Customer Service Is Back in Style

As retailers gear up for the holiday rush, many are discovering that shopper satisfaction equals higher sales

by Pallavi Gogoi

"Hi, how can I help you?" For years, that was the hallmark of customer service for many retailers.

Zip ahead to Black Friday, 2006 (see BusinessWeek.com, 11/2/06, "Forecast: A Very Happy Consumer Holiday"). Customer service is in the midst of a transformation across the retail landscape, becoming a more focused, strategic weapon in the competitive arsenal for a variety of retailers. Retailers angle for better customer service in several ways: signing up trendy designers, finding products to appeal to their specific customers, and listening more carefully. The result? They're seeing the payoff in their profits.

At office-supply retailer Staples (SPLS), for instance, the old "Can I help you?" is out, replaced with: "What can I help you find today?" "We then walk a customer to a product and might use that opportunity to cross-sell other items," says Shira Goodman, Staples' executive vice-president of marketing. She notes that Staples' customer-satisfaction metrics increased by 5 percentage points after employee training was focused. In the same spirit, Home Depot (HD), the nation's largest home-improvement chain, has set aside $30 million in a program to grant store workers bonuses based on internal customer-service scores. Upscale department store Nordstrom (JWN) has seen its bottom line increase 10% in its most recent quarter, helped by offering the clothing styles that women said they wanted.

In a way, it's a return to the customer for many companies. After years of struggling to digest all the unknowns of online commerce, the complexities of global supply chains, and the ferocity of far-flung competition, many retailers have finally gotten to a point where the shopper is again the prime focus. Retailers seek to gather more data and understand spending habits. For example, a frequent Target (TGT) customer may also shop at Nordstrom, but J.C. Penney (JCP) sees plenty of Target shoppers, too. So while both may like Target, the customer's choice of department store points to marked differences as a consumer—precise preferences many large retailers now seek to analyze, understand, and translate to greater sales.

Lack of Service Is a Turn-Off

The other factor has been the 800-pound gorilla of retailing, Wal-Mart Stores (WMT). The company has been widely admired for its ruthless focus on operations, squeezing each penny of waste from its supply and distribution networks. Everyone wanted to emulate Wal-Mart's efficiencies—the way it stocked its aisles with just the right amount of goods, its logistics management, and its efficient relationships with merchants.

Yet amid all that retailing success, customer service was lost. "Logistics improvements need heavy investments, and customer service fell by the wayside," says Eric Nelsen, a director at Mercer Management Consulting. In a survey last year by the Pew Research Center for the People & the Press, poor customer service topped the list of what people disliked about Wal-Mart.