National author tells how to compete against giants

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Local independent retailers will continue to be challenged by consolidation, mass merchandisers, margin pressure, new competitors, less consumer loyalty, and economic uncertainty, but there are ways to effectively compete, according to retail futurist Ryan Mathews, co-author of The Myth of Excellence.
Mathews spoke at CBA International’s Future of the Industry conference at the Cheyenne Mountain Resort two weeks ago. The Colorado Springs-based trade association represents Christian stores, book publishers, music companies and other industry suppliers.
“People are consuming more and enjoying it less,” Mathews said. “How many of you have been in a crowded mall at Christmas time enduring the crush of people just buying to complete a task?”
Contemporary life has created a mistrust of institutions and affluence has pandered to material needs while meaning in life has dissipated, he said. “Even the most affluent and successful people feel there is something really, really wrong in their lives,” Mathews said. “Institutions of all sorts are failing to validate values for individuals,” referring to the tragic killings at Littleton’s Columbine High School two years ago. “Have you seen the house where (the killers) lived?” he asked, indicating their upscale neighborhood. He said people are placing increased emphasis on values over value, and they increasingly want businesses to validate their personal lives.
As business consolidation continues and products increasingly become commodities available anywhere, successful retailers will move beyond “content-driven” transactions, which emphasize features and functions, to “context-driven” transactions, which accent psychological forces more than market forces.
Content-driven transactions mean customers may like your business offering, but they can and will buy it anywhere. However, context-driven transactions reflect an intimate understanding of customer wants, needs, and their self-identity. A bond forms between a store or business and customers that becomes a barrier to doing business elsewhere, Mathews said.
This new dynamic has caused a re-thinking in retail about how stores compete. In the shadow of big discounters, such as Wal-Mart and Sam’s Club, and “category killers” like Best Buy or Barnes & Noble, retailers are finding they don’t need the lowest price to compete.
“When you compete on context, you play where they can’t play,” Mathew said. “In content-driven offerings, anyone can match prices or product functions. But if you’re offering products or services in the context of how your customers see themselves, no one can match that.”
In retail, businesses that provide relevant products and great service can outperform those that compete on price and product alone, Mathews said. “Don’t compete on price and don’t sacrifice your business for low-margin sales,” he said. “Leverage the special sense of community you have with your customers. There are plenty of strategies for profitable, peaceful co-existence with the Wal-Marts of the world,” he said.
Mathews’ upcoming book is The Deviant’s Advantage: How Fringe Ideas Create Mass Markets, which he co-wrote with associate Watts Wacker. Both men are with FirstMatter, a consulting firm (www.firstmatter.com). The two futurists’ book embraces the importance for contemporary business to embrace “edgy” ideas, products and people because they often become the next big business idea. Featured in the March Fast Company, the magazine said, “Deviance tells the story of every mass market ever created. What starts out weird and dangerous becomes American’s next big corporate payday.”
In Colorado Springs, Mathews reflected on Wal-Mart: “Wal-Mart started as a single store 40 years ago in Arkansas in a town nobody really wanted to be in. Now it’s the world’s largest retailer.” The key to Wal-Mart’s success is that it understands its customers and always gives them what they want, he said.
“So much for the ‘there’s no chance for the independent,’ thinking,” Mathews said.