Mirror, mirror on the wall, so who is the cheapest of them all?
For months we have been surrounded by a wall of noise – mainly from media commentators and investment analysts who have loud opinions but no real idea – about the ‘power of Amazon’ and how its online model will crush all before it. Now we get to see the reality for ourselves. But an interesting study came to light recently that sheds new light on the survivability of the Amazon model into the medium and long term.
Conducted by BMO Capital Markets in the United States, an extensive cross shopping survey comparing like for like items, the study found that Amazon and Walmart online had almost identical basket prices on most items with Walmart considerably cheaper on selected items. However the big surprise was which retailer actually turned out to be the cheapest.
Turns out that the cheapest place to buy is actually Costco stores, followed by Costco’s own website. Yes – their stores were cheaper than their own website and Amazon by some considerable margin. As is usually the case, pricing is always an item-by-item comparison and as we have found out by alternate comparisons between Woolworths and Coles, the only real comparison that matters tends to be the basket not the individual item.
But this survey confirms what most people who have studied retail for more than a decade already know. The real Amazon and the media hype are two very different things. There is much to admire about Amazon and they have – in many ways – forced overdue changes to the retail landscape in distribution dynamics and operational models.
But they will not destroy physical retail and they will themselves hit some pretty big roadblocks. Time will tell whether they themselves survive but if they do, it will certainly not be in their present form – for the simple reason that retail is constantly evolving and always has.
The New Year will bring more changes to retail. Many poor and lazy retailers in this country will become victims – not to Amazon – but to their own weaknesses, many of which lie in the area of leadership. Retail is overdue for a cleanout and we’re in the middle of it now – globally. Retailers with fresh, new ideas that customers value are thriving. Great products are selling and attracting a price premium.
And being the cheapest is not as easy or as sustainable as it may first appear – as Amazon is now finding.
So mirror, mirror on the wall who is the cheapest of them all? There is only one answer to that. What time is it? Because minute to minute, item-to-item, opportunity buy to opportunity buy the order changes. And the order of who is the biggest and most powerful is often a moment it time exercise while the competition adjusts and reacts.
You need to be more than the cheapest. You need to be the best and those that forget that simple premise do not survive the long game.
Peter James Ryan is a retail expert and head of Red Communication. 02 9481 7215 or [email protected].
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