3 lessons to learn from the supermarket big boys - Part II

Last week, in Part I, I briefly covered the evolution of supermarkets and showed how their business model came to be and what lessons we could take from that. Lesson #1 was about pricing and Lesson #2 was about branding.

(Read it here if you missed it.)

LESSON #3: STRATEGY

There are three key strategic takeaways from studying the history of supermarkets:

Firstly, standing still is certain death. The middle ground, where are you trying to be all things to all people, is not a sustainable strategic position. Any concept in between will be squeezed out towards one or the other. (Read more about the Big Squeeze here.)

Knowing where you are, where you want to be and the translating that into a business model is the essence of a strategy. That is, the ‘positioning’ you adopt dictates your strategic imperatives.

For example let’s say you can choose to be a (1) mass-market, disposable fashion segment operator, or you can choose to be (2) a high-end, high-fashion boutique operator. Depending on your choice, you will build your brand, your supply chain, and your pricing strategy based on that initial choice.

And this is the important part: If you choose option 2, you cannot simultaneously play in the low price, high volume segment. It is self-evident, but yet every day, we see the exact opposite.

Secondly, the key to driving costs down is aggressive innovation in technology. Big box retailers like supermarkets have led the way in innovative technology, from bar codes to big data and beyond. The financial, direct cost of technology is coming down, but the rate of change is adding a significant indirect cost of constant learning and re-learning, constant tweaking and changing. This is the advantage of the little guy because the investment is lower and the turnaround is quicker.

Finally, and most importantly, every supply chain will have (or attract) middlemen who want to rort the system and ‘clip’ the proverbial ticket without investing in the ownership (and risks of owning) the product. This has been so since time immemorial and it is true today. The new incarnation are SEO services, providers of marketing automation services and the like.

If history is anything to go by (and it is) you can plan for the following inevitabilities:

1. Businesses will evolve towards a more efficient supply chain with fewer middlemen. I don’t know what will replace these middlemen, but something will. Something like the Google Buy Button may well be the thing that changes the game completely.

2. The oscillation between big and small will continue. The Amazon-Alibaba-Google cohort will become the price/convenience operators and the only point of difference will be … not that. The strategic challenge is to find a competitive advantage that capitalises on your smaller size and taps into something the customer really values.

It won’t be product knowledge, because the internet killed that. Figuring out the answer is a key strategic imperative.

The good news is that customers naturally prefer to deal with the little guys, the ‘market operators’ of today, but they won’t do it any price (lesson #1).

Even better news there ARE answers, the question is simply whether you will find it.

Have fun

 

Dennis

Ganador: Management SOLUTIONS (especially tough ones)