Ten reasons why retailers must adapt or perish

Elliott Ettenberg is chairman and chief executive officer of Toronto-based Prism Communications. The following is an excerpt from a speech Ettenberg made to the Young Presidents' Organization in Montreal on Oct. 12.from the home office in Medicine Hat, Alberta, here, ladies...

Elliott Ettenberg is chairman and chief executive officer of Toronto-based Prism Communications. The following is an excerpt from a speech Ettenberg made to the Young Presidents’ Organization in Montreal on Oct. 12.

from the home office in Medicine Hat, Alberta, here, ladies and gentlemen, are the top 10 reasons Canadian retailers must adapt retailing to the Nasty ’90s or perish.

10) Wal-Mart’s EDI system

The standard has been raised.

We all know about the negative aspects of Wal-Mart’s entry into the Canadian marketplace.

However, a good competitor also has the effect of making us all better at our jobs.

Wal-Mart’s investment in edi lets manufacturers understand how their product is doing right down to individual store locations.

It reduces out-of-stocks. It generates better inventory management. It reduces markdowns. It maximizes productivity.

9) They still make their money on their buying, not their selling

Most Canadian retailers have a strategic mix in terms of private label to branded merchandise.

Unfortunately, too many retailers see the branded segment not as their easiest sale, but as a funding opportunity for warehouse charges, over and above programs, co-op dollars, end-aisle display allowances, sampling allowances, etc.

By drying up the marketers’ consumer funds and forcing a reallocation to trade, they are inadvertently helping to kill the high-margin brand-loyal consumer.

Retailers must learn the laws of price elasticity.

8) They suffer from chronic dly disease

Most retailers have developed powerful and immediate feedback information systems.

They know exactly what was sold, when and where, in real time; unlike packaged goods players, who find out three to five months later what happened last March.

Unfortunately, instead of using the database to project future consumer behavior, they have focussed on Same Day Last Year data.

This means they are walking backward into the future because they cannot adjust their product mix to probable changes in consumer behavior.

7) The middle class is disappearing from the store

We’re only 27 million people. We are over-governed, and, hence, over-taxed. We are fort people, not homesteaders like our American neighbors.

So, the middle class, which finances government and retail, has changed purchase behavior radically. Price will not coax her out of the home at a profitable return to shareholder’s equity.

6) Still target adults 25-54, HHI of $35M+, high school + education

People no longer buy things because they need them. They buy things because they want them. Demographic targetting is an antiquated, obsolete accounting term. Psychographics is the tool for modern times.

5) Marketing is still a staff job

Most retailers still believe their bricks and mortar, their real estate, their inventory or their people are their biggest assets. Few grasp the concept that their consumer is the only asset they truly own. For, without consumer pick up, there is no business.

4) The decade of solitude is approaching

Retailers are not preparing for the decade of solitude (the naughts, 2000 – 2009.) The hippies of the ’60s begot the experimenters of the ’70s, who begot the spenders of the ’80s, which gave us the savers of the ’90s.

Retailers have consistently lagged half a decade behind consumer purchase behavioral change. They will do so again.

3) They cannot spell oligopoly

Canada’s a unique marketing experience, 55% of our buying power is found in 10 cities (U.S. = 20%, U.K. = 21%.) All our major retailers are operating in oligopolies. All our packaged goods marketers operate in an oligopoly.

You cannot successfully use price as a discriminator in an oligopoly. Retailers refuse to believe this.

2) In-home, interactive technology is a reality

The future is now. Digitalized technology has already impacted on retail, and will continue to do so.

A retailer who believes their biggest asset is the consumer, will begin to experiment and invest in this reality, and, ultimately, prosper.

Those who get goosebumps from their logos on a storefront will not.

1) They think we’re in recovery

The No. 1 reason retailers must change or perish is that they believe the press, the government and economic gurus who tell them we’re out of the recession.

Consumers don’t. They don’t believe anyone anymore. They control 66% of gdp and all of dstm.