When I was about 6 my dad brought me an American comic back from his travels. I was immediately hooked by a persuasive Charles Atlas body building advert and decided to transform myself from weedy kid to become the world’s strongest man. That would fix everything.
My dad explained that he could show me some exercises if I was interested in being stronger, but added “remember, there will always be someone who is stronger than you.”
This advise did put my plan into perspective and made me realise that simply trying to become stronger than playground bullies was not a strategy that would work. If I didn’t want sand kicked in my face, I’d need to use other tools at my disposal that required a less direct approach.
Just as there will always be someone stronger than you, the same is true that there will always be someone cheaper. For me, the two most memorable examples of this are:
Firstly in the early 2000’s when I was designing chairs for Italian manufacturers. At the time, the design led Italian furniture sector faced intense and increasing competition from Chinese manufactures. Previously faithful customers were lured away by cost savings and the artisanal Italian companies initially had no choice but to chase business by dropping price. There followed years of desolation to the industry, historic businesses being bought, sold, and disappearing. The survivors of this period were those that recognised early on, the power of their brand and discovered ways of adding value beyond price and successfully selling back to China.
Secondly in the 2008/9 recession when, desperate to secure contracts, many creative agencies I knew, began competitively dropping prices. Firms had to reduce head-count, cut salaries and finally went out of business. Those that remained claimed this had weeded out the weaker agencies and certainly many of them now have developed more robust & relevant offers.
Currently it seems that for many high street retailers there is a similar race to the bottom. Phenomenal price discounting (50%, 60%, 70%+) have become the default route to attract customers through the door. But the common fact remains... there will always be someone cheaper than you, especially if you have the overhead of running shops and your competition is online.
Post Christmas trading results apparently prove that this strategy still didn’t deliver the footfall for many retailers (let alone the profits when it did).
Tesco & Morrisons revealed profit warnings and sited sales were lost to discount grocers such as Aldi & Lidl. M&S Non-Food sales were down despite heavy discounting as customers shopped instead at Zara & Next. Debenhams also discounted heavily to Christmas and recently issued a profit warning*.
Fortunately there are retailers that don’t overly discount and are none the less doing well. House of Fraser, John Lewis, Next, M&S food & Sainsbury’s are all examples.
As with the Italian furniture industry in the 2000's, retail is in the midst of a transformation and there will almost certainly be more pain. It seems very likely we will see further familiar high street names disappear. Those that remain will be here not because of their ability to drop prices, though being competitive will still be fundamental. They will survive because they have found other tools to leverage and are able to make themselves remarkable to their customers.
To me that there are four main ways retailers will become remarkable and so I see future retailers being..
- Stores that offer their customers a retail experience they cannot find online whether this be predictive and automated or animated and experiential.
- Retailers that invest in the value of their brands, ensuring they become trusted and tangible parts of their customers lives.
- Retailers that provide or facilitate meaningful human connection, through the level of assistance and service and as places for social interaction.
- Strong multichannel businesses with parity or at least synergy between product offer in store and on line and superb infrastructure and logistics to deliver the new minimum level of service customers will demand.