkets. These grocery stores are usually stores with a larger assortment of non-food products. ​

These are scaled down food stores, in some countries like the US they are usually attached to gas stations​. They stock everyday items like coffee, snack foods, soft drinks, tobacco products, and some can sell alcohol. They are usually located along busy roads, near rail stations or other transportation hubs, ​and they usually charge significantly higher prices than conventional grocery stores as they order smaller quantities of inventory at higher per-unit prices. ​They make up for this by having longer hours, servicing more locations, and handling shorter check-out lines.

These are stores that have a pharmacy. These stores also have some level of convenience in some areas of the world. For example, in the US and larger stores in Europe, they combine pharmacy sales with convenience items, such as milk and toilet paper.

In Hardlines, one of the biggest differences is the expectation for a seamless home delivery experience (especially in heavy goods like furniture and appliances)​. This isn’t a delivery company dropping a package at your door; it is a new bed or flat screen TV being delivered, unboxed, and set up. ​Consumers are willing to pay more for experience, speed, and convenience in the hardlines space​.

While this category is broad, many of the things sold in hardlines stores are large, expensive items so customer expectations are a bit different. Consumers value speed and convenience. For example, if a person decides today that they want to remodel their bathroom, they want to be able to head to their local DIY store and start. ​

When a person decides at the last minute they want a bigger TV to watch this year’s World Cup, they want to go to their local electronics store and not only purchase the TV today but have it delivered to their home in a matter of hours. ​

In Softlines and Fashion, there are short product lifecycles due to fast-changing trends​. Consumers are willing to pay more for experience, transparency, and sustainability​.

Fashion is going through a major change to become more inclusive and diverse​. In 2019, more brands released sustainable and vegan fashion lines as demand for animal-free and eco-fashion grew. For example, sustainable sneakers became a mainstay in consumer’s athleisure wardrobes with Everlane’s first trainer launch, and direct-to-consumer brands such as Allbirds reaching mainstream success. ​

Other established brands like Adidas followed this trend as well, with Adidas pledging to use recycled plastics in its products by 2024​. The fashion industry is often cited as one of the world’s worst polluters due to the short lifecycle of their products, and companies are beginning to see that this is not sustainable. ​

Lastly, within Food, Drugs,​ and Convenience, it is a heavily replenishment-driven business due to high inventory turnovers and low shelf life (in fresh foods)​. Consumers are willing to pay more for value, experience, and convenience.​

The way many grocers can provide value is through private labels. Even at higher end retailers like Whole Foods, they offer private label options that are often much cheaper than the other branded options. ​One example of a company that offers these cheaper alternatives is Aldi.

Aldi is a value player, but it is much more than that. Its focus on private label enables it to control quality and cost, which delivers value and experience. With over 11,000 stores worldwide, it’s working hard on the convenience component. ​In Europe, it’s perceived to be one of the top five e-commerce players​.

To conclude, all three segments have a lot in common.​ The biggest common denominator, however, is that all retailers need to focus on the experience they are providing and help consumers to acquire the goods the way that they desire.

Retail Segments and Sub-Sectors: Retail is broadly divided into Softlines, Hardlines, and Food, Drug, and Convenience segments. Each main segment has numerous sub-segments. For instance, Softlines includes luxury designers and active wear, while Hardlines covers furniture, electronics, and sporting goods.

E-commerce and Clicks-to-Bricks Model: All retail segments are experiencing significant growth in e-commerce, especially accentuated by the Covid-19 pandemic. The retail strategy "clicks to bricks" is where businesses operate both online and in physical stores. It is increasingly disruptive and aims to drive customers to physical locations.

Commonalities and Differentiators Among Segments: All segments share traits such as the importance of customer experience, personalization, seasonality, and trend influence. In terms of differentiators, Hardlines emphasize seamless home delivery for large items, speed, and convenience. Softlines have short product lifecycles, focus on sustainability, and evolving trends in fashion. Lastly, the Food, Drug, and Convenience sector focuses on high replenishment rate, value, experience, and convenience, with private labels as a key strategy for providing value.