Competitive advantage…do you even have one?

Shopping-centreWe have long spoken about the need for retailers holding a competitive advantage against the competition, but how many business leaders actually set out to achieve a sustainable point of difference? Over the last ten years or so, we have seen the polarised diversity in price with the value offer being the biggest movers, which have left the middle market price operators in a tight place with struggling sales.

The best current example of this is Kmart, who are delivering very keen prices and have maintained, if not increased, style and quality, to great success. This has left the likes of Target nowhere to go. We are even seeing international icons like H&M finding their appeal waning and same store sales falling.

Kmart have created a sustainable point of difference in price and value. Some call it ‘masstige’.

But we are continually hearing that in order to thrive in today’s crowded and ever increasing market competitiveness that it is instead all about the ‘experience’. Apart from a few local independent owner operators, it is hard to think of any major chain creating an experience that is compelling.

Some are achieving dominance in range, Bunnings comes to mind, BCF are not far off in some stores on service and product knowledge. Dan Murphy and JB Hi-Fi have also succeeded in outranging and achieving a perceived price advantage. Aldi too has carved out a position for itself, but many specialty offers are nowhere near.

When one walks through major malls, lined with store after store, it is hard to differentiate between most on market positioning. It seems hard to see any differences between today and 10 years ago, in terms of the fashion or food court offer – even grocery stores. If change is certain and consumers respond to new and exciting, and are more knowledgeable today than they were then, it is little wonder why shopping is ‘boring’ and losing ground to online.

Think of some long-standing Australian retailers and assess what has changed in the last decade. Myer, Target, Big W and Oroton to name a few. What has changed in these businesses, what discernible difference is there to 10 years ago?? I see little or no service improvements, no visible technology advances, no specialist service points of difference, no shop fitout changes. In other words the “experience” is about the same as it was back then. All of them could be in the year 2008.

All retailers are saying that retail is tough, and it is tough, however you hear very few complaints from those that have created a point of difference and a strong market positioning for themselves. They are all growing sales and profits and doing it by being the best offer within their category.

The key is to decide what element(s) you can be better at and then instill that into the DNA of the business. Live it every day, employ people who can deliver it, relentlessly drive it throughout the culture and create something that customers will appreciate you for.

So what to do about improving the appeal of the business and improve your cut through in a sea of offers? As a specialty retailer what makes you special? Generally, you cannot compete on price, or marketing. Nor can you be the most accessible. That really leaves only two options. Matching your merchandise offer (range) to the local market better than anyone else or offering a level of service that is above expectation, and demoting ‘price’ as the deciding factor.

Those that are delivering that at the specialty level, are growing and have healthy businesses.

Peter Sheppard is senior Consultant and head of implementation division at Retail Doctor Group. Peter can be contacted on (02) 9460 2882 or [email protected].


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