now that I am no expert and I’m learning about customer centricity as much as anyone else. I’d like to start off by saying something that might be somewhat controversial. At Super Retail Group, the customer doesn’t come first. That might sound like it flies in the face of what customer centricity is meant to be about. But what I’ve just said really does go to the heart of how we at Super Retail Group think about, and try to be, customer centric. We have a philosophy that the results we achieve – our sales, our profit, our cash flow, our share price – only come from engaging our customers with solutions and experiences that meet or exceed their expectations. We are only able to engage our customers with those solutions and experiences if we develop the organisational capabilities that are required – our stores, our websites, our ranges, our marketing, our supply chain and so on. But, as we all know, capabilities are a combination of processes, systems and people – and it is people that are the key ingredient. The quality of the team members we attract, the culture we build and the leadership we exhibit are all critical in building the engagement of our team members. This is the foundation for everything we do as an organisation. So when it comes to priorities, our team members come first. How can we expect to engage our customers unless we engage our team first? Increase sales, reduce staff turnover I’ve been very fortunate to be the CEO of Super Retail Group for the last 10 years and during that time there has been much for us to be proud of. We have grown group sales, profit and share price by a factor of five times. However, the outcomes that give me the most pride are our performance in reducing team member turnover and increasing team member engagement. In 2006, annual turnover of our team members including all casuals stood at 41 per cent. This is now down to 24 per cent. We started measuring team member engagement in 2011 and we had a score of 60 per cent, which compared to the retail industry average of 55 per cent. Over the last five years we have increased this to 71 per cent, which puts us in the top quartile of all companies. However, we need to do better and our target is to get to over 75 per cent. So is this all just fluffy HR nonsense? To me there are compelling pieces of evidence. We can clearly see that as a rule, those stores that have the highest level of team engagement achieve the highest net promoter scores, and those stores with the highest team engagement achieve the best sales results, the best cost results and the best loss results. Rebel Acquisition One of my favourite stories relates back to the acquisition of the Rebel Group in 2011. We bought the business from a private equity firm and as you can imagine they were very focused on the financial performance and the margin potential of the business. We were looking at the business through different lenses – we saw a business with a great brand but a customer experience that was disappointing. The stores were tired, the stock was aged and the team was disengaged. The engagement score was 43 per cent (as a reminder the retail industry average is 55 per cent). So when we sat down to negotiating a price to buy the business we outlined the investment we would need to make to get the business firing. Store refurbs, new products and team engagement. I can always remember the reaction from the private equity firm. They understood the investment in stores and products, but the response on engagement will stick with me for a long time – “Since when has employee engagement got anything to do with company value?” Well I can say with absolute certainty that engagement has got everything to do with value. At the time we bought Rebel, the business had delivered like-for-like sales declines of 3 per cent per annum for the previous three years. Customers were telling us that service was poor, there were never enough team members available. So what’s happened in the four-and-a-half years since? First thing is customers started saying that service was better and that there were more team members available. Well, you know, there wasn’t. It’s just that the whole team were more engaged and motivated. Without doubt the store refurbishments, great new products and strong marketing have all played their part but the business has now averaged 6 per cent like-for-like growth per annum since the acquisition – a huge turnaround. Team member engagement has lifted from 43 per cent to 68 per cent, which our engagement consultants Aon Hewitt tell us is a remarkable increase over a four-year period. Competitive difference So having hopefully explained why we see team engagement and team centricity as the starting point for customer centricity, let’s now talk about why we see customer centricity as so critical. We all know that the retail environment is going through massive change. We are seeing more and more global competitors coming into our markets, we are seeing the impact of digital disruption, we are seeing more informed and demanding customers. The balance of power between retailers and customers has changed. No longer can we invite the customers into our stores with the promise of an unmatched product range at unbeatable prices. Now we must earn the right to be invited by our customer to fulfil one of their needs how, when and where it best suits them and unless we can do this well, our customers have plenty of other choices. Retailers need to decide how they will position themselves in this new world. The opportunity is there to win on product and price but only if you have the scale and cost structures to do so. Although product and price has been our heritage, at Super Retail Group we have recognised that we will not be successful in the long term if we continue to try and win on product and price alone. We are in the fortunate position that our customers are passionate about the product categories we retail. Whether it’s a customer who is proud of their classic Commodore or an avid follower of V8 Supercars, the guy who can’t wait to get out and catch his next ‘barra’, the family who love nothing better than getting out hiking through the bush or going to watch their favourite footy team, or the young mum getting out to her weekly Pilates class. Our opportunity is to connect with our customers around their passions and to inspire them with the experiences and solutions we provide. We must no longer see the interaction with our customers as a transaction, but as part of a long-term relationship. We need to understand our customers and predict their needs and wants. We recognise that a key foundation of this strategy is to make a cultural shift from being product centric to customer centric. What do we mean by this? Like many retailers our systems have been built around analysing store and product performance. We can easily tell the sales performance of each product in each store. When we look at the way we have historically built our budgets or assess our performance as a business we have lots of discussions about our categories and products. When we think about our promotional campaigns, they have largely been built up from a product perspective. It has been much harder for us to analyse our business through the lens of the customer so we have to invest in systems that allow us to do this more effectively. This leads to interesting debates: Is a store that is over achieving its sales and profit budgets but delivering lower than expected net promoter scores a better performer than a store that is achieving higher net promoter scores but missing its sales and profit budget? Of course over time, there needs to be an alignment between NPS and sales and profit outcomes, but this isn’t the case over the short term and how we react to these situations can be a test of how customer centric we really are. We have also recognised that the customer has not been central to our historical decision making – so we are trying to introduce a question into all of our business discussions. How will what we are proposing impact our customers? It is amazing how impactful this question can be in influencing a discussion. We have needed to look at the discussions that our leaders were having with our store teams when we visit stores. Our historical approach was at the end of the store visit to give the store a mark out of ten. This was based on store appearance and standards. Was this setting a tone of customer centricity? Today discussions about team safety, engagement and the customer experience are the most important aspects of any visit to our stores. So, how do we see the customer experience evolving? In the past, when customers asked for help most of the time they asked our team members where they could find a certain product in the store. An historical answer may have been to tell the customer that the product is in aisle four and to point the way. Today, the approach would hopefully be that the team member would walk the customer to the product and engage in conversation. We see the big opportunity being around the type of conversation that we have. Take the example of a customer coming into store looking to buy a fishing rod. A typical approach may be to take the customers through the various features and benefits of different rods around the customer’s price expectations. But why is the customer coming to us to buy a fishing rod – are they looking to put that rod on display in their living room? Of course not – the reason they are looking to buy a fishing rod is that they want to catch a fish. This has to be the basis of the conversation that we have with our customers – how much more engaging is a conversation around the best locations to catch that fish, talking about all the different types of gear that can make the fishing trip more enjoyable. How much better is it when the team member can share their own passion and their own experiences with the customer – just like having a conversation with a trusted mate. We have changed the focus from selling a fishing rod to helping the customer catch a fish. This to us is being customer centric. Future Insights So how do we see our retail model evolving as we look to develop a successful customer-centric business? There are five areas that I would like to consider: customer insight, store experience, services, digital engagement as well as team capability and engagement. Let’s start with customer insight. Like most retailers we have huge amounts of data – we have over one million active members in each of our Supercheap Auto, BCF and Rebel loyalty programs. We need to better use this data to understand who our most valuable customers are and treat them accordingly. We have customers who spend over $10,000 a year with us – if we disappoint one of those customers we need to be on it straight away. We need to augment our own transaction data with timely customer feedback and we need to action it. We need to continually monitor how our customers perceive our offer. Better insight will lead to the development of better offers and more relevant and targeted marketing. It will be raw material used in all key business decisions. Without understanding our customers how can we be customer centric. The second area is store experience. We have a commitment to store refurbishment across all of our group brands – we have paid the price in the past with underperformance from stores that look tired and dated. Customers are demanding and expect a vibrant and contemporary retail experience. We have found that where we make an investment, we are rewarded with uplift in NPS and sales. The third area is services. Customers no longer want products they want solutions. Supercheap Auto has been providing product fitment for a number of years. Customers don’t just want to buy windscreen wipers, bulbs or batteries, they want us to fit them for them and we now do over 6,000 product fitments a week. We see the extension of our service offering as a key opportunity for future growth. We have started to build relationships with third-party service providers as we recognise that we need to be more flexible in the way we operate. We have an opportunity to partner with these service providers so that we focus on what we are good at and they bring their capabilities to provide extended solutions for our customers. An existing aspect of the new digital world is that we can connect our customers with these service providers digitally. So that takes us to the fourth area of digital. We are very excited about the opportunity that digital provides. We see our relationship with our customers moving to a whole new level as we use digital to develop social communities who share similar leisure passions, such that they share their own knowledge and experience and get access to information, services and products that we provide. We are investing in start-up digital businesses such as Fixed Price Car Service and You Camp as part of this push. Fixed Price Car Service is a booking and comparison site targeting customers with vehicles that are five to 10 years old that are searching for a mechanic to service their cars. We are recognising that our traditional Supercheap Auto customer is no longer doing it for themselves but looking for others to do it for them. We want to remain relevant to that customer and will do so by finding the do-it-for-me solution for them. You Camp is like an Airbnb for camping. It connects our customers looking for personal camping experiences with private land holders across Australia. It will be the platform for a community of You Campers and we can extend this to areas like fishing, boating, caravanning and so on. We are about to trial Share My Ute, Share My Trailer to again provide more solutions for our customers. This brings me to the final and probably the most important area – team capability and engagement, which also brings me back to where I started. The key to engaging our customers is to first engage our team. Even in today’s digital world, retail is a people business. The majority of interaction that our customers will have with our businesses will always be with our people. We are social animals and enjoy interacting with others, particularly when they share our passions and interests. It is our people that will deliver our strategy, it is our people that will engage our customers. As leaders, our primary focus has to be on engaging our team to deliver a clear and focused strategy. To wrap up, an ambition to be customer centric has to have an intrinsic link to the company strategy for it to be really successful. Secondly, a move to customer centricity is not about new processes or new systems. It is a fundamental cultural change that every part of the organisation needs to embrace. For Super Retail Group, unless we fully embrace customer centricity, we will not succeed in delivering our strategy – it is that critical. But what a great thing to be focusing on – how much more inspiring for the team to be working on customer centricity than cost savings or big system changes. Retail is a great industry to be in. It’s an exciting, dynamic, meaningful industry but most of all we connect with our customers and we are great employers of people. The retail world is changing and I believe there is no more exciting time to be an Australian retailer.   This is an edited version of Peter Birtles’ speech delivered at the Retail Customer Excellence Awards. Access exclusive analysis, locked news and reports with Inside Retail Weekly. Subscribe today and get our premium print publication delivered to your door every week.