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The value equation

  • Opinion
  • April 9, 2015
  • Juanita Neville-Te Rito
The value equation

It was hardly surprising when the economic downturn resulted in the rise of a more value-conscious shopper. Perhaps a few eyebrows are raising now that, while consumer confidence is on the rise, recession-scarred shoppers are still prioritising value for money. The Neilsen Global Consumer Confidence continues to show the trend of Kiwis over-indexing, however, New Zealanders continue to rank as the most price-conscious shoppers internationally out of a survey of 68 countries.

Value for money entails more than offering a low price. In shoppers’ minds the value proposition takes into consideration relevant promotions, convenience, range curation and availability.

No doubt there are shoppers happy to pay a price premium for trade-offs such as convenience, aka “Saving me time,” or knowledgeable, friendly and efficient service, or other attributes that make up a superior shopping experience.

Retail guru and global MD of the Labstore, Jon Bird, often talks to the true equation of “value = price + quality” from a customer’s perspective as having two components; the benefits received and the price paid. Value increases as benefits are added at the same price point or as price is reduced for the same benefits.

This might be another instance where I am stating the obvious, but many retailers don’t fully appreciate that the “hot buy” price tag is not what customers are buying. Rather it’s a whole host of benefits for a certain price, which discount retailers would do well to take heed of.

Market gossip is all about Mark Powell’s decision to step down as MD of The Warehouse Group and who may or may not be keen to fill those big shoes. His contribution has been very positive, but has enough been done to support the positioning of the Red Shed’s ‘Where everyone gets a bargain’ promise? This should be the lens through which everything filters. But has this been compromised in the quest for acquisitions and group synergies? My recent visits to The Warehouse stores and Kmart make me believe the Red Sheds should be acting on the knowledge that their lens has become blurred.

The cultural shift resulting from the GFC means that, while shoppers accept bargain-hunting, they still need, and expect, to be respected. Value-focused doesn’t mean tired stores, broken stock, unclear navigation, out of stocks or a confusing offer. It does mean being clear and focused and always having an element of surprise, those exclusive, limited offers that add a touch of excitement to a shopping visit, making us want to return again and again.

My recent visit to the new concept Kmart in Australia at Westfield Garden City, Mt Gravatt, Brisbane revealed an excellent execution of a value retailer. Quite honestly I’d rank it behind Target, but given we don’t have a Target in New Zealand, Kmart takes pole position in the race for improved discount retail experiences here.

The new style Kmart, which I understand is the format at both Whangarei and Hamilton, was a work in progress at Auckland’s St Lukes branch when I visited a few days before Easter. But it is shaping up nicely. With high level departmental navigation signage incorporating bright colours it brings a level of modernity and freshness to created zones which are surprising for Kmart. ‘Bed & Bath’ and ‘Home’ both display depth and breadth of product and information; they are on trend and helpful.

I’m not yet a fan of the checkout in the centre of the store. I know it works for retailers such as JB HiFi and even Number One Shoes but it will take a bit of time for me to get used to, and others, judging from online commentary and the comments of shoppers in-store. I want to feel confident that I have covered the entire store without missing out on something and you can’t underestimate the FOMO that kicks in if the racetrack doesn’t make sense.

But the new Kmart ticks in the boxes for lighting in the store (still bright) and especially the use of product to create interesting wall displays demonstrating range and fashion as demonstrated in the men’s department. There is also good use of information to help shoppers select the right product and fit for them.

There are strong price bombs throughout the store to reinforce price. Of course there’s room for improvement but for now Kmart has achieved an excellent balance as a discount retailer and created a fit for purpose environment with inspiring product curation that makes me want to come back.

Kmart have been improving their offer for a while and here are my five reasons why I believe they are on to a good thing:

-        They are focused on selecting only the best products in each category and displaying them extremely well, thereby eliminating the cost and overheads of stocking crap.

-        Exclusive ranges and brands are delivering a power packed punch of on-trend home brand and at dazzling prices.

-        A clear network growth strategy is in place in key geographic locations (case in point, Whangarei), with stores easily accessible, close to other leading retailers but outside the busy shopping centres and with a carpark (St Lukes excluded).

-        Marketing is clever, clear and focused, especially with catalogues which are necessarily functional but with a dose of lean-forward.

-        A strong network of advocates socialise all the good stuff and contribute to a positive image. When the Whangarei store opened, a NZ Herald article reported, “When Lee Howard-Mizsey camped outside the new Kmart store in Whangarei with a chilly bin and foam mattress, she didn’t realise the 14-hour ordeal might inspire the completion of a 1200-word essay or result in her peeing into a bottle… and all for a $5 voucher.” This enthusiastic shopper was quoted as saying “It was a great experience and good fun and I would do it all again!”

Now there’s an advocate if ever I met one.

Kmart is delivering value though more than just price. Staff were friendly, engaged and interested to assist. There are loads of things even the most discount adverse shopper would be excited to pick up and purchase.

There is a simplicity and transparency to the offer; product is on trend and is brilliant value.  Value is a simple concept and Kmart’s ongoing success, especially in New Zealand shows that simplicity sells.

​ ​

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