Jeweller - November 2021

BUSINESS
Strategy
The existential question
facing every retailer today
Amid growing competition and pressure in the retail environment, innovation and
creativity offer a path to continued relevance and viability, writes DOUG STEPHENS.
Bad retailers will never run out of
customers; history suggests that there
is always a segment of the consumer
population willing to ‘trade down’ if they
believe they can save a dollar or two.
Some retailers, like long-beleaguered US
department store JC Penney, have spent
decades proving this thesis.
However, such retailers will eventually run
out of brands to stock, and the reason for
that comes down to simple maths.
At its core, retail has always been a value
exchange between brands – that is, the
businesses that manufacture branded
product lines – consumers, and retailers,
with retailers occupying the precarious
middle part of the equation.
For the relationship to hold, each party
must contribute value to the others. But
in a post-industrial, increasingly postdigital,
and post-pandemic world, the
retailer’s place in that equation has become
more complicated.
The value equation
Only a decade or two ago, delivering value
as a retailer was relatively simple.
Brands brought product design, quality, and
name recognition, while consumers brought
demand and dollars.
And retailers, in most cases, needed only
to provide physical points of distribution for
products, coupled with a willingness to relay
product information on behalf of the brand
to consumers.
Everyone was satisfied.
The problem today is that while the value
contributed by brands and consumers
has remained more-or-less constant, the
contribution traditionally made by retailers
is now all but worthless.
Consumers, with the internet at their
fingertips, no longer require retailers to act
as porters of product information.
Likewise, brands, with unmitigated
digital access to hundreds of millions of
consumers, no longer need to rely on
a third-party retailer’s physical assets
for customer acquisition or product
distribution.
In other words, consumers and brands
have all the tools they need to carry on quite
capably without retailers.
It has all driven
us to a rather
dramatic
moment in retail
history; a point
where retailers
across all
categories have
to completely
re-think the
value they bring
to their part of
the equation
Hence, brands like Nike are ramping up
their direct-to-consumer strategies.
It has all driven us to a rather dramatic
moment in retail history; a point where
retailers across all categories have to
completely re-think the value they bring to
their part of the equation.
They must once and for all retire easy
scapegoats like Amazon, e-commerce
and Millennials because the real enemy is
none of these external forces, but rather
their own failures to beat back irrelevance,
a condition for which there is only one cure
– reinvention and the contribution of new
radical value, not only for consumers but for
brands, too.
Defining ‘radical value’
This notion of radical value is important.
Take, for example, Amazon. Love it or not,
brands are drawn by the tens of thousands
to sell on Amazon because Amazon
radically redefined our sense of selection
and convenience and in the process, formed
a global tribe of Prime Members nearly 200
million deep.
Similarly, China’s Alibaba has executed a
74 | November 2021