A Larger Slice of a Smaller Cake?
By Brian Moore, Global Retail Consultant and CEO of EMR-NAMNEWS

If the recession is about absorbing slack or excess that has built up in the system over the past fifteen years, then this slack will have to be absorbed before ‘green shoots’ will be close enough to the surface to be able to emerge into the new world…hence the probability of a three-year ‘flat’ period, minimum.

This means that the cake is now smaller, ‘fair share’ will be less, and any increase will be at the expense of the healthier competition that have survived the initial phases of the recession and are now serving an increasingly savvy consumer.  In practice, companies are currently experiencing a change in level and type of demand within their product portfolios as consumers trade down to middle market offerings, but retain their upmarket tastes.

The best way forward is to work within what has become the new ‘normal’ market environment, and re-evaluate everything in the mix.  In practice, assume you are launching a totally new product, in a new market, to new customers and new consumers via a new company, against new, healthier competition, and leave pursuit of the ‘upturn’ to others…

With the political and financial systems compromised, banks are still unwilling to lend and firms continue to cut investment, which means that a return to growth of the economy will be further delayed.  Consumers have seen everyday certainties move from impossible to improbable to inevitable in a few short months, and cannot be blamed for becoming very cautious. 

Given job uncertainties, coupled with more realistic property valuations, consumers have become more careful in terms of taking risk at any level, more demanding of brand performance and demonstrable of value for money, very clear about basic needs and their satisfaction, and are determined never to outsource choice again.  This new savvy consumer is not the same loyal brand-user of yesterday, and needs to be re-discovered, and treated in an entirely new way, in order to rebuild new brand-loyalties.

The market itself is changing radically, as service-providers emerge to help this new consumer to make more informed choices.  Comparison-shopping has never been easier, and will result in elimination of me-too and brand overlap, as the market takes up the slack.  Private label will have to stand more robust comparison with healthy brands, or result in permanent erosion of the retailer’s brand equity.

Because of the inevitable reduction in numbers of middlemen and with fewer people buying, the market can react now faster to changes in consumer demand, and make or break brand offerings, fast.  A totally new market, prepared to vote with its feet. 

To meet this new demand, cost effectively, the brand itself has to offer new combinations of product, price, presentation and place, all re-engineered to match new market realities.  Its KPIs, criteria for assessment and ‘guaranteed performance’ will never be taken for granted again.

As suppliers cut back for survival, every role and function is being re-assessed against new market need, with a view to their possible elimination, sometimes via outsourcing.  Organisations are being ‘de-layered’, making communication more effective in the process.  The resulting simplification will make identification and meeting of market need more cost effective, leading to further elimination of organisational excess.

Obviously the surviving retailers are undergoing the same process, but even faster and more efficiently.  They are reacting immediately to on-shelf shopper demand, without the burden of time-lag research, and simply shifting risk back up the supply chain.  They are eliminating in-store cost or transferring functional responsibility for ‘essentials’ like merchandising, to trusted trade partners.  As a result, they are more receptive to, and more demanding of the business consultancy skills of NAMs and KAMs.

Finally, those that remain of the competition are surviving because of their early acceptance of this radical change in the marketplace.  They are healthier, more efficient and very effective in terms of meeting market need.  They represent entirely new competition for the brand, and need to be factored anew into realistic comparisons of brand attributes, through the eyes of the consumer and retailer. 

Long-term, the real issue is whether the consumer will revert to pre-recession behaviour in the ‘upturn’. However, given the financial, economic and political compromises that have resulted in the current crisis, holding one’s breath simply adds an additional, unneeded pressure…

For KamTips on 'Making the Offering Standout...' see Namnews – June 2009

Date article published: June 2009