Inflection Points Bring New Retail Strategies

Almost every company faces ongoing changes of one type or another in its industry, and retail is no exception.  However, various news and events of the past year or two make me think that there are fundamental permanent changes going on that will leave some retail chains behind if they are not on top of it. 

I am not referencing the banking crisis or recession itself, which we will eventually pull through after some period of time.  Nor am I referring only to some of the long-term trends we outlined in our report “Six Biggest Challenges Facing Retailers Today”, which is available on our website. 

Issues such as dealing with national chains and big box retailers have been on the table for a while, and most smaller and mid-sized chains have figured out how to successfully deal with that type of competition.

What I am referring to is the type of change called an ‘inflection point’ as defined by Andy Grove, the long-time CEO of Intel, in his book “Only The Paranoid Survive.”  This occurs when an industry or segment faces lasting changes so large and significant that it calls for companies to adapt with a new strategy or ability to compete, or face what becomes an irreversible decline and failure. 

Such an inflection point may bring even greater opportunity than before for organizations who do figure out how to take advantage of it.

Also of key importance is his discussion regarding the great difficulty in distinguishing a true inflection point from the more routine types of changes going on every day, and that even very intelligent industry veterans and observers may be late to realize what is going on.  In fact, Andy points out that the CEO in particular may be so immersed in their particular company’s business and attaining goals that they are the last to realize that something has changed!

So, while major demographic shifts are taking place in the US, big box retailers have dominated large chunks of the retail landscape, many specialty retailer has been able to navigate through each of those with some degree of success.  Even the rise of online retailing has not been a completely overwhelming threat as it is hard to replace the live shopping experience in many specialty categories.  However, it may turn out that retailers who make the best USE of ALL technologies to take advantage of all the other trends will turn out to be the survivors! 

What I am pointing out is not just the ability to place merchandise online and sell it, but rather to use new technologies to identify and market to individual customers, and in turn get them to market your store to their friends and associates !  I read an article recently discussing how upscale consumer brands are using exclusive limited-time or limited-availability announced through low-key websites or social media to clear out slow moving merchandise rather than obvious heavy discounting in store.

For example, what might happen if it turns out those same brands realize they can make a larger margin on a consistent basis and sell a much higher volume by cutting the retailers out of the equation entirely?  This is already occurring to some degree with luxury brands who are opening their own store chains.

The actual cause of the inflection point itself may well be that as a result of a combination of all the other trends, retailers with a better ability to communicate with their customer (both to AND from) may be the ones who stand to benefit the most.  This requires good marketing and promotional talent, especially when enabled with good technology tools such as e-mail marketing databases, web promotions and social media.

Again, this is something that Andy Grove touches on in his discussion of inflection points - that the large and dominant players in an industry may, or very well may not, figure out how to change and make the transition to the next level.

While we don’t have room for a full discussion of where this might go in a single article, I would leave you with these thoughts – might your retail segment be facing an inflection point, and if so, are you really prepared for it?

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