Are retailers dead? Time for managers to step up
Thursday, September 6, 2012/
It seems as each week goes by we see another Australian retailer either announcing that they are in trouble, or as in the case of Allans Billy Hyde, going into receivership.
The mantra they are citing as the cause of their troubles is pessimistic consumer confidence and offshore retailers enticing buyers with lower pricing. While I would agree that internet retailing sites and the slowing economy have made things more difficult for retailers, I would argue that to some degree, management’s inability to adapt to a changing world is more the reason for the demise. Let me explain.
All markets run in cycles from boom to bust, and history is littered with examples of these boom to bust cycles such as the ‘Tulipmania’ boom in the 1600s and the ‘South Sea Bubble’ of the 1700s to modern-day boom/busts such as the ‘Tech Wreck’ between 1995 and 2000.
In every boom/bust cycle, the psychology of the market goes through many stages as the cycle weaves its way from start through to the boom period and the eventual bust. I associate the stages of these cycles to the four classical elements of water, air, fire and earth. Another way of explaining it is gestation (water), expansion (air), contraction (fire) and consolidation (earth). Wise investors recognise the signs that occur at each of these stages, adapt to them, and then invest accordingly.
At each stage of these cycles we need to move through a process, which is no different to what I teach traders to do. I advise my students that to be consistently successful that they need to move through a process of recognition, acceptance and adaption.
However, I find that many people in traditional businesses are struggling with this type of process as consumer expectations are changing quite fast. Many are failing to either recognise the cycle is changing, accept that it is changing or, lastly, adapt to the changing stages of the cycle.
As an example, I visited my local Allans store to buy a guitar amplifier. After 20 minutes in the store I had to approach someone for service, and this was not my first experience of the service in the same store. From that point, the service was reasonable – however they almost lost a sale as I nearly went elsewhere. The same amplifier I paid $250 for was available online for only US$150, plus $200 delivery, so while the amplifier was cheaper online, getting it to my door was more expensive.
I have talked to many consumers, like myself, who are happy to pay slightly more at a local retail outlet for good service from someone knowledgeable and the luxury of taking home the product immediately, rather than ordering online from faceless people in another country.
Anyone who has tried to shop at Myer or David Jones knows the extreme difficulty in getting the attention of any staff, let alone the waiting times suffered at registers simply to pay. So it’s no wonder many prefer to shop online, and you can’t blame people, especially if you can get the same product cheaper online and not have to worry about average to poor service from retailers.
On the flipside, step into any Apple store and within 10 steps someone approaches you offering help, which from my experience, is excellent. In simple terms Apple makes it easy to buy from them, and so it is no surprise that it has now become the largest company in the US.
If I am looking at retailers to invest in, then you can be certain I am looking at how they are moving through the stages of the cycle to see if they are following the process of recognition, acceptance and adaption. Consumers are now more demanding, so maybe our retailers need to take a bite out of the Apple story and recognise that retailing has changed and adapt to it.
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