Thursday, December 3, 2009
...WHERE EVERYONE GETS A BARGAIN
New Zealand must be the worst country in the world for retail sophistication.
Most differentiation between similar retail traders is on price. It is all price off, cheaper, on special etc. Just look at the stupid platform that stores like Bunnings operate on - "if you can find it cheaper elsewhere we will match the price". What crap. This ultimately means poor service because of reducing staff numbers or minimal wages paid (look at The Warehouse's current labour problem). It also means poor quality product as the cheapest produced items make up the bulk of the stock. Too frequent sales cycles is another problem. Kathmandu and Briscoes have given away franchise integrity by having 40% off sales. How can consumers believe that what they are buying is quality when this is the case and with the frequency no-one in their right mind would buy anything outside of a 'sale' period.
The wine industry has followed the same dreary path - lead by supermarkets. Now supermarkets set up the 'Wine Sale' concept a few years ago and found that there was a massive spike in sales. The frequency of the sales has increased to a point now when one of the chains is generally having a sale every couple of weeks. Once again anyone wanting to buy volumes of wine would be crazy to buy outside of the special cycles. The long-term result of this special ling though will be inferior product as wine companies will be forced to engineer the quality of the wine downwards to cut costs.
Now, for what I really want to say.
A week or so ago the National Wine competition results were published with details of the medal and trophy winning wines made available. A few years back these results were eagerly awaited by retailer and consumers. The retailer so as to secure the top wines and make good profit and to help leverage sales of other wines. Consumers to scramble to buy scarce and sought after product. Many years ago prices of trophy wines would inflate as some profiteering took place.
This year, as soon as the Gold Medal and Trophy wines were named several retailers (not supermarkets to blame this time) immediately advertised that the wines were on special at vastly reduced prices! How dumb is that? If we want to have a quality industry and to encourage winemakers to strive for the best this practice is self defeating.
Basically it is due to laziness and very pedestrian thinking. Retailers (of any sort) need to differentiate on all sorts of other things before price. Giving away margin is the simplest thing to do but ultimately the most costly as not only is the product being sold for less than it could or should be but brand franchise, store franchise and consumer loyalty are all put at risk.