Are you wondering how to gain market share in retail and build a successful retail empire? Marvin Ellison, CEO of Lowe’s, explains: “It starts with retail fundamentals first. As the old saying goes: you can’t put the icing before the cake.” He admitted the company has been “serving a lot of icing lately,” but has vowed to scale back on Lowe’s vision to focus on getting the small steps right before tackling innovation. After that, it’s about “taking market share,” he says, and planting more of a stake in an industry that holds $700 billion worth of opportunity.
Once companies have the fundamentals down, it’s time to rise in prominence. Market Analyst Simeon Gutman explains the success of powerful brands like Walmart and Best Buy: “Hallmarks include making investments in stores and online; optimizing the supply chain for omnichannel retailing; working closely with vendors and reinvesting savings in price; and creating competencies to make processes more efficient and remove unnecessary expenses from the system.”
Turning competitors’ customers into your own isn’t always easy, especially when targeting customers of rivaling well-loved household names like Apple, Louis Vuitton, Nike, Amazon, or Starbucks. However, there are many strategic ways to gain retail market share, including the acquisition of a competitor, formation of a partnership, or launch of a direct-to-consumer extension of the business.
Why Market Share Matters
To the naked eye, a handful of percentage points in market share doesn’t seem like it would create much of an impact, but when translated to real world dollars and cents, the effects are monumental. Consider the example of Pencil World, a company that single-handedly accounted for $25 million of the $100 million in pencils sold in 2013. The following year, they lost 5% of their market share to the competition, which ended up translating to a loss of $5.5 million!
On the other hand, once a brand has sliced off a significant piece of the pie, brand value increases, allowing the company to charge up to 14% more—and people will pay it.
Market share doesn’t only possess monetary value, but also brand value and reputation. The companies with the greatest market share tend to hold strong as the leading giants of retail.
Companies that make a conscious effort to grow market share see faster revenue growth than competitors, allowing them to make strategic investments, scale operations, develop new products, and improve profitability for years to come.
How to Gain Market Share in Retail in Three Steps
1. Invest in Innovation That Will Hold Customers’ Interest.
There’s a reason why Sony PlayStation owns 68% of the gaming console market and competitors like Atari and SEGA failed—innovation. While core design elements like the logo and base system functionality have remained the same, the platform has been upgraded, revamped, and leveled-up numerous times to meet consumer preferences and expectations. Wireless joypads, extended battery life, smaller power buttons, faster performance, expanded storage space, and digital downloads are just a few of the improvements made over the years.
Innovation can be accomplished in a number of ways:
- Gaining insights from consumer data: In order to invest wisely, it’s crucial to have the right digital tools in place to collect data, actively listen to consumers, incorporate actionable change based on feedback, and activate key insights. The right analytics program can generate a 7x increase in ROI, according to Nielsen.
- Attending key events: Inspiration comes in many forms. Hearing how other corporate executives are putting best practices into action can be highly transformative, no matter what niche a retailer fulfills. Industry trade shows, conferences, and seminars are a great way to keep a pulse on what’s exciting, new, and trending within the retail industry.
- Encouraging innovation from within: Company employees, business partners, network contacts, vendors, and suppliers can all make valuable contributions to the creative process. Retailers can set up internal suggestion boxes, offering cash incentive bonuses for the best ideas, and also hold small group workshops to brainstorm. Actively searching for innovation in new hires and celebrating individual employee successes will help create a workplace brimming with potential.
- Increasing omnichannel shopping capabilities: Digital retail isn’t directly competing with its brick-and-mortar counterparts; most shoppers prefer a combination of channels. In order to maintain considerable market share, businesses will need to allocate their limited resources effectively. This may mean enabling Buy Online Pickup In Store (BOPIS), launching a direct-to-consumer subscription business model, introducing same-day shipping, or making use of a mobile shopping app.
- Investing in technology to improve operations: There are many approaches to innovation; having the best product isn’t the only method. Operational innovation to boost productivity, cut costs, decrease employee turnover, and improve core efficiencies in manufacturing or distribution are just as relevant to a retailer’s success. Poor inventory management alone can chip away 3-5% of a retailer’s margin.
2. Expand to New Target Audiences.
Retailers may open a store in a new city, launch a new product that appeals to Gen Z buyers, adjust pricing to appeal to budget-conscious consumers, or create a landing page that addresses a particular subset of shoppers. Other ways to target new audiences include:
- Developing more detailed, distinct personas: The types of shoppers that gravitate toward a particular retailer may evolve over time. Every landing page or article published should align with a distinct persona and set of needs that are current. Surveying existing customers can help reveal demographics, motives, and pain points. Robust customer relationship management (CRM) software can also help yield insights into common consumer trends.
- Tailoring messaging and communication channels: Retailers needn’t always reinvent the wheel to appeal to a new consumer segment. For instance, when Vera Bradley wanted to expand from the baby boomer market into a younger demographic, it was a matter of tapping into the power of social media and mobile marketing with helpful “how-to” videos. The brand listened to and took note of what younger buyers wanted, such as bags with built-in smartphone chargers and stores that act as community hubs.
- Fine-tuning digital advertising: Tools like HubSpot, Marketo, Hatchbuck, Google Analytics, and Facebook Insights have the power to drastically improve the reach of digital ads within six months. A/B testing to identify the optimal wording and imagery is a cost-effective way to double down on what’s working and tweak what isn’t.
- Testing the waters with a pop-up shop: As the saying goes, “Location is everything.” But which location should a retailer choose? Pop-up shops offer an affordable way to test out a new market, such as experimenting with new products, locations, and the surrounding landscape of commercial businesses, without getting locked into a long-term lease or wasting valuable shelf space on an untested item. The experiential nature and small-shop format allows brand ambassadors to actively engage shoppers and derive valuable feedback.
3. Leverage Partnerships to Increase Customer Loyalty.
Brand partnerships offer the unique proposition to piggyback off each other’s success, allowing for the expansion into segments and markets that may have previously seemed unattainable. Customers delight in new, novel experiences and benefits, which is key to driving customer loyalty and brand affinity. In some cases, a partner can step in to fill gaps in service, product variety, or messaging, allowing for swift growth without the need for multi-asset investments.
Brand partnerships not only increase market penetration, but provide access to a larger data set, offering a glimpse into the demographics, interests, and shopping habits of an expanded audience.
Below are some key examples of successful brand partnerships:
- Macy’s launched in-store retail concept “Story” in 2018 to dabble in experiential retail and brand partnerships. One such partnership included curated items from Dick’s Sporting Goods and Miracle-Gro in an outdoor-themed Story display, giving shoppers the opportunity to browse seasonal home goods, furniture, and sports equipment in a unique space. Exact figures on the collaboration’s success are difficult to come by, but Dick’s CEO Ed Stack has said sales from its private-label brands offered through Macy’s saw a 14% year-over-year increase.
- As Kroger’s digital sales grew 42%, they began offering pickups at Walgreens locations and debuted a new branded section within the drug stores known as “Kroger Express.” The competitive partnership dominated the market, leading to a 39% acquisition of the local grocer/drug store market, which then ushered in an expansion of the campaign from 13 to 35 locations a year later.
- Adidas’ partnership with Parley Ocean Plastic to make shoes out of recyclable waste was reported to generate over $1 billion. Following the partnership, Adidas saw double-digit growth and has been giving Nike a run for their money ever since, while boosting brand reputation. In fact, they plan to partner with Parley Ocean Plastic on launching a new line of eco-conscious fabrics.
- Kellogg’s wanted to increase market share in Target stores during the busy back-to-school season, so they partnered with Shopkick, a popular mobile shopping platform that rewards points (“kicks”) to shoppers who engage with their brand. With Shopkick’s help, the cereal-maker engaged shoppers with in-app content (like custom promotional videos and lookbooks), as well as incentivized in-store actions (like scanning products and purchasing certain items). When shoppers engaged with the brand, they received kicks that could be redeemed for a wide selection of digital gift cards, featuring popular brands like Amazon, eBay, Sephora, and Walmart. The end result was an 82% increase in unplanned sales, a 47% lift in future intent, and 28% of market share stolen from competitors.