OPINION: Why marketing, not technology, drives net retail

With unemployment at its lowest level for two decades and inflation below the government’s target, the UK’s economic figures paint a rosy picture.

With unemployment at its lowest level for two decades and inflation

below the government’s target, the UK’s economic figures paint a rosy

picture.



But ask any of our leading retailers about their business and they’ll

all confess that the going is pretty tough.



Cast your eyes over the Atlantic, and this bunching is far less

apparent.



In the year to date, The Gap is some 8% up, Wal-Mart is 15% up, and Home

Depot is running at nearly 30% ahead.



Other well-known names are achieving flat sales at best.



As the FT’s Lex column reported, ’A gap is opening up between the top

one or two US retailers in a given category and the rest. For the market

leaders, it is a virtuous circle. Increasing scale and national presence

gives them cost advantages smaller rivals cannot match.’



Joining this virtuous retailing circle has long been an ambition of

major UK retailers.



Progress has been much much slower, but there are signs that one or two

may be getting there.



But, in their moment of glory, are these power retailers under

threat?



With their constantly increasing investment in bricks-and-mortar, are

they onland sitting ducks for the rapidly increasing forces of

cyber-retailing?



If they add an online presence, will they simply cannibalise their

existing sales?



Asked that question this time last year, when we were gathering for

Goldman Sachs’ annual get-together for retail CEOs, I’d have said that

some power retailers were looking distinctly vulnerable.



Their internet strategies, with few exceptions, were lacklustre. The

dot-coms were capturing the headlines. Would they also capture market

share and become virtual members of the virtuous circle?



The e-tailers have made their mark, particularly in categories which are

information-intensive, where price and selection frequently change, and

where the onland shopping experience is ’unappealing’.



Moreover, the increased availability of automatic online comparison

shopping creates a very swift means of access to your preferred

merchant.



But following this year’s New York presentations, it’s becoming clear

that the established onland retailers have begun to execute combined

online/onland strategies that reinforce merchandising strengths and

enhance the inherent power of their brands.



Marketing and merchandising, not technology, are seen as the key drivers

of internet retailing success.



Technology might be the platform, but it commoditises quickly.



So the power players are using online as a pre-selling opportunity both

to confirm their traditional customer values and to reach out to a wider

audience.



They are capitalising on situations where delayed gratification is

unacceptable, where a tactile element is an essential part of the retail

mix, and where bricks-and-mortar provide the social excitement that

’going shopping’ still offers.



And at least they have the logistics and distribution systems in place,

although adaptation is needed. Even onliners need access to this element

of ’bricks-and-mortar’.



The way forward is still by no means easy.



What is crystal clear is that the major onland power players are

devising strategies for complementing rather than cannibalising or even

harming their brands.



And of course they are achieving net margins (double digit in some

cases), which must bring tears to the onliners as their losses continue

to accumulate.



Nigel Whittaker is UK chairman of Edelman Public Relations Worldwide and

director of several on- and offline retailers. These remarks formed part

of his address to Edelman’s First International Summer School in London.



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