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Welcome to Loyalty MagazineLoyalty Magazine reports on customer retention,loyalty schemes, rewards, affinity, CRM, call centre issues, direct and viral marketing, mobile and internet channels for both B2B and B2C enterprises. It covers all global markets and business sectors, including retail, financial services, travel and hotels, telecoms and electronic commerce. |
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Tuesday, 31 January 2012 14:22 |
Comment: Out of touch Target like King Canute
Target, the giant US retailer, has embarked on an interesting strategy to counter the practice of what it calls “showrooming”.
Upset at the growing number of people who browse their stores and then go home to actually purchase online, Target has written to suppliers asking them to provide the store with “Target only” products, that are not available anywhere else.
These in-store only products, it hopes, will provide the much-needed carrot to get people to actually purchase in their stores.
"What we aren't willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands," according to the letter signed by Target chief executive Gregg Steinhafel and Kathee Tesija, Target's executive vice president of merchandising.
While having sympathy with Target’s position, and the problem of competing against low price online companies, isn’t Target’s management taking a King Canute approach?
Shouldn’t someone suggest that changing the tide of customer behaviour is about as difficult as stopping oceans and as unlikely to succeed?
Customers have been quick to realise the merits of shop and click, or research then buy. To be fair, they are also doing online investigation and browsing, and then going out into the shopping centres to buy in person. Apps such as eBay’s red laser and mysupermarket.com are very useful to compare prices and the mobile phone is going to be used increasingly to do this while customers are out and about.
Bricks and mortar retailers are finding this a problem, but the best are embracing the new technology and going with it. John Lewis, for example, has a scheme whereby you can choose online and collect in store. Many other retailers are following this model. Countless retailers are investing heavily in their online ventures to ensure customers can shop with them wherever and whenever they like.
As Richard Beattie, CEO of TCC Global, told Loyalty Magazine: “The eCommerce boat has left the harbour and any retailers not onboard are likely to be in trouble.”
Customer behaviour is changing. In fact it is a revolution of a change. This is going to be challenging for those who, like ocean liners, are going to take some turning, but it will be death for those who keep going on their traditional route. Target could well be one of these.
If Target is successful with its new strategy, some suppliers may produce Target-only merchandise. How likely is it that these will be able to compete with brands the customer actually wants to buy? Are they going to be content with the Target brand when they want Nike, or Abercrombie. Is the “made for Target” beer going to reach the spot when they wanted a bottle of original Cobra? Can you imagine Apple making a Target only iPad, or a book publisher producing a Target only best seller?
It isn’t going to work.
The big retailers have always wielded considerable power over suppliers to do it their way, but the internet takes away some of this power because, for the first time, brands are able to communicate directly with their customers.
Antony Jones, CEO of The Logic Group commented to Loyalty Magazine recently that he had bought some Swarovski jewellery as a gift, and was offered a ten per cent discount on his next purchase – wherever he bought it.
“This means that wherever I am in the world, in whichever store or airport, I can claim my discount,” said Jones. “This is very powerful, and shows how FMCG brands are communicating directly with customers now. In this example, the retailer has become less important.”
So with brands wielding more power, and using this ability to talk directly to the consumer, the retailers need to be even more careful to make their stores somewhere customers want to go.
Battening down the hatches and using yesterday’s rules is probably not going to work in this exciting new world. Ask any teenager if they would be prepared to wear Target jeans rather than their preferred make, and you will have rebellion. Suggest they go online and find the best price or the most interesting deal on the brand they favour, and you will have a willing participant.
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