The
IT revolution that helped Tesco and Wal-Mart leap ahead of the independent
channel may have a sting in the tail, the authors of Reshaping Retail, a new
book from Wiley, suggest.
Stefan
Niemeier, Andrea Zocchi and Marco Catena have collaborated on a book that
summarises the world view of McKinsey, the giant US consulting firm.
Technology
has handed power to consumers at retailers’ expense, they write. Smart phones
that let shoppers product search and research, purchase and pay, and connect to
social media for reviews have destroyed “the monopoly retailers once enjoyed
over information about products and prices”.
The
book’s most provocative assertion is that many retailers simply do not have the
mindset to adapt to the new situation. “Too many of those who began their
careers operating stores are still trying to squeeze more from their
traditional business processes rather than responding to the new world in
entirely new ways,” they write.
Wholesalers
could ask themselves where they sit on this question. As the importance of the
physical store diminishes, does this present an opportunity for wholesalers to
sell direct to consumers? Indeed, the book starts in the Middle Ages when
grocers and mercers operated as both retailers and wholesalers. Are we headed
back to this model?
The
strength of physical stores is in four areas: preselection of range;
aggregation of consumer demand; sales advice to shoppers; and the fast and
effective physical movement of stock. If Amazon can do it, what stops a
wholesaler?
McKinsey
says there are six reasons to still enter a store and the authors believe that
both grocery and household products will remain the preserve of bricks and
mortar stores, particularly c-stores.
Reshaping
retail suggests there will be four basic retail archetypes that will survive
into the future. The lowest cost operator (Aldi and Lidl), the convenience shop
that is located in the right place, the convenience operator that depends on
pre-selection (formerly the demesne of the hypermarket) and the platform
operator (Amazon or a department store).
“Convenience
stores save consumers from making much effort to buy what they need or desire,
although the ease of purchase comes at a price,” they say. C-stores save time
travelling. They offer instant solutions, especially if you have forgotten a
key ingredient for a meal.
Their
success depends on location and store size and layout. They need to be close to
a good flow of potential customers and away from potential competitors. Ideal
locations might be in villages without another shop within five miles.
This
previous paragraph shows the consultant focus of the authors which might grate
at time as the world just is not as perfect as they envisage. However, their
ideas are thought provoking. A wholesaler could easily have a business
supporting local shops while also offering a “dark store” lowest cost operation
where shoppers who pre-ordered goods could go to collect their groceries.
What
drives this is technology. “Anyone who can convene traffic can use technology
to act as a retailer, aggregating consumer demand.” The chapter on technology
fizzes with ideas on how to better forecast demand, how to use promotions and
how to optimise the assortment.
One
un-named grocer replaced 10% of low margin products with higher margin ones and
increased sales by 2% and margins by 1%, the book notes.
This
book is sub-titled “how to win in the new consumer driven world” and provides
you with a road map. The direction that you take is very much up to yourself
and having some bright minds to help can only be a benefit.For more, go to www.betterretailing.com.
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