Articles

Your Game Is As Good As The Company You Keep

“Why isn’t the standard of customer experience in retail here as good as best practice overseas?” You’ve heard it many times from residents and tourists alike. You may well have said it yourself at times. When we travel internationally we often immerse in a customer experience in retail stores that we yearn for at home.

The harsh reality of why we don’t get best practice here is very simple.

All mature, western domestic markets are finite with a known growth factor – including our country. Most retail business people have a firm grasp on what they believe is both their top-line growth potential and their cost base. Customer experience – in all its nuances and subtleties – is seen as a cost of doing business. That is, a cost to sell products or services. You spend what you need to spend to be perceived by the customer to have added value to them in a way that makes you a more magnetic option to shop than your competitors.

“No sane business-person invests too far ahead of the curve” is the well-used phrase.

Why would you spend money over and above what is needed to win? After all, if there is no additional pay-back in upside sales and profit, there is no justification to increasing your cost base. That’s just giving away profit.

So your game is only as good as the company you perceive you keep. If you have very few competitors and you are better than them already, as a market leader you will only invest the minimum amount to keep yourself marginally ahead. In markets with bigger population bases that are more connected in “continental” competition rather than just domestic competition, we see a dramatically different picture however.

Paranoia is rife because the nature and context of competition changes rapidly and from unseen directions. Investment in customer experience is not just seen as a cost of doing business, but a cost of protecting and growing a franchise through innovation often across borders.

The nature of competition – and therefore your investment view – is as much about belief as it is fact. The 20 tonne gorilla in the shadows of the room however is complacency and how rapidly – even in what seems like a relatively protected category – the competitive paradigm can change. Many retailers are simply unaware of leakage to international internet or e-commerce sales; direct sales made with retailers discovered on overseas trips; alternative suppliers; and in the customer’s eyes the number of purchases increasingly being viewed as commodity purchases because there is simply no enjoyment in the purchasing process.

Not to mention how quickly and unexpectedly competition can emerge. With limited growth potential in the near term, the international retail landscape is seeing rapid consolidation of retailers and customer types. In the retail world, healthy paranoia is a good thing.

After all, you may know the company you currently keep. But you don’t know what you don’t know and unseen competitors may be eyeing off your customers right now. Sometimes it pays to invest just a bit more. Its called insurance.