(Shared by Entrepreneur Dương Thanh Tâm, Former CEO of Miniso, Deputy General Director of Vincomerce, about the scale and coverage strategy for the retail and service sectors.)
I. Target businesses suitable for implementing the Scale and Coverage Development Strategy.
The scale and coverage strategy is typically for businesses that have the financial capacity and resources ready to dominate and capture networks in the short term. Or for businesses that are confident in having key drivers to dominate the market, such as market monopoly, product monopoly, or absolute price advantage. Additionally, the reputation, trust, and positive curiosity from buyers and users, which the brand has established before being present in any location, cannot be overlooked. Therefore, the scale and coverage strategy will be suitable for businesses and brands in the following groups:
- Group 1: New brands of an organization that have proven their success and brand reputation, business effectiveness, and reputable products, such as Vinmart, VM+ of Vingroup, Bách Hoá Xanh of TGDĐ, Gogi House of Golden Gate. These chains, when established, were backed by the parent brand’s reputation and trust.
- Group 2: Brands that have succeeded in one area and have been spread by word of mouth and viral media, where customers in regions where they have not yet opened are aware, expect, and are ready to embrace the brand if it appears in their area, such as HighLand Coffee, Phúc Long, Gongcha, Miniso, H&M, Zara, Halidao. These brands will usually develop a coverage strategy after 1-2 years when they have quickly built a reputation and secured a top position in the industry.
- Group 3: New brands in trending sectors or industries that possess competitive advantages such as superior quality, competitive pricing, attractive packaging, innovative product/service concepts, and unique experiences. This group typically adopts a “hit hard, win fast” strategy, focusing on exceptional products to capture the market when users are tired of existing products. Their timely appearance with distinctive advantages and low prices allows them to quickly become the “vedette.” At this point, the key task is to focus efforts on rapid expansion, even accepting loans to capitalize on the golden opportunity.
II. Four essential factors to focus on when developing the scale and coverage strategy.
Customers come to you for a reason, stay because of that reason, and leave for the same reason! What does this mean? Ultimately, regardless of the retail model—whether convenience stores, supermarkets, fashion, F&B, cosmetics, spas, services, consumer goods, or shopping malls—if the product you offer does not meet the expectations of buyers and users, the strategy you choose will only be a subjective choice from one side. Being fast and big does not necessarily mean an advantage, defeating competitors, dominating the market, or winning customers.
Many businesses pursuing a scale and coverage strategy often fall into the trap of their own “image,” becoming overly focused on less important factors in the chain business model, such as store concepts, speed of new openings, store size, or number of stores. I call these factors less important, not irrelevant.
So, in the retail sector, what are the important elements of a winning model? Here, I will focus on the front-end factors—those directly interacting with shoppers, impacting their purchasing decisions, return visits, and loyalty, based on the 4-element model that creates an ideal shopping space.
1. Shopping Space
- Convenient location, easily accessible to target customers.
- Layout that is easy to navigate and positions the merchandise clearly.
- Products displayed in an easy-to-see and easy-to-reach manner.
- Sales and shopping support equipment are always complete, new, and clean.
- Sound, lighting, scent, and POSM visuals.
Creating a shopping space with a unique style and distinctive highlights is one way to help customers differentiate, recognize, and remember the outstanding features of your chain compared to others. It’s not just about the logo or brand colors, but the full sensory experience (six senses) that the shopper has in the space you create. Importantly, this feeling must be consistent across all stores, every time a shopper returns. This is the role of factor number 2.
2. Operational Process
- Professional, efficient, simple, logical, ready, complete, and understanding of shopper behavior, habits, and shopping patterns at all times.
- Real-life situations during shopping interactions should be adaptable, proactive, and responsible.
3. People
- The essence of the chain model is “READY TO SELL – NOT SALES.” The people, the staff in stores, are the ones who prepare everything to create a perfect shopping space, allowing customers to freely experience instead of having an employee hover nearby, monitoring or closely observing the customers.
- The standards of behavior and operational practices for each position must be consistent and unified throughout the system.
- Investing in training, development, and reward policies is a way to create more brand ambassadors.
- Sales staff are mass employees and are characterized by being “easily impressionable—yet quick to forget,” so the most important thing is to make them understand clearly why they need to strive every day and, even more, what that effort entails. In other words, they need motivation and pressure every day. This section has a separate KPI concept for chain sales staff.
- Empowering each employee to own the relationship between the customer and the brand is the best way to prevent losing customers due to the staff’s fear of responsibility.
4. Products
Product differentiation strategy: Why is the word “strategy” added to product? Because for any business model, the product is always the soul, the key factor that helps you retain customers, make them remember you as you and not confuse you with others, due to the differentiation that customers can feel in the products you provide. I must emphasize that this is the most important factor in any WINNING MODEL! Therefore, the products you are selling must possess and satisfy the following competitive advantages:
- Are your products created from a process, formula, or R&D technology that your brand owns and has created? Owning intellectual property and investing heavily in R&D will always give you the most sustainable competitive advantage in any market context and competitive strategy.
- Do you have exclusive rights to sell your products?
- Do you have signature products?
- Have you established a system for continuous product quality improvement?
- Can you identify the SWOT of your products compared to your competitors’ products? And do you have solutions to proactively improve the W & T?
- Have you developed a method to continuously gather feedback from users about your products?
- Variety, richness, and always offering new products.
- What is the role of your product category strategy? This must be clearly defined from the P&L structure and serve as a guide for departments like purchasing, production, sales, and operations to follow and demonstrate to the shopper. The result will be that the shopper will remember your brand through the product strategy. What customers say about your product, what they remember about it, is also what they will remember about your brand.
- Pricing strategy: In alignment with the product category strategy, the pricing strategy must be synchronized. For example, if the product serves to attract traffic, the price must naturally be lower than competitors, at a rate that compels customers to leave competitors and come to you.
- Is the sales policy flexible and comprehensive enough?
- Finally, does your product meet the “Value for Money” criteria?
It is easy to notice that around me, many startup/growing/expanding businesses are focusing heavily on the strategy of scale and coverage. This is a reasonable choice, as the Vietnamese consumer market has the highest CARG growth rate in the world. However, the danger is that many businesses are treating scale and coverage as a “trend.” Factors like store concept design, the shopping experience, renting large, beautiful spaces, and training a professional sales team are all elements that can be implemented and created in the short term, so they focus solely on these to create competitive advantages and differentiation.
Meanwhile, the fourth factor—product quality and differentiation—is being overlooked. It is not invested in to the extent it deserves, as most businesses lack the necessary persistence and creative culture. But if you look at successful and failed retailers around the world, the key factor determining their sustainable growth is still the product. A typical example is the growing success of Zara and the decline of H&M. Clearly, H&M once had a larger scale than Zara, but its product concept in recent years has disappointed shoppers and users, causing them to leave.
III. When will the scale and coverage strategy be truly successful?
Whether in Group 1 or Group 2, achieving scale and coverage is only part of the success. No system can survive if it keeps expanding without reaching breakeven and sustainable profits; short-term success will not be lasting. The guarantee of sustainability lies in increasing customer satisfaction and loyalty. Therefore, investing in R&D, creating differentiation, exceeding expectations in quality, and offering products that stand out is a necessity. Businesses must invest appropriately in the research and development phase and in building product ideas.
In my consulting work for the Tokyo Life chain, I can confidently say that the reason Tokyo Life continues to win more customers’ love is because of their excellent product quality, achieving the “Value for money” strategy. I know that the BOD of Tokyo Life spends 60% on R&D, and they are always willing to learn from new fields to create new products with outstanding quality.
One issue I noticed when surveying the fashion market is that most Vietnamese brands have not invested in R&D or sought high-quality fibers and fabrics. Most fashion product concepts from Vietnamese brands focus only on how the product looks when worn, rather than investing in how the wearer feels while wearing it.
For example, Elise, the fashion brand beloved by office women, is owned by Ms. Lưu Nga, who is very stylish and knowledgeable in the fashion industry. She uses all the famous global fashion brands to feel and understand why their products are so high-end. In fashion and beauty products in general, if you are not someone who loves beauty, knows how to appreciate it, and has a good aesthetic sense, it is very difficult to create beautiful products. This is why successful fashion designers often have to be fashion icons themselves.
When I was in charge of approving the product range for VinmartCook—Vinmart’s private label for ready-to-eat foods—I was always the one to directly test all the products from Center Chicken and other products sold on the market. I would discuss the recipes and preparation methods with the expert team. To make convincing suggestions to the production team, I had to visit the market a lot, eat a lot, to the point where I was almost sick of it. Some products required countless versions of R&D before they were perfected.
Once, on the first day we launched the Tết cakes (Bánh Chưng and Bánh Tét), I was the first to test the product and discovered a small issue that caused the quality to fall short of the previous samples. In the end, we had to make a very painful decision: to stop selling the entire batch across the system because it wasn’t the best product we wanted our customers to enjoy.
The loss was immense, but when a business has chosen quality as its core value, you must protect it at all costs.
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