Thursday, March 17, 2011

LMFF Industry Forum – Retail Detail

Earlier this week I sat in on one of the L’Oreal Melbourne Fashion Festival’s industry forums – Retail Detail. The forum was pitched as providing an opportunity for Australian retailers to share in the insider knowledge of retail and marketing experts from across the globe on what retailers can do to access new markets and sustain a competitive edge.

By far, the most influential panellist (and host) was Mark Ritson – Associate Professor of Marketing at the University of Melbourne and more interestingly, consultant to LVMH for over 10 years. I found myself continually nodding in agreement at his brutally honest assessment of the current threat posed to Australia retailers with the arrival of global giants H&M, Zara, GAP, Coach and Victoria’s Secret to name a few. I’d like to share his thoughts with you.

Ritson identified that Australia is in effect an oligopoly – a market condition that exists when there are few sellers (typically less than 7 or 8) and, as a result of which they can greatly influence price and other market factors. Aside from being profitable and well established players, oligopolies also typically fit these characteristics:
  • Ill prepared for aggressive competitor tactics
  • Slow response times to new entrants
  • They have brand awareness but not brand association
  • They lack innovation
  • They lack consumer focus
So what challenges does this leave Australian retailers facing?

1. Need to accept this is real competition
The big four banks and two supermarkets dismissed the arrival of HSBC and Aldi believing it would be hard for new players to make money in Australia, that it’s a different kind of market and that they would struggle. The truth is that Australia is a small but easy market.

2. Inventory and distinctive newness
Coach’s point of difference was to create 12 collections plus one for Christmas. This left other luxury brands who typically produced only three or four per year looking old and stale very quickly.

3. Targeting and differentiation
Targeting is key, not segmentation. Establish who you want to include and just as importantly, exclude. Abercrombie & Fitch intentionally create dark, loud stores with semi-clad males greeting customers at the front to keep older, daggier men away from wearing their brand.

4. Store experience
Break the mould and do something exciting. Otherwise I’m going to shop online from the comfort of my own home.

5. Service
Fix the broken standard of service so it’s at minimum, on par with the US or Europe. Chanel have quietly “enacted an enormously systematic mystery shopping program which drives almost every aspect of the way they deliver service”.

6. Market Research
Coach constantly refer to ‘She’ – the target client that drives everything the team do. They spend $5 million p.a. on market research, conduct 40,000 one-on-one telephone interviews and meet 500 customers per month in focus group research. They also utilise conjoint research (I highly recommend reading more about this – fascinating stuff) to drive and set prices; and engage in prototype testing. They mine their database of 10 million consumers in America for constant customer orientation. “Creativity is driven by their knowledge of the client.”

7. Consumer Orientation
Ritson believes Australian retailers are typically “run by financially driven men that don’t understand the client and truly believe that their revenues come from the revenue figures” (Oh hello! So relevant when you look at the poor percentage of women that sit on company boards in this country. Sussan Group which is 100% owned by Naomi Milgrom employs 98% women and has two of the most successful fashion houses in this country – Sportsgirl and Sussan). Revenue comes from the client and it’s time to understand her, to respect her, to spend some money on researching her and time to build the business around her. Zara’s operations diagram depicts the customer at the centre – everything they do is driven by her.

In summing up Ritson posed the question – when will Australia represent itself internationally? We have no global brands yet ‘Australia’ is the number one country brand in the world (even more so in 2011 thanks to a $5m investment in Oprah). He proposes that “We spread our brands to the international market… Maybe the best form of defence is attack.”

Australian retailers – take heed!

1 comment:

  1. No global Australian brands ... yet.

    Lloyd ;-)
    Big Richard