My Other Man

I’m a happily married woman. But I’m here to confess: I have “another man” in my life. His name is Lalo. He “speaks” and sells (at rock-bottom prices) great brands like Tory Burch, Moschino, Diane Von Furstenberg, and Nanette Lepore. I’ve been seeing him steadily for two years.

But my visits go beyond the fact he helps me land designer brands for cheap.

Lalo is a reminder that America is full of remarkable, resilient business builders with abilities to search out untapped customer needs, profitably meet them, and earn deep customer loyalty along the way.

And, I NEED that reminder at the moment! How about you?

With news of corporate misdeeds, bank failures, scarce credit, home foreclosures, plummeting stock values and layoffs swarming all around, it’s pretty darn easy to feel scared and hopeless. But the truth is, our country is full of thought leaders (and doers) who step up and courageously create new “business designs” — defining and differentiating their offerings, choosing how to go to market, configure resources, capture profit, etc. (No doubt, our Big Three automakers are the poster children for bad business design!) But amidst all the bleak news, it’s important we remember our country has plenty of firms, both large and small, that do ‘get’ it.

My man, Lalo, is a case in point.

This Austin-based, veteran shoe retailer saw the writing on the wall several years back. With internet search engines providing consumers with ever-increasing choices, Lalo recognized the need (and opportunity) to shift his customer value delivery into overdrive. His solution? Launch Designer Clearance House (DCH), a no-frills store where in-the-know women could find hip designer shoes and handbags at rock bottom prices ($300 shoes routinely going for $23 to $50.) How did he deliver his deals? By brilliantly cobbling together a stellar customer value proposition fed from willing channel partners whose “gets” exceeded their “gives.” Here’s how he did it:

First, the great inventory…. Approximately twenty designer shoe manufacturers sold Lalo their end-of-selling-season samples. Why? Besides the immediate cash for the samples, Lalo’s store, tucked away in a business office park, provided these manufacturers (many of whom are well-known in Europe, but not in the United States) an opportunity to build brand awareness among high-end, fashion-conscious shoppers who were candidates for full-price shoe purchases in the future.

What’s more, a number of high-end local retailers sold Lalo their end-of-season close-outs for pennies on the dollar. Through DCH, these retailers could sell-off merchandise that didn’t move after final mark-down.

Lalo’s message to customers who “loved the shoe” but not the size? Visit the regular retailer at the beginning of the season! Lalo would tell them where to shop.

Next, low fixed cost…. Lalo kept his store’s operating costs super low by opening his doors only during prime weekend shopping hours, several times a month. He used e-mail to notify his customers a couple of days in advance of when he would be open (these openings typically coincided with availability of new inventory). Castillo also offered shop by appointment, whereby a group of girlfriends, for example, could reserve store access and private shopping time.

Finally, word of mouse…. No advertising. Just a web site where customers sign up for e-mail notification (he offered in-store sign-up, too). Lalo sent out e-mails whenever he had a new shipment, and customers came running, often bringing a friend or two with them.

Customers embraced the “just in” notifications! On one of my visits (yep, I’m a regular), I vividly remember a departing customer, with new leather boots in tow, enthusiastically calling back as she walked out the door, “I can’t wait to receive your next e-mail, Lalo!” (When’s the last time you heard that at the mall?)

In this tough, bruising economy, DCH and its carefully-crafted business design are thriving: Lalo’s talented daughter-in-law, long-time shoe rep, Spring Castillo, has joined the business. The store inked an exclusive deal with upscale Houston retailer, Tootsie’s, and now DCH offers clothes at an astounding 75% off retail price. After expanding its retail space three times in less than two years, DCH began 2009 with a move to a more centralized, permanent store location with ‘real’ stores hours.

Loyalty Lesson: Your firm’s business design choices have huge consequences on its ability to profitably grow loyal customers. And profits matter! How does your firm (1) select its customers, (2) define and differentiate its offerings, (3) define the task it will perform itself and (4) those it will outsource, (5) configure its resources, (6) go to market, (7) create utility for customers, and (8) capture profit? Choose wisely. Your ability to earn customer loyalty depends on it.

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