Three decades ago, the rule of thumb in US retail was that there was room for three big players in each product category. “Good, better, and best,” as Walter Loeb, a veteran US retail consultant, recalls.
But today, it appears that each category has room for just one specialist chain, competing with Amazon, the world’s biggest online retailer by sales, and Walmart,
The issue for UK retail is how specialist retail will fare in categories such as electronics, alcohol, books and toys. The major multiples are growing at the expense of specialist retail, by focusing on these non-food categories, cherry-picking SKUs and reflecting scale economies via deep-cut prices, as retailers do…
Moreover, suppliers cannot afford, or be seen to give additional price support in different channels. Realistic customer profitability analysis will also prevent any other subsidising of specialist retailers by suppliers.
This has all been compounded by the emergence of the savvy consumer using smart phones and price-comparison sites
It follows that it is not possible for full-range specialists to compete and survive on this basis, however good their retailing abilities.
However, given that specialist retailers serve an important purpose of ‘explaining’ the category and ‘educating’ users, it is vital that they be treated differently by suppliers in terms of remuneration via performance-based-reward. In other words, a supplier should regard specialist retailers' activities as part of their advertising programme and reward them accordingly. Specialists can also benefit from help in providing category-specific instore entertainment, an enhancement of the shopping experience.
Otherwise, it is inevitable that even a 1-specialist chain, Tesco/Walmart and Amazon may be unsustainable in a flat-line market…
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