Staving Off the Competition: A Lesson in Self-Preservation
I was walking through a store recently when I stumbled upon an old standby — the gift card section. In recent years, gift cards have become a staple of retail endcaps, providing the ideal grab-and-go item for those looking for a last-minute token, a present for a distant relative or a thank-you gift. This wasn’t always the case, however. I remember when gift cards didn’t even exist just as clearly as I remember the day they suddenly popped up in every store on huge displays. As for the state of the gift card industry today, one thing is for sure — it’s still a big business. As I walked away from the chromatic rows of cards, something struck me. I quickly turned back for a double take and there it was: Amazon.com gift cards. Very interesting …
I couldn’t wrap my head around why a brick-and-mortar retailer would devote valuable space to help the ubiquitous retailer taking over the world — and the store’s own business. This got me thinking about what’s more important, self-preservation or meeting consumer needs? Unfortunately, it’s a zero-sum game. Retailers can’t stay in business if they don’t meet consumer needs because those shoppers will go elsewhere if their demands aren’t met. However, if what the consumer wants directly undercuts a retailer’s business, then its future is at risk.
While this is a slippery slope, we’ve seen what happens when a retailer decides to stick to its traditional model out of fear of killing its own business. And the results aren’t pretty. Stores have been shuttering at an historic pace, and reports show that the number could surpass 8,600 locations by the end of 2017. This would be the worst year on record, with the U.S. losing more than 147 million feet of retail space.
We've seen a number of high-profile retailers die by the hands of rigid models, especially with the rise of online elements and fierce competitors across every industry. Macy’s serves as a recent example of an archaic model that has waned in the face of a new era, with 2017 shares plunging, the closing of 100 full-line stores and lackluster sales. Luckily, there are a few ways that retailers can persevere.
- Look outside of your business model. Don’t let what happened to Blockbuster happen to you. Blockbuster only saw itself as a retailer, and was therefore blinded by the importance of turning into a tech company to stay competitive. Today, digital is continuing to disrupt the industry, with e-commerce sales happening four times faster than brick-and-mortar, and four out of 10 shoppers subscribing to Amazon Prime. As market requirements change, so must your business to stay at pace with the industry.
- Evaluate the competition. While an Amazon gift card may not look like a threat, it’s the companies that offer similar services or even just capture your customers interest that can be detrimental to your business. Consumers have become brand agnostic and wouldn’t care if 74 percent of brands disappeared, so consider comparable entities competitors and their products opportunities.
- Provide assortment. Consumers want retailers that provide them with what they want and what they didn’t know they want, which is why a varied assortment is key. Research shows that up to 98 percent of a retailer’s national brand assortment is the same as their in-market competitors, which means retailers should leverage brands for differentiation. Look at data to learn what items are appealing and use disciplined screeners for all item selections.
To improve a business and succeed in an ever-competitive market, retailers are going to have to do a lot more than simply keep up with the times. I encourage all companies to track trends, incorporate new technologies and embrace change, because whether you like it or not, your customer's business is ripe for the taking. Just ask Blockbuster, the bankrupt company that first brought gift cards to prominence by displaying them in-store. For those retailers that have no choice but to help an adversary, the least you can do is be intentional in your strategy to beat the competition.
Jim Holbrook is the CEO of Daymon, a provider of expert global retail strategies and services.