What CMOs can learn from the highly volatile retail market
To succeed in today’s turbulent business environment, CMOs should rethink their marketing model. Jacob Bruun-Jensen, a principal at Deloitte Consulting LLP, proposes four strategic changes.
Digital disruption has created volatility in many industries, but retailers in particular have had to adapt to survive—and some have been more successful than others. Many have weathered falling sales, encroachment from online and international competitors, and executive turnover, along with a slow average revenue growth of 1.3 percent.1 While some retail business leaders say this slow growth is cyclical and will soon pick up, others believe it is structural in nature—something that can be fixed by focusing on shopper experiences or carving out a niche. In an environment this volatile, retailers must ask themselves, “What do I need to compete in this new market?”
Recent Deloitte research indicates that this slow growth could be the start of something much bigger than a cyclical shift. Since 2010, when the economy was emerging from the recession, retail volatility—a measure of increased disruption in the industry—has increased 250 percent, resulting in $200 billion more of retail sales being “traded” among competitors. Typically, larger players shake up the market by purchasing smaller companies or competing against other companies with scale. In the latest market shift, however, we are seeing smaller companies taking market share away from larger companies. For some retailers, this means death by a thousand paper cuts, where the competition is no longer the big box retailer across the street, but rather myriad new players.
Coping with the changes this disruption has caused will require CMOs not only to think outside of the box, but also to adapt their existing marketing model to more effectively compete. Here are four strategic changes they should consider to win in this new world:
- Instead of being a jack of all trades, excel in one area. Companies that are succeeding in this market are learning to make a bigger splash in one area instead of spreading themselves too thin. It may seem surprising that an online retailer specializing in razors can steal market share from a big box retailer, but this is the reality of the new era of retail. Retailers that find their niche and give customers a memorable experience can attract sales and quickly gain new ground.
- Build a world-class, innovative product. Winning in this highly volatile market means considering how to differentiate your product or service and tailor it to your target audience. While focusing on product differentiation means products have to be unique, they also have to be available only through your organization. For example, an online retailer that hand-makes customized children’s items can effectively compete against a big children’s retailer. One reason is that the online retailer is providing something that bigger retailers cannot produce. In addition, perhaps this smaller retailer is providing a warm, welcoming, personalized experience that the bigger retailers just do not do well. In a shopping environment where consumers have many options for what, where, and how to buy, CMOs must consider how to stand out from the competition.
- Win by experience. Differentiate your brand on something other than price or convenience. For instance, consider a retailer that specializes in outdoor equipment and not only sells gear, but also offers classes, climbing walls, and equipment that customers can test out in the store. These customers can find a tent at a competitive price somewhere else, but they get a full experience when they go to this retailer. For CMOs in all industries, providing a rich and meaningful experience has become critical for attracting—and keeping—customers.
- Get social. Creating a virtual relationship with your customers is key and really ties your strategy together. Many companies are doing this already, but not all do it well. Spending time and sometimes investing dollars into this area is important in today’s connected society. Figure out your company’s “voice,” start your narrative, and tell your story. Engaging with your customers through social media or via mobile allows them to connect to your brand.
Many people ask us, “Do we have a sense of optimism about the market?” The answer is not concrete. Even companies with strong brand and omnichannel retail strategies find today’s environment can be a tough place to thrive. In some instances, the broader and more diverse a product or company is, the more difficult the competitive landscape is. It is common for people to think the current conditions are a matter of big box retailers versus everyone, but now more than ever, smaller retailers are taking a bigger piece of the pie.
Learn more about our Deloitte Retail Volatility Index at www.deloitte.com.
Source: US Commerce Department, 2015 Retail Sales growth rate