Articles

Beholden to a False God - Cheap Price

What customer in the world wouldn’t want to buy the things they need and want to buy cheaper – better yet, get them for nothing. Every retailer knows that cheap price is a powerful and rational motivator for the customer (let alone for themselves). Wal-Mart has proven how successful this can be. But economic realities mean that any retail business must sustain a profit margin that keeps the business afloat and provides a good return to shareholders.

Importantly today, specialty retailers must understand that they exist in a competitive framework where their costs of doing business (CODB) are escalating while their “profit through volume” rivals are CODB is reducing through scale advantage and supply chain and systems productivity investment.

Right around the world, specialty retail is being forced to abandon competing on price by focussing on how to differentiate themselves in the customer’s perception. Differentiation that creates a magnetic attraction to buy at higher prices. 93% of U.S. retail exists outside Wal-Mart. Even Target USA does not compete head on with Wal-Mart on price – and they are a profit through volume retail with a low CODB. Many retailers are thiving in the shadow of the dominant price leader through differentiation.

So why is it that so many specialty retailers in Australia do not put enough energy into differentiating their product range, their brand experience, their customer service and their locational appeal and are almost forced to fall back on promotional price-off to survive? Why do they fail to inspire their own staff – let alone customers?