click Buyers have convinced themselves that they are entitled to deprive brands and shopkeepers of a degree of the asking price profit in the hunt for a bargain – yet in almost the same breath, they’ll tell you that businesses need to be responsible and to behave ethically and that they shouldn’t take shortcuts that compromise people or safety.
But there are prices to pay for things being cheap. In fact, one could go so far as to say that once prices get below a certain point, someone has to suffer. Some of the side-effects are obvious and horrendous: child labour; unsafe working places; the flourishing replica and fake markets; food scandals. Some are less obvious but still telling: the ongoing effects of over-production on environments and economics; the free-fall decline of high street retail in the face of online trade; and declining employment in the retail and service sectors.
You don’t have to look far for predictions that retail is about to close its doors. In this interview on Pandodaily, Marc Andreessen says, “Retail guys are going to go out of business and ecommerce will become the place everyone buys … Retail chains are a fundamentally implausible economic structure if there’s a viable alternative. You combine the fixed cost of real estate with inventory, and it puts every retailer in a highly leveraged position. Few can survive a decline of 20 to 30 percent in revenues. It just doesn’t make any sense for all this stuff to sit on shelves. There is fundamentally a better model.”
The responsibilities for an intelligent and viable response to the dilemma fall at least two ways it seems to me.
Retailers and brands have to invent new business models for their retail outlets. Clearly, the prevalent high-street model is dying – and a key reason is that shops have absolutely failed to find a value proposition to address the online threat head-on. Despite all the understanding and talk of brand, the shopping malls, the high streets and the side roads are littered with look-alike stores selling look-alike goods. The emphasis on price is proof that physical retail has lost a lot of its thrill.
If we look at what Andreessen is saying, I think the key words here are “if there’s a viable alternative”. Like publishers, airlines, the music industry, the telcos and so many others, retailers will need to find new ways of selling that justify the price point, perhaps by fragmenting offers (the way airlines have) or by making the experience of buying in store (not just pre-shopping) feel worth more than buying over the internet.
To achieve that, retailers must be prepared to be as revolutionary in how they reframe their businesses as producers have been in how they manufacture and as distributors have been in how they deliver. Compared with the extraordinary changes that they have taken part in those areas of the supply chain, shopping for the most part has barely changed at all. Frankly, it hasn’t kept pace. So retailers need to up the experiences.
Equally customers, if they want to continue to physically see and shop for retail goods need to take some responsibility for their survival. That requires a conversation about the ability of retailers to both pay a fair price (so that products can be made fairly) and make a fair living themselves. There’s a story in there, it seems to me, that needs to be teased out and it focuses on encouraging consumers to align their global beliefs with their local purchasing behaviours and making retail shopping an ethical consumer decision. It begs a question – and it’s an absolute ripper: If you believe in fair trade and in sustainability globally, why wouldn’t you believe in paying full retail price at home?