How your company’s purpose impacts your competitiveness

It’s the time of year when retailers publish their annual performance after the holiday period. Depending on what news story you looked at you might think that it’s been a great period for most, and really good for one, or you might think it turned out poorly when considering the bigger picture.

What’s clear is that the retail industry continues to become more competitive, and the traditional retailer continues to worry about the Amazon effect. The problem is that most retailers are doing little to really innovate in how they serve customers, preferring a follower model. A quick look at how they all position themselves suggests how the company’s purpose impacts competitiveness, and how this might affect the longer term investments and strategies.

Little differentiation

Marty Neumeier describes 5 ‘clutters’ that impact competitiveness .  These are Product, Feature, Advertising, Message and Media- they’re explained in this slideshow. Today there is an abundance of choice for consumers. A wealth of information creates a poverty of attention. If there is little difference in an offer then people will likely stick with what they know and are used to – basically, there’s no reason to spend time and energy moving.

Below are the straplines or slogans of the major retailers in the UK and US. Basically, their core message or purpose.

“Save money. Live better” – Walmart

“Every little helps” – Tesco

“Live well for less” – Sainsbury

“Big on quality, Lidl on price” – Lidl

“Spend a little, live a lot” – Aldi

“Right store, Right Price” – Kroger

“Expect More, Pay Less” – Target

“Whole Foods, Whole People, Whole Planet.” – Wholefoods

“Everyone deserves quality food. Everyone deserves Waitrose” – Waitrose

UK-based Morrisons has shifted messaging a number of times over the last few years including “Everyday low prices”, “I’m cheaper” and now “Price crunch”. It seems to be having trouble settling on the one message that best represents the goal, but it tends to follow the general pattern of the majority: being the most price competitive whilst improving on quality.

Purpose clutter

When you look at them all together it’s hard to see much clear differentiation or difference in purpose.  Wholefoods and Waitrose play more on quality and wholesomeness rather than price. The rest are very much focused on price and seem to target the most sensitive customers.

Cutting costs is the major game in town. It’s a reasonable bet that the majority of investment will be either focused on ensuring gross margins remain healthy by cutting costs, or removing every point of operating cost to keep SGA as low as possible.  I haven’t looked at the Features of each experience, but it’s probable they each have price matching strategies and associated technology investments.

Differentiation creates attention

Retailers are suffering from message clutter, which results in similar advertising. The missions of the firms are so similar it’s actually leading to feature and product clutter too.

In such an environment, it’s not hard to see why Amazon provide such a refreshing option.  A different mission, a different approach:

“Earth’s Most Customer- centric Company” – Amazon

Even though they are still in the same industry of providing general merchandise, and moving into other retail segments, the over-arching mission is quite different.  They have moved beyond the pay less message.  They aren’t necessarily targeting the same market demographic as the rest, but are providing low prices as well as an online customer experience that is simpler and easier than the rest. Over time, their approach will continue to eat into the markets of the others.

Remaining relevant and competitive

It’s reported that in the next 3 years the online retail segment will grow from $200bn to over $500bn. A little will come from general market growth. But, much of this will come out of the bricks and mortar business. As the preferences and needs of consumers continue to shift it might make sense for the smaller players who try to compete on price re-focus efforts to better differentiate more on their why to improve the overall competitiveness.  Even the bigger players should consider what they can do better than everyone else and start to draw a stronger message. The goal is onlyness:

“Our brand is the only _____ that _____.”

Creating a strong and distinct purpose smaller retailers has to be a priority.  Otherwise, some may find themselves becoming irrelevant.

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