Retail Has Changed Forever
By David Dorf on May 14, 2009
I read an interesting article in Forbes called Why Retailing Will Never Be The Same Again. It says that the industry is splitting into three camps: those that compete on price, those that compete on uniqueness, and those that can't compete. The recession has accelerated the demise of those that fall into the third camp. Retailers like Circuit City, Mervyn's, and Linens-and-Things have failed miserably.
Because the web has made comparison shopping so easy, retailers that choose the discount path must excel at keeping costs low and thriving on razor-thin margins. Here, Walmart is king and there is limited space for competitors. Dollar Store and Costco are examples of discounters that have found their niche in the Walmart world.
What's interesting to me is the remaining group of retailers that compete on uniqueness. If you can't compete on price, then there are three broad ways to differentiate yourself as a retailer.
The retailers that excel in this space are often manufacturers like Apple and Coach that are no longer satisfied letting other people sell their products. Companies like Bose have found that selling their own products direct to consumers is the best (but not only) way to ensure control. Many traditional retailers, led by the grocery industry, are creating their own products that are sold only in their stores. Vertically integrated retailers, exemplified by Target and Trader Joe's, figure out what their customers want and deliver it. Some, like Nike, even personalize the products.
Uniqueness of products extends to services as well. Providing installation, delivery, repair, training, personal shopper, etc. are ways to differentiate. Offering unique products and value-added services, as Best Buy and Lowes do, are just want our gen-y and boomers want. People short on time don't want just groceries, they want nutritious, ready-to-eat meals.
Today's consumer has very high expectations regarding a retailer's capability to provide information, customer service, and engaging content. Here again the Web has impacted the way in which people shop. Not only do consumers expect to be able to shop in stores, online, and via catalog (i.e. multi-channel) in various combinations (i.e. cross-channel), but they also expect reviews, ratings, comparisons, and advice at their fingertips. They want to be recognized as good customers, and be rewarded with discounts and special treatment.
Think about stores where time flies. Apple, Barnes & Nobel, and Whole Foods offer an experience beyond traditional browsing. They are engaging, but each in its own way.
This is making the traditional POS obsolete. Try to find a cash register in an Apple store. Its there, but its hidden because its not part of the store experience. Paying is a formality at the tail-end of shopping. Don't think about the cost; think about how the products will enhance the way you live.
Why be slowed down by a checkout-clerk when you can scan your own groceries? If you want to special order a particular floor, use the kiosk to do it. Can't find the size you're looking for? That's ok, we'll have it shipped to your home for free. Its not a scan-and-bag world anymore.
The ironic thing is that we're now demanding the same high-touch customer service we got at the corner dime-store in the 1950s, but through the use of technology. Technology is the great enabler that provides service at scale. This makes the software that retailers run even more important, and the CIO is an indispensable part of the survival equation.
The Web and its associated technologies have changed retail forever -- the recession is just making that even more obvious.