The purpose of this paper is to identify several companies that have demonstrated strategic thinking about issues that are similar to those faced by Gottschalks.
One of successful examples of using innovative retailing strategies is Abercombie & Fitch. In 2004, the company opened several new concept stores under the name of Ruehl No.925; they are very different from other stores run by the company. Apart from Ruehl, it sells apparel under three other concepts, namely Abercrombie & Fitch, Abercrombie, and Hollister (Mulugetta, 2007).
Ruehl was initially based in Paramus, N.J. (Ralph.fm, 2006). Yet Ruehl’s concept quickly proved to be a success in other locations like San Diego, Canoga Park and San Francisco, California; Novi, Michigan; Paramus, New Jersey; Tampa and Aventura, Florida; Columbus, Ohio; Schaumburg and Oak Brook, Illinois; McLean, Virginia; Honolulu, Hawaii; Dallas and Austin, Texas; Las Vegas, Nevada; Natick, Massachusetts; and Freehold, New Jersey (Ruel No.925, 2007).
At first, company management envisioned that Ruehl’s market selection will be mostly driven by geographical considerations, i.e. success of the concept was predicted in such areas as New York, San Francisco or other northern California markets (Scardino, 2004). However, the concept, namely a metropolitan setting, appears to be appealing to a wider segment of the population.
In the case of Ruehl, Abercombie & Fitch uses a differentiated marketing strategy. Generally, Abercombie & Fitch’s stores are characterized by the bright lights, loud music, and large graphics. However, Ruehl is very different from the usual marketing approach the company relies on. It is a concept-store inspired by the lifestyle appropriate to the German family of the Ruehls (International Council of Shopping Centers, 2004). The store caters to a clearly defined segment of the population, namely persons in the early stages of their careers who can afford better quality but still prefer youth style (Bhatnagar, 2004). These are the clear signs of a differentiated marketing strategy: while Abercombie & Fitch offers a standardized selection of products in stores that share the same style, Ruehl is a store with a different exterior and interior design that sells a different set of products at a higher price.
Furthermore, Ruehl’s choice of a target market should be regarded as an effective one. With regard to consumer attitudes toward shopping, customers from metropolitan areas often enjoy the very process of shopping. Therefore, design of a store plays a role in customer decision process. Furthermore, class consciousness can be another factor contributing to Ruehl’s success. Young people at the early stages of their career pay excessive attention to the brand, quality, and look of clothes they purchase. In addition, lifestyle factors come into play: target customers prefer comfort and youthful look combined with high quality and respected brand.
Ruehl is successful at reducing customer’s cognitive dissonance, i.e. post-purchase consumer doubt about utility of a purchase. Since products sold in Ruehl are fairly expensive (a cashmere sweater costs $160 and some purses cost more than $900), the company provides customers with two basic elements that can help reduce shopper’s cognitive dissonance, namely realistic sales presentations and customer after-care. Realistic sales presentations in the Ruehl’s case include supplying customers with full and honest information about the materials of which clothes is made, place and method of manufacture, and other pertinent information. While clothing stores rarely engage in customer after-care, Ruehl has gained a competitive edge over its competitors by doing so. Their money back guarantee is an effective way of providing quality customer after-care. Customer satisfaction surveys serve the dual purpose of expressing concern for the shopper and gathering valuable marketing information with a view to further improving Ruehl’s services.
The example of Ruehl has important implications for Gottschalks. The first strategy employed by Abercombie & Fitch is differentiated marketing. Gottschalks also needs to take into account demographic, behavioral and psychographic variables of its target consumers. Since the company operates in six different states, namely California, Washington, Alaska, Oregon, Nevada, and Idaho, consumer attitudes and behavior vary greatly from state to state. Satisfying customer expectations implies collecting and analyzing all the relevant background data on target customers.
Another strategy that might benefit Gottschalks is associated with the way Ruehl employs to enhance customer shopping experience. Attractive store design and special atmosphere lure shoppers; qualified and well-trained shopping assistants increase customer loyalty. Using different design in different stores across country is also a possibility to consider.
Gottschalks should also borrow Ruehl’s strategy of customer after-care. While post-purchase cognitive dissonance is less of an issue with cheaper products offered by Gottschalks, money-back guarantee and post-purchase surveys are effective strategies for any company in the retailing industry.
Another example from retail industry is the success of customer loyalty program implemented by Big Brands Foods, Inc. The company introduced Bonus Card program instead of coupons it used previously. This initiative allowed the company to compile a database of customer information (name, telephone number, and street address) and customer preferences (a list of specific items purchased). The company used information obtained with the help of Bonus Card program to study customer preferences and purchasing patterns. This provided a perfect opportunity for more targeted marketing. For instance, range of sales to customers with specific preferences was increased by mailing them advertising booklets. Customers that did shopping at a specific time had their own particular profile; the company used information about them to modify the way store stocked and displayed the items preferred by those customers. Another criterion of success is the issue of customer loyalty. Bonus Card is very simple to use, and people have an opportunity to buy products with multiple discounts. The only problem with Bonus Card problem is the issue of confidentiality: private information can be leaked to third parties. But the contemporary information storage systems can ensure the safety of information. However, careful and integral knowledge management system has to be in place (International Engineering Consortium, 2007).
Gottschalks should also introduce an effective customer loyalty program. Bonus cards, discounts, and direct mail should be a part of such marketing effort. The potential of an effective customer loyalty program is hard to overestimate: together with increased number of permanent customers and higher sales, such an initiative opens new marketing possibilities on the basis of collected information.
Bhatnagar, Parija. (August 27, 2004). ‘Abercrombie looking to ‘Ruehl’.’ Retrieved October 25, 2007, from http://money.cnn.com/2004/08/26/news/midcaps/abercrombie_ruehl
International Council of Shopping Centers. (2004). ‘Abercrombie rolls out Ruehl concept.’ Retrieved October 25, 2007, from http://www.icsc.org/srch/front/200409091663.htm
International Engineering Consortium. (2007). ‘Knowledge Management for the Telecommunications Industry.’ Retrieved October 25, 2007, from http://www.iec.org/pubs/pub.asp?pid=45&bsi=1&cat=cont
Mulugetta, Retta. (January 08, 2007). ‘Abercrombie & Fitch: Solid Domestic Performance, Strong International Growth Opportunity.’ Retrieved October 25, 2007, from http://seekingalpha.com/article/23622-abercrombie-fitch-solid-domestic-performance-strong-international-growth-opportunity
Ralph.fm. (December 5, 2006). ‘The 5th concept of Abercrombie & Fitch.’ Retrieved October 25, 2007, from http://ralph.fm/2006/12/05/the-5th-concept-of-abercrombie-fitch
Ruel No.925. Home Page. Retrieved October 25, 2007, from http://www.ruehl.com/
Scardino, Emily. (September 20, 2004). ‘Ruehl: A&F’s hip new retail concept.’ DSN Retailing Today. Retrieved October 25, 2007, from http://www.accessmylibrary.com/coms2/summary_0286-13504935_ITM