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How Top Retailers Profit in an Economic Slump

Unique Selling Propositions Drive Profits and Losses

By

Updated July 05, 2008

All successful retailers have identified their Unique Selling Proposition (USP), which is the aspect of their business that makes them different or better than their competitors. Once identified, the USP drives marketing, merchandising, and even the in-store customer experience. But when consumers have a chokehold on their wallets, will USP strategies be enough to loosen a shopper’s grip?

Some retail organizations have actually posted impressive sales figures in a slumping U.S. economy. They are proving that a strong and clear USP will not only help retail businesses survive, it can also help them thrive in any fiscal conditions.

Price Uniqueness – Wal-Mart & Costco

It seems logical that in bad economic times, a “bargain” USP will win out. After tax stimulus refunds were distributed in May, Wal-Mart cashed $350 million worth of those checks for its customers, and got to deposit much of that money into its own bank account. Customers stocked up on low-priced merchandise and Wal-Mart quadrupled its same-store-sales gains over May 2007. Discount club Costco also posted a significant gain at 9%.

When consumers think “bargain,” they think Wal-Mart and Costco. These days, that’s a USP that can’t be beat. Or can it?

Product Uniqueness – Buckle Inc. & Children’s Place

Even with its May success, Wal-Mart’s clothing category sales were down, while Children’s Place and Buckle Inc. clothing sales were up by 10% and 44.1% respectively. Why? Because Buckle Inc. is the “it” store for teens who dress themselves, and Children’s Place is the “it” store for kids who are dressed by their parents.

Even though Wal-Mart has better clothing prices, consumers went for better clothing style. This demonstrates irrefutably that a “Product USP” has power even in a tight economy.

Experience Uniqueness – Staples, NOT Office Depot

While Staples enjoyed just a 1.5% increase in profits in the first quarter of 2008, their competitor, Office Depot, suffered a staggering 55% decrease in profits at the same time. The explanation behind Office Depot’s profit freefall might be complicated from their point of view, but from a customer vantage point, the reasons are simple; everybody sells the same envelopes, and nobody gives a discount on printer ink. But Staples is “easy.” Office Depot is not.

When products and prices are confusingly similar, the retailer that gets more consumer dollars is the one that offers a superior experience. Apparently, a large majority of small business people agree that Staples owns the “Experience USP” for office supply outlets.

Unremarkable Uniqueness – Exxon & Mobil

On June 12, 2008, after a century in the retailing industry, ExxonMobil announced that it is selling all of its retail gas stations and convenience stores because it couldn’t make its retail operations profitable. The ExxonMobil USP failed them because they don’t really have a USP at all.

To consumers, gas is gas and candy bars are candy bars, so there is no Product USP for most gas stations. When you think about bargains, you don’t think about Exxon or Mobil. In fact, after years of record profits, “price” is ExxonMobil’s USP Achilles’ heel.

Is it possible to create an Experience USP in a gas station environment? Yes it is, but apparently ExxonMobil didn’t. So, with no discernible price, product, or experience differentiation, customers had no motivation to choose Exxon or Mobil over the lower-priced competitor on the opposite corner - no USP, no customers, no profits, no more retail stores.

Without Uniqueness, Retail Stores Can’t Compete

ExxonMobil’s retail failure shows the rest of the industry that there is no room for arrogance or complacency in a fast-moving global economy. No brand is invulnerable, and longevity does not guarantee a future. Cutting edge innovations will help U.S. retailers keep pace, and basic strategies like having a USP will help them stay strong.

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