What business are retailers in: selling more stuff or helping people choose their lifestyles?

Patagonia announced a radical idea recently: at the point of purchase they will ask customers if they really, really need that jacket / jumper / pair of shoes. Other retailers may react in disbelief. But it makes me ask: what business are retailers in: selling more stuff or helping people choose their lifestyles?

From the niche and radical shores of retailing comes an intriguing idea. According to a friend, at a recent textile conference in New York Patagonia, the outdoor apparel and gear company, announced they would ask customers  if they really, really needed that jacket / jumper / pair of shoes. For Patagonia this is part of innovating a more sustainable business model, which includes take-back programmes and more (again, according to what my friend heard at the conference).

I mentioned this to one of my retail partners. They went all Yes, Minister. “That’s a very…interesting idea,” they managed, a little shocked.

Of course, Patagonia is a company built on sustainability. Challenging their customers is a natural extension of their brand. It reinforces their difference. Although it may stop a few sales, I’m willing to bet it will drive more loyalty amongst their customer segments – very useful when other companies are trying to steal their green clothes, as it were.

But it did make me wonder: what business are retailers in? This was the question Theodore Levitt asked in 1960 in a Harvard Business Review article called Marketing Myopia (requires subscription).  Famously, he gave the example of the railroads:

The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented

The more pertinent example is Henry Ford:

We think he was able to cut his selling price and therefore sell millions of $500 cars because his invention of the assembly line had reduced the costs. Actually, he invented the assembly line because he had concluded that at $500 he could sell millions of cars. Mass production was the result, not the cause, of his low prices.

And the prescription is precise, and very relevant to Patagonia’s position (emphasis added):

The entire corporation must be viewed as a customer-creating and customer-satisfying organism. Management must think of itself not as producing products but as providing customer-creating value satisfactions.

There’s lots of evidence that simply having more stuff doesn’t make you more happy. At some level, many of us know this. Seen in this light, Patagonia is providing a service: helping the customer make better lifestyle choices. Sometimes those choices are about not buying an extra pair of shoes, but feeling good about it – and then felling good about Patagonia.

What about other retailers? Often their profit formula is all about volume and velocity: sell as much as possible as quickly as possible. They think they are in the business of selling more stuff.

Does that meet Levitt’s prescription of creating and satisfying customers? It has done, and almost certainly will do in emerging markets. But, in more mature economies where the already-rich (by global standards) have more stuff than they need? Retailers profit formulae just create consumers who believe they will be satisfied by consuming more, but are then disappointed.

What if retailers redefined the business they are in as helping customers choose their lifestyles, or something? They could provide customer-creating value satisfactions by making the ‘good life’ easy, fashionable, affordable and desirable. If that sounds like pie in the sky, read this quote of recent interview with Sir Terry Leahy, the outgoing Tesco CEO and retailer par excellence:

“The one thing I have come to understand is that people have this universal desire for a better life, and you are not going to stop that. The only chance we have got is to let people fulfil that desire, but in a sustainable way… You have got to work with the grain of human nature…We must make green easy, fashionable, affordable and desirable.”

Tesco and Patagonia together on the radical shores of retailing? Don’t hold your breath, but don’t be surprised either.

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