The question for today’s retailers: What business are you in?
Photo: Best Buy
Through a special arrangement, presented here for discussion is a summary of a current article from the IMS Results Count blog.
In one of his best-known works, “Marketing Myopia” in Harvard Business Review (HBR) from 1960, Theodore Levitt focused on a single strategic question: “What business are you in?”
Mr. Levitt argued that every major industry was once a growth industry. In a majority of cases, growth slowed or stopped, not because the market became "saturated," but because management failed to redefine its business in terms of customer needs. For instance, railroad owners should have seen themselves in the "transportation business" to meet the emerging transportation needs beyond tracks and railroad cars.
In a same manner, retailers in decline tend to define themselves in terms of what they sell. Leading innovators define the business "they are in" as how to best serve customers.
It is a fascinating exercise to look at today's retailers and ask the question: “What business are they in?” Let me take a stab at a couple:
- Best Buy – “Your 'digital plumber'”: The Geek Squad has been a prime force behind Best Buy's profitability and why customers return to get help in their digital lives. Will Best Buy's new partnership with Amazon be a plus or negative in the company's continuing efforts to evolve into America's digital plumber?
- Ace Hardware – “Ace is the place to get answers”: Ace’s staff go out of their way to provide solutions to run households. Will that be enough to bring customers back when they can find cheaper products online?
- Walmart – “Your Amazon alternative and maybe something more”: Recent investments in online, click and collect kiosks, apps and hip brands indicate that Walmart can be a competitive at "phygital retail". Will Walmart eventually define its business as being something other than an alternative to Amazon?
What business is Amazon in? While certainly in retail, much of Amazon's profit comes from cloud services. Amazon is certainly an ecosystem built on customer centricity, but is that a business? Will Amazon ultimately become a platform and portal for all commerce?
The days of retailers differentiating based on the products they sell seem to be long past. There are no distinct channels. Customers are crossing all boundaries on their own. The fundamental question today may have become: "What business is retail in?"