Commoditization, is it happening to you?

28 11 2007

“We are living in an era where there are too many retailers serving too few customers and where there is no longer any brand loyalty or retail loyalty” Kevin Burke, President/CEO. The American Apparel and Footwear Association.

From this comment by Mr. Burke I believe the apparel and footwear industries are in the midst of an important struggle, to move away from their current status of a commodity business.

The winners will be those with strong design, distinct brand, and smart developed distribution systems. The same can be said for almost any current industry.

Too many retailers and points of sale? I doubt it. What I interpret from this comment is that there is intense competition between retailers, and instead of seeking exclusivity or innovation to attract and maintain customers, they are using the oldest,simplest trick known….lowering product prices and with it, the quality of the shopping experience.

It is a classic example of commoditization.

Manufacturers are also to blame. The rush to sell their product to high volume buyers insures loss of control of the marketing and retail channels.

The rush to sell everywhere, to everyone, at the same time allows and promotes price competition and price wars between the various manufacturers and retailers.

Too few customers? The real problem is overproduction. Current manufacturing focuses on high volume production and this encourages the standardization of product. The desire to reduce fixed costs drives manufacturers to seek out cheap world labor, increase productivity through mechanization (which encourages product standardization) and the outcome is a mountain of finished products, created all over the world, that are indistinguishable from one another.

Commodities. Most apparel and footwear companies focus on low cost, high volume manufacturing, they sell to wholesalers or retailers that also focus on volume. So suddenly branded products can be found in department stores, boutiques, grocery stores, flea markets and the Internet. The product is everywhere, consumers have learned that one should just look for it where the price is lowest.

This also makes it easier to pirate and sell a product to a growing network of sales outlets focused on offering a brand name for less.

No brand or retail loyalty?
If there is no customer loyalty (read as no perceived advantage to shopping with you versus the competition), and loyalty is important for continued growth, profit and success, then it’s time for a serious reevaluation of how one is doing business.

How can one stand out from the crowd, do something different and unique, and create a sense of exclusivity and prestige for the consumer?

This is the future.

Related Links

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25 02 2011
Commoditization, is it happening to you? | Business Blogs

[…] Are you listening to what the customer needs? Lee Iwan Accumulated Experience […]

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