As Bricks and Mortar stores, (B&M) except those run by on line monsters, Apple, Amazon, and a few others flounder, retail needs to rethink itself.
Easy to say, hard to do.
It is hugely ironic that the most successful B&M retailer on the planet, by the retail industry’s own measure, margin/square foot, is now Apple, and I suspect Amazon is not too far behind.
Rent is the 3rd biggest cost in most retailers P&L, after staff and Inventory. Rent is in effect the cost of distribution, or the major part of it, and is always raised as a cost that on line retailers do not have, which is their competitive advantage, along with convenience.
Of course, on line retailers do have distribution costs, increasingly absorbed in the price paid by the customer, or cunningly disguised as some form of membership, as with the sensationally successful Amazon Prime.
Distribution is the battle ground of retail. Reshaping the traditional retail model by cutting out the retail store, and delivering by some combination of post/courier/pigeon. However, B&M retailers have gutted themselves by electing, on mass, to walk away from their primary competitive advantage: stores, and the relationships they can create and nurture with customers.
The competitive advantage of a store is that a customer can go in, look at, touch, try on the merchandise, and talk to a person, who hopefully has some level of product knowledge, and is able to build a rapport. This is a hugely potent competitive advantage if used well, but instead of using it, most retailers are cutting back their investment in stores, staff, and product knowledge, cowed by the spectre of on line price competition.
It is like a golfer, who when comfortably ahead, stops using his driver because his competitor is better at using his putter, so he uses his putter to compete, on what becomes uneven terms.
Stupid.
If retailers looked at rent, inventory carrying costs, and most importantly the cost of customer facing staff, as the cost of customer acquisition and retention, they may make startlingly different strategic choices. They become items in their marketing budget, which can be subject to creative experimentation, and customer service and retention optimisation, rather than a cost to be minimised.
I suggest that this seemingly simple change in mindset, would lead to a huge change in their capacity to compete and succeed.
Bring out the driver again lads, stop playing the whole game with your putters!
