Where’s the money in Retail…??

As ecommerce is becoming widespread (…we’re in the post Amazon-era, aren’t we…?), traditional Retailers are losing their exclusive role of distribution-points for goods.

That’s why the old, traditional store business model is not sustainable anymore: retail revenues and profits move elsewhere, while costs and investments don’t.

By the way, where do retail revenues and profits move to, exactly?

Fundamentally they relocate to:

  • pure e-retailers (e.g. Amazon) – these are brand new players, starting from scratch (…recently some of them are opening traditional stores – peculiar, isn’t it?)
  • Manufacturers that now sell direct to Consumers through their ecommerce websites – these are players new to the retail arena, applying the “disintermediation” paradigm
  • traditional Retailers’ ecommerce websites – these are known players that apply the “channel multiplication” paradigm

…that’s why “comp” store sales (“comp” = comparable) are often disappointing (they’re flat or declining) and physical stores suffer eroding margins and slipping market-share.

This is a Big Change: wondering what initially triggered it?

The cause of the Big Change – without doubt – was the recent economic downturn combined with the explosion of digital technologies; these two elements radically impacted Consumers’ behavior everywhere… …and once Consumers’ behavior changes, also the buying-and-selling equation changes.

I think it’s clear why (traditional) Retailers cannot play according to the old rules any more.

Let’s not be fooled

It is no coincidence that everywhere you read: “…traditional retail is experiencing slow/anemic/stagnant growth, significant decline, lackluster results, disappointing sales, drop in store traffic, poor numbers, […insert additional gloomy terms and sad faces here…]”.

Please don’t be fooled by clichés… …this is a general, but not very accurate description of the retail situation; for instance, traditional brick-and-mortar players like Dollar General and T.J. Maxx (in the US) are success stories; similarly, many luxury Retailers are literally thriving all over the world…

The real – and more accurate – story is: many traditional Retailers are in (deep) trouble, while few others are going (very) well: average numbers suck, nevertheless there are many significant, fortunate “local maximums”; in point of fact, “local maximums” are more often than not localized on the opposite sides of the market: off-price retailers vs. upscale retailers.

…the middle? That’s not an enviable position.

Make a choice, either:

  • OPTION#1 – fight openly on price and convenience

or

  • OPTION#2 – go up-market and surprise Shoppers with such an exceptional shopping-experience that they can’t help spending their money

I’m all for OPTION#2 and, as a matter of fact, I am strongly convinced that our physical stores are perfect to wow (WOW!) our Shoppers.

…yes, I’m talking about creating an exceptional in-store shopping-experience.

Andy Cavallini  –  http://retaildom.com

 

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