Articles

The Death of Commoditised Aggregators.

There is simply no way to sugar coat the rapidly approaching demise of many retailers other than to say some, not all, can avoid going the way of The Titanic. The technological icebergs that have re-drawn the charts of retail can be navigated. But unlike the Captain of that famous ship, the problem needs to be understood and acknowledged and help sought quickly to avoid impending disaster.

Far too many retailers today are nothing more than ‘commoditised aggregators’. That is, they stock and sell the same range of over-distributed merchandise as their many and varied competitors, increasingly cutting their cost-bases and dumbing down their offer in the vain hope of supporting thinner and thinner margins and lower and lower contributions from their stores.

In a world where online retail is the ultimate commoditised aggregator because consumers can get instant transactional access to the lowest price for any item they want, anywhere in the world, anytime they want it, geography is no longer protection.

There are only so many strategic and tactical options available to you and unless you have massive scale advantage cheapest price (in the world) will do nothing other than make you endure the painful death throws for a little longer.

Some retailers have the option of going vertical. GAP did this in the 1970’s and did very well out of it for 30 years. Some retailers play in highly specialised sectors of the market where expertise is valued and can be increasingly monetised if marketed effectively. Trade based retailers such as BOC Gas’n’Gear or Total Tools spring to mind. But for the many that rely on branded or easily benchmarked goods the solutions are limited. And they start with changing expectations.

According to the IMF Australia is and will remain (for the next two years at least) the stand out economy in the western world with low, sustained growth. That means the expectations for retail businesses and their business models need to be aligned to steady not heady growth.

But the ultimate adjustment must be in the products retailers stock and the value proposition their stores offer. Any product brand that refuses to face up to global pricing, stripping away un-necessary distribution layers and costs and a rationalisation of the availability of their products should be considered toxic and the necessary steps to quarantine their impact on the retail business taken immediately.

The contemporary consumers that can sustain your retail business will pay for genuine service they feel is value adding to them. How much they will pay is determined on the value they place on the service. Ultimately the re-set button on physical retail stores however will see the vast majority of retail continuing to be enjoyed in physical stores that remain after the Titanics have sunk. There will be one commoditised aggregator servicing each category – more than likely a multi-national e-commerce behemoth like Amazon or eBay. The rest will offer a total customer experience and product offer tuned to deliver what the customer values enough to pay for with the currency of their time and their money.