Compete Effectively With Online Retailers

by Jeff Weidauer, Jun 14, 2012, 8:00 AM

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Success in retail has never been easy, or for the faint of heart. The difference between success and failure is often one of degree -- having just a little more clarity of purpose can be the determining factor between scaling the peaks or circling the drain.

That’s been true for as long as there has been competition. But retailers now have to compete with more than the guy across the street, down the block or even across town. Competition is now everywhere. The growth of online sales at the expense of traditional brick-and-mortar retailers has shaken the retail world to its core. The last time the world of trade experienced an impact of this magnitude was the discovery of the “new world” by Europeans; the changes are no less shocking today than they were half a millennium ago. 

Today’s shopper has access to tools and transparency that were virtually unimaginable just a generation back. No longer do statements like “low prices” carry any meaning; finding the lowest price is just a quick scan away. Shoppers have long been suspect of those claims in any case, and today they can back up their disbelief with data in real-time. The operation of a brick-and-mortar facility with its need for inventory and access to the shopping public adds costs that online retailers don’t have. And while tax laws currently favor online sellers, those are in the process of changing. While this is good news, it won’t level the playing field.

In any competitive environment, shoppers have a concern about price. This is even more true -- and more evident -- as we struggle to recover from the worst economic downturn that most people have experienced. Couple the desire for low prices with the appearance and growth of daily-deal sites and we get a shopper who considers paying “full retail” for any product from cars to cantaloupes unthinkable.

The traditional retail response to increased competition is to cut prices and drive more traffic. This has rarely been effective in the past, and is even less so today. Getting into a price war will most likely start a race to the bottom, with no one (except possibly the shopper) winning. A price-first approach comes from the retail tradition of putting more focus on acquisition of customers than the cultivation of existing customers. Cutting prices -- even if effective -- only brings in the bargain-seekers, and is only effective as long as the price is lower than anywhere else. With the ease of access consumers have to competitive pricing, no retailer can count on owning the low price crown.

Clearly, a change in strategy is needed. More than just a shift away from competing on price, the change must consider the unique benefits a brick-and-mortar store can offer and focus on those. The poor customer service offered by most retailers only serves to push shoppers online. There are fewer salespeople in the store, and those who are there often don’t know the products as well as the customer. 

So what’s to be done? There are five steps that will begin to change the paradigm and help to compete on a value vs. price basis:

Stop putting the total emphasis on price

This is critical and urgent. It is also very risky for retailers and requires a clearly articulated plan be successful.

Find other unique attributes

These could be service, or education or product offering. Defining this value will get to the heart of the business and why it exists.

Change the conversation

This step is the communication of the outcomes from steps one and two. Price is important, but not all-important. Most shoppers are willing to pay a little more if there’s a benefit, and communicating that benefit needs to be done clearly and consistently.

Execute

Deliver more than shoppers expect -- and at least what’s been promised to them.

Stay the course

As with any journey (and make no mistake, this is a journey) -- there will be setbacks and challenges. Respond, change as needed, but keep the emphasis on the long-term goals.

These are simple steps, but they are far from easy. Inertia, fear of change and the need to educate consumers will all present ongoing hurdles to this process. The alternative is to keep doing the same things the same way. However, we know that is insanity defined -- and is only delaying the inevitable. 

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