Opinion

As retailers face existential crisis, agencies need to step up their game

Edge's Fergus Stoddart compares Australia's retailers to the rest of the world, and considers why its lagging market means agencies need to step up.

So we see another round of retail Christmas ads. Remarkably similar to last year’s selection. You can’t knock the production values or the festive feel-good factor, but is it another demonstration of the lack of innovation in the retail space?

Tectonic shifts in technology, society and personal attitudes have dramatically changed the way consumers behave. Brands cannot settle because consumers won’t, and no one is more exposed than our retail industry.

There’s no doubt it’s a challenging time and most of our retailers are not well placed to survive and thrive. We all know the top-line story:

Amazon is open for business any day now.

More global brands continue to arrive.

The newer pure play ecommerce entries are stealing share.

New(ish) media players (Google/Facebook) are controlling access to the new retail audience.

With this onslaught, consumers are now exposed to so many options, changing their expectations and behaviour. They are more connected, more empowered and spending more than ever.

So even with retail spending increasing, most retailers are experiencing downward pressure on prices, growth and profits.

The need to innovate and change has never been higher.

History says that once online penetration reaches 20%, major retail businesses fail. Products that could be digitised were first to hit the wall: electronics, films, books and music left many of the leading players in each industry powerless to react.

Most retail categories are nearing 20% and are under significant threat. Figures from NAB* show where we sit in comparison to international markets.

% Going Online % International Online
Fashion and Footwear 20.6% 40.4%
Homeware/Appliances 19.6% 9.7%
Department Stores 17.2% 44.8%
Recreational Goods 16.9% 56.8%

* NAB online index Dec 2016 and IBIS WORLD

Yet retail is locked into a culture of building marketing plans and KPIs on “year on year” targets, including like for like store growth, like for like revenue per store growth.

They all want to ‘comp’ themselves with comparative results. By its very nature it means that they start with the base from last year and build off that simply because they have always done it that way. Hence they don’t change the rules and innovate.

In a market like this, traditional retail marketing is no longer relevant for either consumers or effective for suppliers. There needs to be a fundamental shift from mass market “price and product” led campaigns and catalogues to one-to-one content.

Retailers need to embrace a blend of personalised, local and social content and advertising that connects to a new customer and drives sales.

There’s a huge communication challenge ahead for most retailers. With so much choice available and a lack of differentiation, there’s need to double down on brand building. They need to invest in a clear, original and meaningful brand purpose and story, big brand ideas that drive long-term equity, brand storytelling and content and contextual brand experience (one to one).

Supplier support is critical for many retailers. Brands need to unlock the catalogue of future and develop value and access propositions for their partners. They need to prioritise their owned media and data strategy, content marketing and publishing strategies along with improving digital customer experiences.

All of that needs a new way thinking and a different agency relationship. Just as many retail marketers are stuck in their ways, so too are many agencies. Agencies need to challenge more and be genuinely accountable.

If we as an industry want to stay relevant and add real value to our retail clients, we need to commit to an aligned and accountable partnership that addresses their future customers evolving needs.

We need to commit to a performance-based partnership approach. One that is agile and always on. One that provides accountable project/output deliverables rather than traditional retainer deliverables.

It’s a challenging but exciting time for those brave enough to change.

Fergus Stoddart

Fergus Stoddart is a partner at Edge. 

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