Differentiate or die
There looks to be no respite from these forces as they persist in denigrating retail to an undifferentiated, lowest common denominator. Left alone, this trend will continue to consolidate dominance in a small number of surviving power players amidst a sea of economic destruction.
Some believe it will go even further in the long-term, causing decimation to the supply model through extreme commoditisation and consolidation. I’m not one of those people.
Why? For the simple reason that I believe consumers are already showing the signs of boredom with the current landscape and have begun to search for differentiation, even if they have to do the work themselves through endeavours such as customisation.
The simple reality for most retailers is a stark choice between differentiation or death. And I don’t mean a new logo. At the end of the day in retail, all roads lead to product and service as the real drivers of repeat purchase and the primary levers of price and margin expansion. Some retailers get this – Apple and Louis Vuitton spring readily to mind – and as a result, they stand out easily as bright colours in a sea of grey with compound annual profit growth in the double digits.
Protection is key
Product and service differentiation is not easy but it’s essential, especially in the technologically-connected modern marketplace. However, one of the critical supports for investment in differentiation is copyright and trademark protection and it is in this area that governments globally undermine retail innovation. Trademark and copyright protection is too expensive, too complicated and the legislation so weak that it is undertaken only by the best resourced organisations.
As a result, almost any new product or service innovation created by retail innovators is ripped off as soon as it takes hold – in some instances, with minor tweaks or “enhancements” but in most cases just plain stolen, often assisted by the very suppliers who are contracted to the originators.
This in turn leads to a lack of organisational commitment and investment to genuine differentiation. Many in government actually believe that there should be no copyright or trademark or patent protection as – in their opinion – open slather creates competitiveness that drives efficiency that delivers low prices to consumers. That’s great if you live in a world where we only need or want basic essentials. But we don’t.
The developed world we live in thrives on self-actualisation, newness and feeling like we are living a continually improving life. That world needs investment in innovation and differentiation and supporting investment of capital, time and resource requires protection and legislation that forces every competitor to respect each other’s intellectual property and create their own.
Real product and service differentiation is what will drive retail in the future. Without that firmly embedded in your organisational and cultural DNA, your retail business is completely vulnerable to forces beyond your control. And that path will lead to retail death. But to ensure investment, we need governments to support, not undermine it, through appropriate protection.
Peter James Ryan is chief executive navigator at Red Communication Australia, and has 25 years of marketing and business experience.
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