The end (finally) of price as a differentiator – and time for retailers to find something new.

I am probably calling this one too early. Like many extinctions, a long time may pass between the first call of a pundit to the final death knell – but here I go. Price is no longer enough, Mr. Retailer. Time to move on.

Sainsbury’s Excellent “Brand Watch” campaign surely is symptomatic of where price has led us. A zero sum game that no-one can win; or at least no-one with millions or billions tied up in real estate.

Price was never a particularly good differentiator, but it has served Big Retail well over the last couple of decades. Wal-Mart in the US used scale and phenomenal distribution systems to offer “the lowest prices”. In the UK, retailers such as Tesco used their scale to drive cost price reduction (CPR) strategies which created a virtuous (vicious, depending on your perspective) cycle of scale, driving down supply price, in turn driving down retail price, which in turn drove sales, and hence scale.

Price was an effective strategy, but is not that much of a differentiator. Even at the height of price wars, there has typically only been a few cents difference in the average price of a basket of goods. Brand Watch uses technology and “real time” data to take the old “best price guarantee” to new levels. As you check out the entire basket of goods, it is compared with the same basket of goods priced on the same day from Sainsbury’s two leading competitors, Asda and Tesco. If you could have got the lot cheaper, then the difference will be given to you. Guaranteed – you can’t buy the basket cheaper. And in a real show of brilliance, everyone gets a feel good message. If you could buy cheaper you get the cash in hand, if not they give you a message, there on your receipt, telling you how much you saved by shopping at Sainsbury. Real brilliance. As a shopper, I feel good. My initial scepticism around these price match campaigns evaporated. Here in my hand was a clear simple message. I saved money. I’m a smart shopper. Real data. Real proof. I’m sure if you dig into the small print there will be clause, exceptions and all sorts of debatable fine prints, but the execution is marvellous, with one exception. Anyone can do it. Everyone is doing it. The best the retailer will achieve is to tread water. This isn’t going anywhere.

Big Retail needs to move on. They have built their dominance on convenience, curation and price. Twenty years ago their ability to bring thousands of products together in one physical place and offer them all at great prices was enough to build empires on. No more. Things change. Online retailers can bring bigger ranges, and offer them in a manner which is far more convenient, and potentially tailored to each individual shopper. And whilst the big retailers all have online operations, their legacy stores and operations will make it hard for them to match prices against online only retailers, once these build scale.

Big Retail – time to move on from convenience, curation and price. The answer must lie in delivering a service experience, more than likely a human service experience, that adds value to shoppers and encourages them to shop there. But that is a topic that needs a blog piece of its own. For now let’s leave it here.

A range of products I can touch on shelf at good prices is no longer enough.