A couple of weeks ago a friend of mine asked me, “So what is a Retail Winner, exactly? And how did RSR come up with the term? “ On the one hand, I was kind of surprised to get the question — it’s kind of a cornerstone of our benchmark reports and anyone who has read a report of ours will know the term is used heavily. It’s also defined in the Overview section, though I’ll be the first to admit that the definition there is fairly boilerplate, and we keep it short in an effort to get quickly to the meat – the survey questions and analysis.

So what is a Retail Winner? At the most basic level, we define Retail Winners as retailers who outperform Wall Street’s expectations for year over year comparative store sales growth, which is usually around inflation. In other words, if you’re not growing faster than inflation, then you’re not growing.

But this definition is not without controversy — and in fact, the issues we have with it represent some of the big changes that are happening in the industry. For example, what does it mean to look at year-over-year store comparable sales? Well, if online sales are growing through the roof but store sales are flat, does that mean the retailer isn’t a Winner? Maybe not! In fact, we’re seeing more and more where retailers are combining online sales and reporting it as part of their comparable store sales. And we’re starting to see situations where retailers are sub-leasing floor space to complementary retailers, not as store-within-a-store but as wholly separate stores with their own entrances, so reduce the floor space in their stores as online takes up more sales.

When customers are shopping across channels, it gets harder and harder to look at just one channel’s sales as the basis for comparison. We’re trying to loosen up that requirement over time, while still being careful not to let a retailer measure something like unchecked new store growth as real growth. Unfortunately, Wall Street still looks at performance as comp store sales growth, and as that kind of focus tends to drives a lot of executive behavior, we continue to look at it that way too – but always with an eye towards the continued evolution of the measure.

But why look at Winners at all? We chose to focus on overall Retail Winners (instead of someone who is best in class at one particular thing) because we feel that success has to be a whole-company thing. It doesn’t matter if you’re the best retailer at one thing — you have to be the best at everything in order to succeed. Or, to look at it another way, it’s hard to take advice from a retailer that may be the best at say, processing invoices or planning inbound receipts or scheduling workers — if that same company is going down in flames because it’s not selling anything.

However, there’s another reason to look at Retail Winners, and it’s something that we discovered over time. Every report and every year, we find some basic tenets about Retail Winners reinforced. The most fundamental tenet is that Winning is not just an outcome – Winners don’t just sell more stuff and that leads to Winning. It’s a state of mind and a set of behaviors, and it is recognizably different behavior than we find from their peers. Over the years we’ve found that:

1. Retail Winners have different priorities when it comes to business strategies and perceived opportunities. They are much more likely than their peers to place bigger priorities on anything that impacts the customer experience. The customer is central to Retail Winners. They don’t have customer programs, they have a customer culture.
2. Retail Winners understand the difference between means and ends, when it comes to business success. While their peers focus on driving sales or improving the bottom line, Winners are much more likely to focus on the things that will yield sales or efficiency improvements – they recognize that sales is an outcome, not a strategy.
3. Retail Winners focus on process first, and technology second. They are not necessarily the leading edge of technology adoption. But that doesn’t mean they aren’t thinking about the benefits they could gain from technology investments. They are just more likely to delay that kind of investment until they understand the process changes that are required to capture the benefits of the investment. Their peers tend to dive into new technologies sooner, ironically enough, because they tend to view technology investments as a way to force process change (which is piling a lot of risk onto a technology investment).
4. Retail Winners want more metrics. They tend to value different ways of measuring the business much more highly across the board. They want data – and even more importantly, they want insights about what’s working and what’s not. Their peers also want data, but back to point #2 above, they tend to focus only on the measures that match up to their top-level goals, like sales and profit. Yes, these are important measures, but if you can’t break them down into the different levers that impact each of these measures, then you have little control over how to improve those measures. Winners tend to recognize this issue much more so than their peers.

These are but a few of the generalizations we’ve made as we’ve worked with Winners vs. peers over time. But back to the original questions: What is a Winner, and why do you look at them over other types of segmentations?

Generally speaking, Winners win. They do a better job of incorporating change and the technology that supports change. Most importantly, they focus on the customer and on solving the lifestyle wants and needs of their customers. That’s not about selling stuff — selling more stuff is just the outcome.