Momentum

Innovation and less “more for less”

Marcos Gouvêa de Souza, CEO, GS&MD – Gouvêa de Souza

“More for less” seems to be the dominant mantra on the

global retail and it seems this scenario will only become
stronger, specially in mature markets.

Even in the periods of forward wind, the fastest-growing

retail segments, specially in the more mature markets,
have been channels, formats, stores and brands that have
been able to offer a full “more for less” proposition. No
question Walmart has been leading this trend worldwide,
but other companies have been growing this way, as Target
or Costco in the United States; Auchan and Leclerc in
France; as well as German Metro’s Media Markt and Saturn,
in the electronics segment in Europe and Asia.

The core question is how to escape from the market

polarization that has, in one side, companies that have built
businesses and strategies to offer lower prices to
customers, pressing hard on suppliers and investing heavily
on IT, logistics and processes to make feasible to reduce
operating costs and investments. In the other side there are
exclusive brands and propositions, being luxury the best
case, with shopping experience as the critical factor. Appeal
and glamour are pivotal issues and it all may become
feasible by charging higher prices and increasing the gross
margin.

In spite of the growth of the luxury market, specially in the

developed markets, but also for some consumers in the
emerging ones, generally consumers seem to have already
chosen store formats, brands, channels and fascias that
offer even more competitive prices and add some service,
relationship and customer care, but giving up on
convenience. As is the case of the warehouse clubs.

The elements converging to make this scenario pervasive

center on the growing power of digital consumers, whose
attention is disputed by more and more brands, stores,
products, channels and also directly by products and
service suppliers.

The plethora of stores, channels and brands increases

alternatives up to the point there are so many choices that
consumers, with less time available, get lost, creating
opportunities to companies who help him to choose and
endorse consumer’s choices. This has been used with
excellence by some retailers, specially in the online world,
where it is even more importance to assure the safety of
the shopping process.

This is the case of Amazon, an e-commerce icon that

supports customers in their shopping decision, providing
product reviews and also showing customers ones, but
assuring the simple return of goods if customers are not
satisfied with their purchases. Or as British apparel
company Hawes & Curtis does, providing a broad
assortment so consumers can purchase shirts and
accessories and, even in overseas sales, all necessary
instructions for eventual product changes.

The same way many apparel e-retailers with international

sales do, in the process helping to increase online sales as a
share of total sales. MasterCard Advisors says in 2007
online apparel sales accounted for 7% of the total market,
rising to 18.9% three years later. The digital product trial,
related services and possibility of doing promotions based
on behaviors and attitudes also must have helped this
growth, but surely the main driver is the curve of positive
customer experiences in the digital environment.
It all leads to an increasing importance of value-driven store
formats and channels, as a consequence of an irreversible
process of maturity, increasing level of information and
access and growing consumer power.

The ongoing challenge is how to innovate to find new

alternatives that increase the value perception consumers
have (something way beyond the simple idea of low price)
and that would allow companies to run under higher
margins, moving away from the “more for less” destruction
route.

In this regard, it is sure constant innovation is the only

solution and brands as Ikea, Whole Foods, Nordstrom and
Container Store continue to be relevant examples that
there will always be, in any situation, an innovative and
differentiated way that let companies increase sales and
profits and avoid the low-price sameness.