The key to surviving in Retail?  Take a brave pill and try something radical.  

Another week, another couple of gloomy stories from the world of established brands.
Debenham’s announced that they were taking advice on a number of potential routes they can explore to strengthen their finances to avoid collapsing.
Across the high street, John Lewis group published their pretty shocking half year results, showing profits down 99% to just over £1m. £1m of profit from the total John Lewis and Waitrose estate.
Jeff Bezos personally made £8m an HOUR over the same period.

Ten years on from the credit crunch and firms are still collapsing
After 6 years of economic growth following the global credit crunch, why are so many established firms still struggling?

‘Changing consumer habits’ some companies say.
‘Challenging economic conditions’ say others.
‘The rise of the internet’ a lot of them blame.
‘Brexit’ MOST of them say!

But none of these things are new, are they? The internet has been properly upon us for over 20 years now. Consumer behaviour has been steadily changing for years with the advancement of technology. The exchange rate has been poor for a couple of years now.

The vicious spiral of price competition

The major trend in Retail that is driving so many of these woes is price competition.

John Lewis themselves blamed their 99% decline in income on their price matching strategy, together with rising cost prices due to the weaker pound.

Amazon have an algorithm that scours offline and online competitors and identifies if any of them are selling a product for less than Amazon, and then AUTOMATICALLY reduces their own price. No 20-page reports and hours of meetings to decide what to do about pricing. Just ‘We will be the cheapest. End of.’

The poor competing retailer then responds by dropping their prices again to try to draw in customers, so Amazon drops theirs again.
The only winner is the customer, in the short term that is. Until said competing Retailer goes out of business, competition reduces, and Amazon can steadily increase their prices again. Yes, the old economic laws of demand vs. supply still exist.

I know how to win the war – we’ll remove our troops!

How to get out of this hole then?

Well, the main tactic of all Retailers is to reduce cost to offset the margin pressure created by price competition.
Reduce cost by closing stores, as in the case of M&S.
Reduce cost by merging with others, as in the case of Sainsbury’s and ASDA.
Reduce cost by laying off workers, the strategy adopted by John Lewis themselves.
Or reduce cost (and ultimately losses) by shutting up shop completely, as Toys R Us did.

But, surely, the more shops that are shut, the less likely it is that consumers will ever return to their traditional habits of bricks and mortar shopping, right? I mean, if Amazon suddenly ramps prices up by 20% because they have little competition, and there’s no visible alternative Retail destination in the local area, what’s a consumer to do?

Imagine the war in Retail were a real war. Would the losing side try to win the war by shutting down front line weaponry and withdrawing its forces? No. It would either dig in and try to win (but likely face a slow death) or it would develop a new strategy. A genuinely innovative strategy. One that takes the enemy (or competition) by surprise.

Time to be brave and take a giant leap in to the unknown

Research tells us that only 2% of us are genuine ‘innovators’. The rest of us are ‘followers’. Some follow quickly (early adopters), some slowly. Others close their eyes, put their fingers in their ears and go ‘la la la la’ hoping things return to the way they were before.

The reality at play, though, is that Retail strategy, on the whole, is to try to follow Amazon and other trend setters like Wayfair, Google and Ocado. To build bigger digital offerings. To reduce lead times and increase shopping options. To reduce prices and put customer experience first. To shut down shops to reduce cost and become a digital retailer instead.

But rather than try to win the Retail war by shutting everything down and trying to follow Amazon (who by the way spent $26bn on R&D last year – try competing with that), maybe it’s time that the traditional Retailers out there try to do something completely different.

Rather than think about the year ahead, and how they can cut costs to enable prices to be dropped further, maybe they need to think longer term. Think bigger. Think more innovatively. And then try something radical that hasn’t been proven yet.

Forget ‘investor interests’ and the thirst for short term profit. Investors will have nothing left if more Retailers go bust.

Where are the new high street store concepts? The ones that mix virtual with physical? Physical shops where we can try stuff out and browse, and then order via our phones at the scan of a QR code or by instruction to our digital assistants. Before grabbing a coffee and a cake and returning home to find our order waiting for us?

Where are the virtual reality offerings from the major brands that enable us to walk an entire shop from the comfort of our own living room?

Where’s the army of helpers in store who can take my shopping list off me (without me having to pre-book an order slot or input in to a website) and whizz round on hover boards or Segway trolleys to grab my items for me whilst I charge my electric car in one of their free charging bays?

Where’s the next ‘surprise’ coming from?

Steve Jobs once said ‘Get closer to your customers. So close that you tell them what they need well before they realise it themselves’.

Whilst the 98% of the population who are followers, not innovators, are amazed that Amazon can send a new bottle of Jameson’s just in time, before the last one runs out, other Retailers should be paving the way so that offering looks 20th century by comparison.

I, like most people out there, don’t want to see any more ‘traditional’ Retail firms collapse.

For our kids to grow up without experiencing the atmosphere of a town or city centre, or the excitement of browsing, is heart-breaking.

Yes, we live in a different world now. And, yes, most things will be digital going forward. But that doesn’t mean that ‘physical’ has to de-exist entirely.
But if the Retail sector fails to take a brave pill and try something radically innovative soon, that’s the reality we face.

Did you know that TEAMango are now working with firms to help them develop the culture and capabilities to drive real ‘moon-shot’ innovation in order to survive and thrive in the digital age?

Interested in finding our more? Email us at info@teamango.com or chat to our chat bot at www.teamango.com/talk-to-a-monster