By James Wells in Maui
MAUI, USA: Narta managing director, Kay Spencer told her members and their suppliers on the opening day of the 2006 conference that this year will be remembered as a defining year where the prophecies of previous years have now become a reality.
Spencer said that 2006 has not been without controversy, and while for some retailers it has been a case of liquidation and elimination, for others it has been a march towards acquisition and expansion which has driven double digit growth.
“The big are cashed up and the small are cash strapped, while the mid size are either getting bigger or selling out.”
Spencer classified the industry into four main groups – mass merchants, online, big box discounters and service-focused specialists.
“Until now, the opposing channels have not sacrificed share to each other. Online will change these rules as public companies in and outside our industry increase sales to investors in sacred regional territories.”
Spencer claims that hardware retailer, Bunnings, has 20 stores ready to trial whitegoods and audio visual products.
“If the rumour is correct, which suppliers will legitimise this channel?” Spencer asked.
In addition to the threat from local retailers, Spencer speculated about the imminent threat from overseas retailers such as Wal-Mart or Tesco.
“If it is not Coles, it won’t be long until we have an international competitor.”
To emphasise Spencer’s point, later in the day Best Buy vice president David Berg told Current.com.au that there is no reason why his company would rule out an entrance into the Australian market.
While Spencer recommended that existing retailers defend their territory, she also recommended that her members should not compete on price, even though this is what the industry is subconsciously teaching the consumer.
“Price shoppers will only shop on price and when competing on price, the consequences are obvious. The answer must revolve around strategies which increase margin and value.”
Techniques which were recommended included the attachment of profitable add-ons, warranty, delivery, finance, bonus offers and private label products. She also recommended a strong investment in technology and logistics in order to manage obsolete stock and deliver meaningful volume.
Other strategies that retailers now must put in place include an ability to cope with the rapid shift from technology to commodity products as well as the ability to sell consumers up to more sophisticated products in the major appliance categories.
“This requires expertise, a point of difference, in home experience and not just selling the package – from demonstration to installation.
“Don’t rely on them not attacking, how by your offer you will not be attacked?”
Spencer also said that a lot of responsibility is still held by the suppliers in terms of emerging channels, declining retailers and market segmentation.
“How do you want your brand to be positioned? How do you choose your retail partners?
Forward thinking will establish strong retail alliances. We believe it is a time to choose. Those suppliers that support all channels should be aware that at retail we will have to choose.”
She said the imminent introduction of the high definition format – Blu-ray as an example of suppliers and retailers working together in a trusting and transparent fashion.