Preface

Competing in Tough Times: Business Lessons from L.L.Bean, Trader Joe’s, Costco, and Other World-Class Retailers is the result of a two-year-long project. Through my experience as a professor with a special interest and expertise in retailing, as well as a marketing consultant, I carefully examined the overall strategies of 10 world-class retailers, looking for common principles that can be universally applied to other retail firms.

I started this project without any preconceived notions of what firms would comprise my list of world-class retailers, as well as what common principles these firms shared. I eventually identified 10 retailers based upon examining such key indicators of performance as sales per square foot, sales growth, return on equity, increase in stock market value membership retention rates for warehouse clubs, and conversion rates for web-based retailers. I also looked at retailer ratings in Fortune’s “World’s Most Admired Companies,” Fortune’s “100 Best Companies to Work For,” and customer service rankings by the American Consumer Satisfaction Index, Consumer Reports, and Business Week. In evaluating retailers for inclusion in my top 10 listing, I looked for retailers that were consistent performers on these measures. Each retailer’s rankings on selective indices are contained in the Appendix, “Individual and Composite Financial Performance, Customer Service, and Worker Satisfaction Metrics of the Best- Practice Retailers.”

The 10 benchmark retailers are diverse in terms of retail format: supermarket (Publix, Stew Leonard’s, Wegmans, and Whole Foods), extreme discount food operation (Aldi), specialty food operation (Trader Joe’s), warehouse club (Costco), web-based (Amazon.com), and multichannel apparel and accessories (Nordstrom and L.L.Bean). They also vary greatly in size (from $400 million in annual revenues for Stew Leonard’s to over $70 billion for Costco) and ownership organization. (Stew Leonard’s, Wegmans, Trader Joe’s, and Aldi are privately held, and Publix is an ESOP.)

As with the selection of the firms for inclusion as benchmark retailers, I did not start out with any perceived conclusions of common retail strategies. Instead, I began to research each company’s strategies using data from annual reports (where available, as four firms are privately held), industry analyses, and articles in financial and business publications.

Despite the disparity in industry, size, and ownership format, these 10 benchmark retailers shared common strategies relating to operating at low cost (see Chapter 2, “Low-Cost Strategies I: Key Elements of a Low-Cost Provider Strategy”), providing consumers with a carefully edited selection of products (as examined in Chapter 3, “Low-Cost Strategies II: Delivering Low Costs Through Minimizing Product Proliferation”), stressing the importance of human resource management (see Chapter 4, “Differentiation Strategies I: Effective Human Resource Strategies”), focusing on consumers’ service experience (see Chapter 5, “Differentiation Strategies II: Enhancing the Service Experience”), and having an aggressive private label strategy (as discussed in Chapter 6, “Differentiation Strategies III: Developing and Maintaining a Strong Private Label Program”).

The strategies discussed in this book mirror Porter’s low-cost differentiation model that argues that a retailer’s competitively defensible position needs to be based on either of these extremes. A value orientation combines elements of each of these strategies. Chapters 2 and 3 focus on low-cost strategies, and Chapters 4, 5, and 6 describe differentiation strategies. Another integrating model that explains the success of many of these retailers is the value profit chain model. This model suggests that employee satisfaction and loyalty translates into high levels of customer service and customer loyalty, and ultimately to high profits.

I have written this book with a managerial orientation. It is in an easy-to-read decision-making format. When academic studies are often cited, they are used to document my discussion. With my academic orientation, I have heavily footnoted this book. I have also taken great care in updating all data to the most current available, as of the date of publication. To verify the accuracy of my comments, I gave executives at each of the 10 firms the opportunity to review applicable portions of the manuscript. I received responses from six firms; these comments were incorporated into the final manuscript.

Chapter 7, “Implementing Cost-, Differentiation-, and Value-Based Retail Strategies,” focuses on implementing cost-, differentiation-, and value-based strategies, as the title suggests. This chapter contains a number of figures designed to help retail managers and owners more effectively utilize the principles discussed in earlier chapters.

Who Can Benefit from Reading Competing in Tough Times: Business Lessons from L.L.Bean, Trader Joe’s, Costco, and Other World-Class Retailers?

I have aimed this book at a wide audience that includes middle to top managers at a wide variety of retailers, owners of independent retail establishments (including chains), supply chain partners who need to have a better understanding of retail practices, industry consultants, and undergraduate and graduate students with a special interest in retailing.

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