Australian Retailers Lay Blame in Wrong Direction

Internationally accredited strategy expert, Robynne Berg warns the Australian retail industry is headed for increasingly difficult times unless retail chiefs start transforming their businesses.

In her whitepaper, Breakthrough Growth Opportunities in Australian Retail, published this week, Ms Berg argues that retail executives who continue to blame their current profit woes on external factors, including online retail, market fluctuations, GST thresholds or the economy, have no one but themselves to blame.

 “These are all issues in their own right,” Ms Berg agrees “But they are the symptoms not the cause of their profit challenges. The core issue for Australian retailers is that they’re working to redundant business models. Unless retailers change their business models and embed an innovative culture they will continue to become less sustainable.”

Her whitepaper contends that the exponential growth in online shopping is not the greatest threat for brick and mortar retailers.  She cites poor Australian retail performance on the endemic problems of poor customer service, ignorance regarding today’s consumer and a persistent discounting mentality. Ms Berg maintains retailers are continuing to base their businesses on out-dated business models and misaligned short-term strategies.

Ms Berg points to retailers including Harrods in the UK, Apple Stores and Zara who have adapted innovative business models and put customers at the centre of their strategy resulting in exceptional revenue, profit and customer loyalty.  
Ms Berg also attributes retailers’ focus on competitive strategy as another core factor in the industry’s current slump. “The problem with competitive strategy – which underpins most traditional strategies – is that it focuses on agreed competitive factors that lock companies in head to head competition for market share and competitive advantage and blinds them to significant shifts in the market place. Focussing on competitors and seeking to emulate or eclipse their strategic moves can leave an organisation oblivious to the actual factors that will drive growth and profit.”

Importantly, retail is not dead, the whitepaper asserts. Rather it is at a pivotal point where those retailers who can transition their organisations and enact transformational change will position their organisations for significant and sustainable growth and profit.

To create sustainable growth Ms Berg states organisations must adopt the principles of transformational or Blue Ocean Strategy®. She encourages retailers seek strategies to break the trade off between differentiation (high value) and low cost strategies and strive for value innovation. Value innovation is the core principle of Blue Ocean Strategy and refers to the simultaneous pursuit of differentiation and low cost strategy.

Ms Berg advises also advises retailers to look beyond the market boundaries that define their business and to view themselves within the context of other industries, strategic groups, customer groups and time. “It is when organisations look beyond the established market boundaries that they will identify opportunities for significant growth and profit; potentially in a way that is industry changing.” 

“The iconic retailers of the future will be led by the visionaries who don’t just talk innovation but embed it into their organisations. Retailers who reframe their business models, embrace today’s consumer and engage shareholders, staff and suppliers in their vision will reap the rewards through revenue, profit and customer loyalty.”

Background

About Robynne Berg:

Ms Berg is Managing Director of Berg Consulting Group and works with Australian businesses to create transformational strategy. She is one of a select number of accredited Blue Ocean Strategy consultants in Australia. She specialises in retail, tourism, financial services and the public sector. She delivers senior executive training, workshops and strategy consultation in creating an innovative mindset and Blue Ocean Strategy.

About Blue Ocean Strategy®:
Blue Ocean Strategy argues that tomorrow’s leading companies will succeed not by battling competitors, but by creating uncontested market space (‘blue oceans’) poised for growth. It focuses on “value innovation” – the simultaneous pursuit of differentiation and low cost strategies.

Blue Ocean Strategy (BOS) is the result of 20 years of research by Professors W. Chan Kim and Renee Mauborgne who studied over 150 strategic moves in more than 30 industries. Their research was the basis for the international best selling book, ‘Blue Ocean Strategy’.