Travelling Beyond Price? All Roads Lead to Product.

On the surface, retail in this country is very healthy. Rolling Moving Annual Turnover (MAT) growth of more than +6% and all time record levels of expenditure at the till on a month on month basis. But beneath the surface there is some interesting movement.

To cut to the chase, the most successful are becoming more successful and the rest are struggling.

There are two sides to this. From the customer context we are seeing consolidation and simplification of shopping behaviour as the perceived stresses placed on customer’s time increase. From the competitive side we are seeing scale being leveraged for maximum advantage and price being used with sledgehammer impact. Those retailers being forced to reduce price and margin while managing an increasing cost base are struggling. If you combine that with a location that doesn’t match the concentration of customer traffic patterns you achieve the perfect storm.

As that great retail consultant Sir Isaac Newton once said, “It’s bloody hard to fight against gravity mate”.

But in business you either fight or surrender. So what weaponry do you need to get customers to a) want to shop with you and b) spend more money than they would with the profit through volume operators on similar goods?

Creating a desire to want to shop you enough to seek you out involves everything from ambience to expertise and service, range selection and efficiency. However, if you stock exactly the same items as the volume retailer at best you can achieve price elasticity with customers of perhaps 5% with a combination of packaging and value-adding. Increasingly shoppers will say thank you for the service and expertise, the experience and the chat and then go and buy the exact same national brand item from where they can get it cheapest.

Inevitably if this happens on too many occasions, you are remembered as being expensive and taken off their well-trodden track. So, not only will they not spend more money with you they won’t even visit.

Getting beyond cheapest price requires an understanding that in the end everything leads back to product. How you showcase and sell the product. But also how you differentiate the product. If it can be rationally benchmarked then it has to be the cheapest or secondary to the main item or packaged up. Customers aren’t as smart as politically correct marketers try to make out. But they are as tight as a short armed, deep-pocketed Scotsman.

Once they have a fix on the product, they want it as cheap as they can get it. So its simple – don’t let them get a fix on the product. It’s a much less complex business model for profit through volume operators. They focus on efficiency and cost reduction. If you stock the same items as them, they’ll over-power you on price and the internet is only going to make that worse. Plan for your business to ensure the customer recognises differentiation in your product and you’ll get to the preferred destination.