The future of retail: How retail is retelling its story
The Australian lifestyle is our economic miracle. In fact, the secret of retail in this country is our continual ‘buy in’ to the Australian way of life. Yes we do dig stuff out of the ground (it’s a great time to be in mining again) and grow stuff on top of it (please keep raining), but our economy has long been sustained by our consumption of great Australian dreams; aspirations, which mean different things to a growing population and a changing population structure that is part old and part young, and full of dual income and multicultural families. When you observe the politically neutral RBA cutting interest rates towards zero they are simply signalling to everyone to buy something. It’s what I call, inspired by our RBA Governor Phillip Lowe, the low tide effect. Rather than the age-old saying that when the tide drops you see who is wearing bathers, Phil is simply saying buy some new ones. They want money to flow from savers to spenders.
Against this backdrop it has been interesting to watch the major retailers embrace the change upon us. Gone from strategies is the language that, for years, essentially amounted to: “Dear supplier, please pass along some additional margin from you to us,” and, “Dear consumer please accept paying less for less.” What seems to be in-vogue now is an acceptance that the race to the bottom actually amounts to a race of diminishing returns, which cheats the basic premise of the universe.
You can’t inflate when you are busy deflating
Everything wants to grow. I am no astrophysicist but the laws of energy are simple. What is will seek to become more but at some point it contracts back to what it can sustain. Whether that is the gases of the cosmos expanding till matter pulls them in; or me wanting to keep pushing my surfing into bigger, more critical waves and the ocean telling me it will make me pay the price, hold me down breathless, and force me to surrender, before it will allow me up again. There are forces like gravity you simply can’t escape, no matter how hard you jump up and down. You have to accept, see your part in the whole and understand that nobody wins without growth.
Pile it high, watch it fall
I believe we are also witnessing this awakening from our retailers. What was a simple game of shop keeping, pile it high and watch it fly, is now different. So how do you seek and find growth once you accept you can’t deflate your way to success? There are, broadly, four trends occurring at the moment to force Australia to be more up-to-date with the rest of the retail world (note dreamy secret wash shirts as J Crew opens in David Jones this year; even if it is about five years too late).
1. A unique narrative. The true heart of a great brand positioning is the message that something is attractive (distinctive) and something you can own (differentiated). I think our four major food retailers have seen this. It is part science but mostly about great storytelling and continual execution. What is out is copying. What is in is being yourself. ALDI is edited choice (savvy), Woolworths is goodness (Fresh), Amazon is choice (easy everything) and Coles looks like it’s pivoting towards something like IGA’s community centric approach matched with the every day low prices of someone like a Walmart. I feel a save money, live better moment coming soon.
2. Pull, don’t push. The weekly shop was an expectation and an obligation. As the ‘square feet effect’ of using cheap capital to add more and more space increased, we were pushed through the doors through bigger and bigger deals. Promotions like Coles’ Little Shop signal an enduring change in this dynamic. Rather than surrounding us, retailers are now seeking to focus on the pull side of the dynamic and give specific, immediate reasons to visit their store over another one. This is only going to become more important as the reasons to spend your time and pick your own groceries become more challenging. You were right all along; it is a waste of your time.
3. Data informed ranging. As a nation of migrants who have fused our cuisines together to create a laid-back sophisticated food culture it has always amazed me just how basic our food offers are in retail. This is changing rapidly especially among our leading retailers. Fueled by data that shows what is purchased where, they are beginning the process of moving beyond standard fare to embrace where eating is heading. And, more importantly, they are doing it in ways that reinforce their uniqueness. They are building customised store formats that deal with the driver of consumption in a particular locale. Most importantly they are executing these programs underneath brands they control exclusively and that can be found nowhere else.
4. Really own it. Retailers are now running their own race and turning their focus inwards. They realise that the supply chain is optimised and that their ‘last miles’ from the distribution centre to the store and from store to front door are where efficiencies must be found. They are also moving beyond ‘sloganeeering’ to create positive impact beyond ‘more for less’ in the communities they serve. It makes sense (when footfall increases but average basket sales decrease) to use the store as a platform to communicate deals but also your ideals on national issues such as climate change or using product sales to support causes we care about.
Be better to each other.
