Articles

Stop Feeding A Machine That Will Kill You.

There’s a fantastic 20th century saying that goes something like ‘Just because you can, doesn’t mean you should.’ A saying that has been too easily forgotten in the 21st century, as evidenced by all those people who use Twitter without thinking. It is obvious in retail too. With the advent of technology and the rise of capability we have been all too easily seduced into doing things that information technology vendors sell us, rather than analyzing the medium term effects of their adoption on our specific business results and the long term sustainability of our individual business models.

Every man and his dog – regardless of the level of their retail business naivety – has been making very loud noises lately about e-commerce and that all retailers should rush to trade with their customers online. What this has resulted in is the rise in a never-ending stream of more and more sophisticated shop-bots and shopping comparison apps that make it easy for shoppers to search and find the cheapest price.

Lets get one thing straight. Customers don’t buy price. They buy a product or service proposition and then a price is attached to it. For retailers that sell me-too products and services or non-exclusive brands, publishing online price lists lays them open to a price comparison game that only one player per category can win. The one who is the biggest volume leader with the lowest cost base – in the world.

With the strength of the Australian dollar, sick international economies, greedy brands that fail to control distribution and establish global pricing and retailers all over the world desperate for any sales at all, shopping comparison apps are having a field day presenting customers with prices that drive margins for domestic retailers to loss making levels.

So why are so many retailers feeding pricing into a machine that takes control of the pricing strategies and drives margins south?

The blended multi-channel opportunities for retailers today are fantastic and ignoring them is not the answer. But for most retailers, neither is entering the world of e-commerce in a manner that opens you up to a competitive pricing game that you will lose. The stakes are massive and the game doesn’t have to be played by somebody else’s rules if you are prepared to take control of it yourself.

We need to stop feeding machines that are built by the information technology industry to the benefit of the vendors and start building blended multi-channel retail business models that work for retailers or we face a bloodbath.

Customers want to shop in real bricks and mortar stores. More than 94 per cent of shopping is done physically not virtually but the current methodology for electronic pricing comparisons effects 100 percent of retail pricing. That leads to a vicious cycle of price cuts and cost base cuts that spiral out of control. And if it continues that way, it ends in an ugly mess for everyone.

Stop feeding the machine in a way that will kill you and find the way that you can make it work as a competitive weapon that strengthens your business.