The Trend Of Retailing

The future trend of retailing is to sell things cheap. Thanks to sourcing of component supplies and production processes, things have become very much alike. Price has become the most important parameter when consumers make decisions. The question is how retailers can press prices further down, after outsourcing production, logistics, customer services and technical supports to the cheapest possible corners in the world. The answer is to outsource to YOU and ME, the customers.

Selling cheap makes billionaires
I've heard the story about how Karl Albrecht, the world's third richest man according to Forbes' 2004 ranking, after Bill Gates and Warren Buffett, built his supermarket empire in Germany. If the reports are correct, boxes of canned foods and personal care products are spread on the floor at the Aldi supermarkets. Aldi hires few workers to put the goods into the shelves. That's said to be one of the cost-saving tactics that allow the supermarket chain to sell at cutthroat prices, and hence expand its market share. Ironically, selling cheap, the company still makes a good fortune.

The Walton family that controls Wal-Mart and Ingvar Kamprad, a founder of IKEA, are among the world's richest people. All of them run retail businesses and play tough on pricing.

The DIY tradeoffs
My last visit to IKEA was unforgettable. It was so tiring. i grabbed a ruler at the entrance of the Causeway Bay store and a shopping cart. And i was on my own. i read lines after lines of the product descriptions all printed on porker-card-sized tags attached to the furniture. i did the measuring with the ruler provided. i could hardly find any staff for further inquiries. Virtually no one is ready to help. There were long queues waiting at the information desks. i was not supposed to get any suggestion on the matching of colors and styles. i got the quarterly brochure for free, which shows me how things will look like when combined together. i moved the furniture that i bought. i paid at the cashier. That's where i saw a friendly smile. Then i cut some ropes and wrapped the cargos. i tested the light bulbs that i bought with devices provided.

Americans like the idea of DIY. i can think of many explanations why it works in the U.S. but not in Hong Kong, yet. Americans have the time and space to work on things they like. They even develop the tasks into hobbies. They spend their leisure time on house improvement and gardening. They take up the responsibility to tank up their automobiles at gas stations. They clean their food trays at McDonald's. In Hong Kong, in contrast, many people cannot afford to manage their own laundries and do their cooking. The absence of minimum wages in Hong Kong is another reason for the supply of helpers. The shopping culture could possibly change slowly, i suspect, when consumers find that prices are low where they have to serve themselves.

The psychological process sometimes works backward. Consumers tend to feel that things are cheap when they are scattered around in a mess. Look at mountains of clothes scrambling at boutiques. Retailers do not need to spare staff to fold the clothes or hang them up orderly. They create the visual effect. The "mountains" are built in shops of Bossini, Baleno, Giordano and occasionally Esprit. IT outlets have the same display setting, but those clothes are not exactly as cheap as suggested by such an arrangement.

Service counts
Mirabell bucks the trend. i enjoy nice service there. Their salespeople are knowledgeable and ready to help. They give me suggestions and compare different shoes. Mirabell must have done a lot to train and motivate its salespeople. When a company treat its staff well, that company is unlikely in too bad of shape.

i don't mind paying a little more for better service. But i definitely hunt for the cheapest possible bargains where i serve myself alone. Even if DIY is a mega trend, i don't think all service-oriented shops will become extinct.

Gift vouchers
As a shopper, sometimes, i buy things for my own use and sometimes as gifts. i have never thought of "outsourcing" my shopping time and efforts when i am shopping for someone else. Gift vouchers, or gift certificates, make it possible. They have become very popular in the U.S. and are gaining popularity in Hong Kong.

Send your friends and relatives gift vouchers for Christmas or possibly more urgently their birthdays. They will take the vouchers to the department stores or retail chains that issue those vouchers and select what they want.

This is a pleasant deal for retailers because: 1) retailers can spread more widely their shopping seasons and better control their inventories; 2) voucher-holders tend to buy items of more than the face values of the vouchers, generating extra sales; 3) retailers have better cash inflow as there is a time gap between the sale of the vouchers and the redemption; and 4) some vouchers will be lost or simply left expired.

Your friends or relatives like it too. They don't always like what you select for them. With the vouchers, they are free to choose what they want, except for the choice of retailers.

You like giving gift vouchers. You don't need to bother what to buy.

But when you outsource the selection process for a gift, you would have probably left behind sense of understanding, sharing and caring, which are very worthy.

The value of gifts
How do we price this? A gift item carries a premium over the value of the practical functions it offers. Think of the price difference between a birthday card and a personal memo pack. Both are for people to write down messages. On a per-message basis, the price of a birthday card could be several hundred times that of a memo.

A voucher-giver purely gives purchasing power. A gift of mere purchasing power is still sweet. Who doesn't like purchasing power? Who doesn't like getting Lai See? Consider that the sense of understanding, sharing and caring could very possibly be mispriced. Think of how often you receive something that you don't like.

That's another way retailers price down
The ultimate victims are the retailers, although they are enjoying a temporary boost. They will be losing the price premiums on gifts, as demand for gifts declines. Again, that's another way retailers price down.

Feb 16, 2005
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