retail news in context, analysis with attitude

by Michael Sansolo

Increasingly it can feel as if traditional businesses are no longer playing on anything resembling a level field.

The onslaught of e-commerce has brought with it competition against companies that seems to operate outside the normal gravity of business. Companies post quarter after quarter of losses yet only watch their stock prices soar. The standard demands on businesses seem inconsequential with these new players.

But in truth, this has all happened before. Think back to the early 1990s when Walmart Supercenters and Costco clubs were the disruptive forces in retail and many of the same complaints were made. So it’s instructive that we remember two things from that era: first, some of those complaints are completely unfounded and second, that some are not.

Let’s start with the items that are unfounded…

Back in the early 1990s, retailers were convinced the non-traditional retailers were somehow operating with a competitive advantage. The industry dutifully studied the situation, endeavoring to prove the point that the newcomers had unfair advantages especially in pricing from suppliers. Instead, the industry found the new players had built themselves for a new era, with unmatched efficiencies that permitted them a substantial cost advantage.

That knowledge gave way to the industry’s Efficient Consumer Response initiative, which, while derided in some quarters, provided ideas that still fuel improved thinking and operations in many quarters. David Jenkins, the godfather of ECR and the former CEO of Shaw’s Supermarkets, is no longer on the scene sadly, but it would be wise to heed the challenges he gave the industry back then.

Essentially, Jenkins forced the industry to recognize it no longer was the leader in efficiency and use of technology. Today we see companies including Walmart and Kroger seemingly recognizing the same reality and searching for ways to leapfrog their way back to the cutting edge on technology and consumer service. The simple truth is what was good enough for success just a few years ago, is no longer anything close.

But then we have to recognize these new players are different and do have built-in, possibly unfair advantages. Back in the 1990s Walmart and Costco were praised for their creative approach to many problems in much the way that Amazon and others are today. These new competitors aren’t burdened with legacy systems and thinking. They seem to have a stunning willingness to experiment and an even better ability to stop a failed experiment and move on.

Operating with, dare we say, Pirate Captain Jack Sparrow’s attitude of “break the rules, fight only where you can win and move on,” these new companies remind the rest of us that we need find a way to see the playing field differently.

This was made vividly clear recently in a New York Times interview with Reed Hastings of Netflix. Hastings made clear how he sees his products and his consumers and did so in a way that suggests how big a picture he sees. Hastings says Netflix isn’t really competing with studios and other companies offering all manner of video streaming services.

Instead, he said, “We actually compete with sleep. And we’re winning.”

Given how Netflix has changed viewing habits, turning binge viewing into a common pastime, it’s obvious that Hastings went well beyond tilting the playing field. Rather he created an entirely new field. Anyone competing with Netflix has to do it on his field and likely will do so for a while until a new change agent comes along to threaten Netflix itself.

Traditional businesses need recognize his attitude and his success are what everyone competes with these days. Old thinking didn’t beat past competitive challenges and certainly won’t beat this one. It’s essential to remember the playing field has changed and it’s clear who is winning and who isn’t.

Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
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