As director of national marketing for a grocer, I read with great interest the Fast Company December cover story - "The Wal-Mart You Don't Know." As you know, Wal-Mart is single-handedly responsible for the drive to commoditization that is happening in the retail business. I love what Seth Godin said in his book Purple Cow that a low price strategy is the last resort of a marketer that is out of great ideas. Commoditization is all about exploiting the low price strategy.
The impact commoditization is having on the game of business is tremendous and Wal-Mart seems to be killing nearly everyone with their quest to deliver the lowest price possible.
In my work, I approach transcending the commoditization trap by following these simple rules...
Stand for Something, Not for Everything
It's the Experience Stupid
Tell the Story. Don't Make up a Story.
Stand for Something, Not for Everything
Companies that are meaningfully unique to consumers and that focus supremely on their uniqueness are successful in the face of Wal-Mart's commoditization approach. In the grocery industry, Trader Joe's and Whole Foods Market (parden the plug) are two such companies that are meaningfully unique enough to consumers to transcend commoditization.
It's the Experience Stupid
If a company treats customers as being curious and discerning and not boring and indifferent then they will reap a reward. Taking customers on a journey is one way to deliver a great experience. Build-a-Bear Workshop and IKEA are two retailers that are masterful at deliver great store experiences.
Tell the Story. Don't Make up a Story.
When you communicate your uniqueness, do it in a way that is authentic and genuine. Dasani advertising makes up a story while HBO always tells a story.
If you are interested in learning how you can help your company transcend commoditization, check out Joe Calloway's book Becoming a Category of One: How Extraordinary Companies Transcend Commoditization and Defy Comparison. It is a worthy read.
Related Stories: | Topics:Management, guest hosts: williams + moore, Wal-Mart Stores Inc., Fast Company Magazine, Seth Godin, Dasani, Joe Calloway |
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Recent Comments | 3 Total
December 10, 2003 at 1:06am by Joseph Price
I would like to know how IKEA and Trader Joe's keep their prices so low. I can't imagine that they don't have to be somewhat vigilant to do it. Does their comparatively small size make them seem less evil than Walmart? What's wrong with any company playing tough with a supplier in order to "pass the savings on" to the customer?
Some would even consider that a good deed ala Robin Hood...
December 10, 2003 at 10:59pm by Bodie Le Monz
It is my understanding that Trader Joe's keep prices low by: (a) Buying Odd Lots/Excess Inventory and (b) Focusing more on Trader Joe's Private Label products than on branded products.
Buying odd lots and buying excess inventory. From week to week, Trader Joe's product assortment will change. Depending on the price deals that they can negotiate with vendors will determine which products they stock at any given time. For instance, Tom's of Maine has a wide range of toothpastes in all types of flavors. Trader Joe's might buy an odd lot of fennel flavored Tom's of Maine toothpaste and only stock that product despite the fact that Tom's has many more flavors.
Trader Joe's Private Label Products. A preponderance of their store's merchandise is in Trader Joe's own private label goods. That alone helps to keep their prices low.
That's my take on how Trader's Joes keeps their prices low. But their website says this:
We act as purchasing agents for our customers. We purchase only first quality merchandise to sell in our stores. Our job is to negotiate with our suppliers to get the best cost. We buy most of our products in large quantities. We don't ask our suppliers to pay us "slotting allowances" ("rent" to put their products on our shelves) or promotional allowances. We manage our packaging, distribution and advertising costs well. As a result, we eliminate a lot of the costs which add to the prices of products on supermarket shelves
Over here in the UK I frequent Odd Bins to buy wine. Like Trader Joe's, Odd Bins features good values and to get those good values, they buy odd lots of wine. The closet thing to Odd Bins in the states is Best Cellars.
All the best,
Bodie
December 13, 2003 at 7:13pm by Jennifer Rice
I have a bit different view of commoditization. A company is in commodity status when it is not offering enough value for customers to pay the asking price. Commodity companies must continually decrease their prices in order to maintain a revenue stream... in other words, they're not 'exploiting the low cost strategy'; they're the self-made victims of lack of value. I have worked with several telecom providers who are trapped in price wars, and it's because customers don't perceive any value difference between the players.
Conversely, there are many non-commodity companies who are pursuing a low-price strategy, and it's not due to a lack of ideas. Take Dell, for example. They can charge a lower price than IBM because they've innovated their operations. Southwest Airlines and Trader Joe's are also great examples. The common denominator is not that they're less expensive, it's that they've innovated in a way that customers value. They 'could' actually charge more and people would pay it because they're providing a quality product or service; but it would run counter to their established brand.
So WalMart is commoditizing brands? I don't think so. They're simply determining who's willing to be a commodity brand and who isn't. Levi's is prostituting itself to WalMart because it had already lost its brand value. Leaders who know the value of their brands, who know they're delivering value and that their brand has a loyal following, will not succumb to the WalMart commodity-making machine.