Three words for the same thing? It may look like that at first glance but maybe not.
Price is what all retailers talk about almost to the point of obsession. The axiom, that the price of anything is only what anyone is prepared to pay for it, is true. But we have got lost in a race to the bottom. The figures for 2015 quoted in the last blog show that volume growth outstripped value growth by 4%, meaning that we are selling more goods at a lower price. The fact that the fastest growing sector is currently discount retailers shows up this trend. But is it all about price?
Value is linked to, but not dependent on price. Value is when you can demonstrate the worth of your product to your customer and add in the less quantifiable parts of your customer proposition (hate that phrase but can’t think of a better one!), like excellent customer service, extra bells and whistles as part of the price or great product knowledge. As a savvy customer I would go out of my way to use a shop/service when I have received good customer service or an added benefit to that service. Likewise I have walked out of shops where the service was awful, rude, incompetent or all three.
Cost, however, is where it gets interesting. There are the direct input costs of a product or service but also the indirect costs – inbuilt obsolescence, carbon emissions, air miles, extraction of natural resources (petro-chemicals), waste and landfill costs. So to put it simply, you may pay more but the product lasts longer, so that you don’t have to replace it as often, and so set the consumption cycle off again. It also cuts down the environmental cost of the product too. Jonas Engberg of Ikea recently suggested that we have reached “peak stuff” in some parts of the world. “We see emerging circular-economy business models as a great opportunity to develop the business further,” Engberg said. This may seem counterintuitive to retailers who want to sell more and more stuff to their customers to grow their businesses.
But maybe Jonas Engberg is right, smart retailers will get ahead of the curve and look to the circular economy to grow their businesses. As customer perceptions of price and value change the time is right to explore this as a growth strategy for retailers. More on this theme in future blogs.
Happy Easter to all and Happy Retailing!