2012 will continue to be a tough environment for retailers. Consumers have no reason to throw off their new found sense of caution and propensity to put saving ahead of spending. If anything 2012 may produce even more reasons for them to retreat with some recent news of the financial services sector spruiking the need to lay off workers, and a sense that flat retail sales is placing huge pressure on retailers to reduce costs.
Retailers will need to re-think everything. At the top of the list will be how they deliver value. This needs to extend beyond simply running sales events. It requires a wider gambit of thinking that includes the sort of retailer experience shoppers are exposed to, product selection and where possible the merchandising of exclusive products, finding the sweet spot at the intersection of the digital and physical worlds etc. It means re-thinking what your value proposition is and why it is or is not compelling. At its heart it is seeking ways that move beyond discounting as the foundation for delivering value. If regular discounting is to be your mantra then it will only make sense if you are positioned at the low end of the market and your operations are geared to deliver a sustainable outcome.
But yes, I agree, nothing new in the above comments. In fact like a lot of things easier said than done. However the retailers who have been inspired to reinvent their value chain are reaping the rewards. Think Ikea (stylish flat pack furniture). Think Zara and Top Shop (fast fashion). Think Bunnings (first mover in box format hardware in Australia). I suggest you at least explore the possibilities by deconstructing your value chain and appraising it against your competitors to determine how it may be reconfigured or amped up to provide yourself with a more differentiated value proposition.
In addition to having a rethink in terms of the value you offer, every brand should also be consciously determining the values it seeks to express. Phillip Kotler in his recent book Marketing 3.0 notes a growing trend in society, whereby consumers are now not only looking for products and services that satisfy their needs but also searching for experiences and business models that touch their spiritual side. Supplying meaning is the future value proposition in marketing. He sees the values-driven business model as the new killer app in Marketing 3.0. Marketers need to identify the anxieties and desires of the consumers to be able to target their minds, hearts, and spirits. In the globalization paradox, the generic anxiety and desire of many consumers is to make their society—and the world at large—a better, perhaps even an ideal place to live. Brands need to share the same dream with consumers and make a difference.
When you consider the Australian retail sector I challenge you to identify a major player who distinguishes themselves by being known for their social conscience. In most categories the competitive dimensions remain entrenched in product, service and other functional attributes. Seeking to build social equity by being a values driven branded organisation represents a fertile territory for retail brands to ponder, particularly if we find 2012 to be a year where economic confidence remains shaky and Governments struggle to craft a reassuring narrative of the future.