Service not price wars key to competing against Wal-Mart

Aki Kalliatakis

They usually come off second best but those who respond by creating improved customer service experiences - albeit at higher prices - have thrived. Service wars are on the way. Delighting your customers will not merely be the nice thing to do; it will be the only thing to do if you expect to take establish your own unique niche.

The combined group in South Africa already has a head start on competitors. Massmart sales rose 15% and earnings moved 21.1% higher during its first six months as a subsidiary of Wal-Mart. Customers voted with their feet even without final merger approval.

Various interest groups have muddied the waters and misread the long-term implications of the group's entry into Africa. The ANC government, COSATU, retailers and suppliers have had their say, while commentators have highlighted the likely price-cutting. Now it is time for consumers to have their say.

The critical areas are the customer experience and customer expectations once the group redefines what shoppers can expect in terms of service, ambience and facilities not only price and value.

Drawing on a 22-year database of key drivers of customer expectations in local and international markets it is important to note that the international group does not pretend to be the best place to shop. Its typical store is functional, not beautiful. Cardboard boxes with products fill the aisles so customers do not need to cover the cost of an employee hired to pack individual items onto shelves.

Service is minimal, but not disappointing. You will not need to queue for a long time to pay for your goods and there is always ample parking. Its slogan, 'Save money. Live better', describes its mission perfectly.

When the 450-pound gorilla that dominates the retail turf, uses price as its weapon of choice, the response that makes most sense is to hit back with exceptional customer service. Any service-led counterattack will not only affect Wal-Mart, but all other retailers. There will be a scramble for the service excellence high ground, which is good news for consumers and for our retail industry.