Retailing in the Week Ahead, Week 45

Bernardo Trujillo is often called the ‘Oracle of Retail’.  From 1956 until his retirement in 1965, Mr. Trujillo taught retailers the ‘rules of Modern Merchandising Methods (MMM)’ at NCR’s famous seminars.

His ideas launched global giants, particularly in France. It is often said that France’s most international retail chains would never have developed into global giants without Mr. Trujillo’s training. The early pioneers of international retail chains such as Carrefour, Auchan, Fnac, Darty, Promodes were all big fans of the MMM ways of retailing and the philosophies that Trujillo taught.

His success relied heavily on using simple slogans that could be remembered, especially since he shouted them and repeated them frequently. Some of his students would call them rules of retailing, such as:

  • No Parking, No Business!
  • Poor People Need Low Prices, Rich People Love Them!
  • Create Islands of Loss in Oceans of Profit!
  • The Only Sure Thing is Change!
  • Retail is a Stool with 3 Legs:  Self-service, Discounts, and No-Gimmick Advertising.

When I first became a retail analyst, my mentors told me to learn everything I could, as quickly as I could, including Trujillo’s MMM principles. Nineteen years later I’m still learning.

So, it was with great interest when I saw a piece of analysis published last week that said that Trujillo’s teachings were being ignored by the very chains that he inspired. The review said that a wide variety of startup discounters are expanding across Europe and have done more to connect to Trujillo’s principles than the big established chains. This leads to the question: “What are the rules of retail and when should they be broken?”

The Rules of Retail

No matter what retailer you meet, you will find they have rules. James Corden, the British-born late-night TV host in America recently demonstrated this when he spent a day working at Walmart in the USA. While filming at Walmart, he learned about the 10-foot rule which states that Walmart staff need to smile, make eye contact, greet the customer and offer assistance if the customer comes within 10 feet of their space (That’s within three metres for non-Americans). If you have not watched Corden’s piece on YouTube, it is highly recommended.

Some of the rules are ones that consumers are aware of, such as Bim’s 10 Concepts in Turkey which is posted at every store entrance or IKEA’s philosophy of getting consumers to walk the entire store and spend as much time shopping as possible, which is discovered after the first trip to IKEA. Others are less obvious, such as Walmart’s 10-foot rule or Tesco’s keep the aisles clear policies.

These rules are increasingly having to be rewritten. Just around the corner from Kantar Consulting’s London office you can see this happening. IKEA has opened its first ‘Ikea Planning Store’ on Tottenham Court Road which is an attempt to enter city centres. IKEA states: “This is the first step in the retailer’s revised strategy, which will focus on city centres, enhanced customer services and digitalization.” 

I often wonder whether Bernardo Trujillo would be proud when retailers break their own rules, which had origins in some of his training. This new IKEA breaks several. The first casualty is obviously the “No Parking, No Customers” rule. A second is Trujillo’s view that success relies on three legs to the stool – Self-Service, Discounts, and No-gimmick advertising. The IKEA design store injects a whole lot of service into the equation.

In the end, all retailers have developed rules that got them where they are today. Many of these rules need to be broken to survive the latest disruptions in commerce.

Which Rules Should Be Broken?

The MMM principles of retailing were revolutionary when they were taught by Trujillo. In those days, retailers did not want to invest in parking because that meant buying a lot of land and not adding much value to it. They did not want to invest in promotions or discounts because that was teaching shoppers to always expect a deal. They did not want to simplify services since that was an opportunity to cross-merchandise and upsell a consumer that would be lost in a self-service world.

Today we see some of the same reluctance to adaptation and investment as we did in Trujillo’s day. When talking about building a website with all SKUs on offer, many retailers will decide not to invest as that would allow competitors to see all the retailer’s products and prices. Similarly, when talking about having collection services such as In-Store Click & Collect, Drive/Curbside Pickup, Lockers, and returns desks, retailers are slow to invest since that may reduce in-store traffic levels and create congestion in hot zones.

Just as was in the case in Trujillo’s day, retailers would be wise to go back to the foundations of mass retailing. These foundations make it easy for consumers to see you where they are looking; make it easy for consumers to come to you using the connections they want to use and make it easy for consumers to understand your prices without too many tricks or delays.

Retail is transforming quickly with new paths-to-purchase, but the principles of making consumers happy in a mass-market retail world have not changed, perhaps they’ve become even more important now that any good mobile phone can tell you whether you’re paying too much for something or not.

Here are links to great pieces of work we published on Retail IQ in Week 44:

Please share your thoughts on ‘Breaking the Rules’, or any other topic. Good luck in the week ahead.

Regards,

Ray Gaul – Ray.Gaul@KantarConsulting.com and @KantarConsulting or @RayGaul on Twitter plus LinkedIn.

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