This is the 20th year Deloitte has released its Global Powers of Retailing publication and again it doesn’t disappoint as it details the top 250 globally retailers, and comments on and predicts market trends.
By now Australian retailers are surely aware they are not immune to the impacts of global competition. The first few weeks of 2017 have provided clear evidence that we continue to retail in turbulent and competitive times with at least five well-known brands entering into administration.
So the question shouldn’t be about awareness, but rather one of preparedness. Do we really need the arrival of Alibaba or Amazon to teach us that retail is competitive? I don’t think so, however the degree to which retailers develop and implement their retail strategies varies greatly.
A retailer can choose to compete on a number of levels, however those who focus on one or two key areas seem to be the winners:
Understanding your customer
Are you absolutely clear who your customer is, not only now, but in five years’ time? If your customer is ageing and you aren’t attracting the next generation, you’re in trouble.
Are you all things to all people as a hedging strategy? This rarely works. One of the retail trends detailed in the Global Powers of Retailing 2017 report refers to “Customers seeking experiences and products that reflect their personal brand. Retailers that can consistently deliver these moments will likely grow a fiercely loyal customer base”.
Ability to innovate
Is the product yours or someone else’s? If the product is not yours, are there ways that you can innovate around the product to enhance engagement? A price war is really just a race to the bottom and should be avoided where you don’t have the capacity or time to compete in this way.
Efficient logistics and distribution process
Is your distribution network actually effective? What are your lead times from suppliers and how fast are you getting your products to your customer? The Global Powers of Retailing 2017 report refers to the continuing impact of Amazon with worldwide members estimated to be 80 million, growing at approximately 50% CAGR. Apparel is the retail segment feeling the pinch the most from this growth with grocery not far behind.
A lean operating machine
Have you really explored efficiency gains in your underlying operations to ensure the organisation is lean and cost effective, in good times and when under stress? According to the Global Powers of Retailing 2017 report, “Global uncertainty, low wage growth and intense competition are casting doubt over the retail sector for 2017”. In uncertain times, operational efficiencies, even small amounts, can accumulate for a greater impact.
I had a recent shopping experience where I required two products from the same retailer. One needed to be ordered and I was told that it would take 16 weeks for it to arrive. My other product, which was in stock, was still going to take seven days to get to me by the time the warehouse had figured out how to load the stock onto the truck and deliver this (distance from home to the warehouse is approximately 20km).
The experience left me frustrated and disappointed by their poor stock control and lack of a logistics solution, which was clearly not customer centric. I certainly don’t want to see the demise of the Australian retailer, but the reality is some will rise and compete and others will unfortunately fail, just hopefully not before I get my order!