New technology is transforming retail and the pace is accelerating. In late 2010 Debenhams's customer survey told them that mobile commerce was number 100 out of 100 in the list of things their customers wanted. They chose to ignore their customers and developed the platform anyway. When the survey was re-run 12 months later, it had leaped into the top 10, and by Spring 2012, 20% of their on-line trade was coming from mobiles.
But technology is a double-edged sword.
Over 50% of UK adults now have smartphones. They can see a product in your store, and within seconds, potentially order the same product from anyone in the world, who will ship it to their home for less than they can buy it from you. One online retailer has described competitor stores as their “free product showrooms”. And with supermarkets making price comparisons ever easier, how long before my device, prior to me checking out my on-line basket, scans the list and sends off a good chunk of the order to other, cheaper retailers without me doing a thing?
Quite simply, to win in today's retail market, you have to be the cheapest option, the best option, or the only option. There is no other option.
1. The cheapest option
Your customers need to be convinced they're getting the best price, so you must be either the lowest cost retailer or the best open marketplace. As more shopping goes through devices, increasingly you will need to be the cheapest on everything in the basket, or parts of the basket will simply go elsewhere.
2. The only option
You primarily offer exclusive products that drive traffic into your store. They may be under your own brand (like Zara or Ikea) or a separate brand (like No.7), but in either case, the products need to be able to stand on their own as innovative, well marketed and value for money. To sustain this position, you need to have relationships, capabilities or intellectual property that others simply can't match and be constantly raising the bar.
3. The “best” option
If your product isn't unique, you can never be far off on price, and increasingly there are only three things the customer will look to you for: retail experience, customer service and convenience. There will always be distressed customers who can't wait for a delivery, but outside of pharmacy and top-up grocery, it's a pretty small market. To survive as a mainstream retailer, you need to be good at all three of those areas, but exceptional in at least one. That mix defines your positioning and your “brand promise”.Best Buy paid a big price when they vacillated on their positioning. Amazon's is evolving as competitors close the convenience gap, and Tesco seems caught in no-man's land. Your positioning needs to be clearly visible and jealously guarded if you want to keep your customers. Without that clear positioning, it's always going to be a race to the bottom on price.
As geographical barriers come down, and transparency, comparability and mobility increase, customers will choose products they want in an increasing variety of ways from an increasingly competitive marketplace, putting ever more pressure on retailers to clarify and justify their role in that supply chain.
The retail brand, and the promise it stands for, has never been more critical, consumer trust in that brand has never been more valuable, nor has it ever been more easy to lose.
To learn the lessons from Best Buy's failure click here
To tackle your retail cost of goods click here