Supply & Demand: Always driving the fortunes and misfortunes of retailers
The latest retail sales figures do not make good reading. Everything from footfall to sales volumes, margins and profits are down. Behind the data the customer is quaking under the pressure of rising costs and inflation. This is the news.
The reality of the ‘new normal’ after COVID is more about the balance between digital and physical sales. In most cases digital is higher than before but has settled back somewhat since lockdown. This is the new balance, a reality check for pure plays in particular, from Boohoo and ASOS, to Made and Deliveroo. This is the new reality.
And whilst costs, inflation and customer confidence are at the mercy of new and sometimes unpredictable occurrences, a war in Ukraine, energy crises, natural disasters effecting raw materials, the fundamental issue is the same. The Supply & Demand equation is inevitably shifting towards a massive over supply scenario. Retailers are general fighting for market share of a diminishing demand.
Whilst governments, and our new prime minister, can do more to increase that demand by somehow lightening the tax, energy cost, inflation and interest rates load on consumers – we all hope Mr Sunak addresses this – the supply-demand equation is not going to change soon, if at all, as we move to an economy which will have to consume and produce less and make profits of more from less.
Retailers need to be ‘essential’ to survive & flourish. Lockdowns taught us that. But being essential in this new landscape is now considerably more than just availability, convenience & price. Whilst the ‘essential’ in lockdown was driven by a temporary shift to under supply, an inconceivable scramble for products, the dramatic re-balance is a stark and harsh lesson in what ‘essential’ means now.
What the Supply & Demand balance teaches us in any specific market is simply –
“How good do we need to be, to be essential?”
“What functionality and integration is required to be on top of the retail evolution curve?” “What levels of expertise and delivery are needed to stay ahead of the competition?” “What degree of emotional sophistication is essential to satisfy the customer?” “What level of relationships must we generate for the public’s loyalty and patronage?”
These are all challenges that must be addressed and conquered by retailers. Because the bar to being essential is now so incredibly high!
And the fact is that even when customer confidence improves, and higher demand results, that bar of ‘essential excellence’ will not come down. Because new brands and retailers are always there to bring increased innovation, enthusiasm, efficiencies, and new relevance into any demand growing market. Demand drives more competition.
It is, as all markets have always been. Innovators, both new and existing, will find new ways to improve and more reasons to be essential. The swift and agile will learn and adapt to the new expectations. New retailers will appear with best practice built in, and those who cannot respond will struggle and disappear.
The cycle is endless, but the current dynamic and speed is unprecedented.
What business, and our governments, can do is to provide the best possible environment for retailers to innovate, evolve and achieve the higher levels of excellence that now constitute being essential. A realistic approach to business rates in an omni-channel retail world, the levelling of the digital/physical tax playing field, relaxation of the burden of corporation tax for smaller businesses, funds and resources for training in new technologies, and old-fashioned customer services, apprenticeships, private public collaboration on infrastructure, broadband and so on… Again, we all hope Mr Sunak addresses these issues.
But no government can guarantee survival, let alone success. That has always been down to individual businesses, and whether they decide to improve and innovate, to reach for the elusive bar of retail excellence, or to languish and disappear into retail folklore.
Ultimately the customer decides, through their buying, or their non-buying preferences.
Because in these saturated and savage markets, they will no longer tolerate and accommodate anything less than excellence. Excellence, in what for each of us constitutes our own personal interpretation of ‘Essential Retailing.’