Courtesy High McLeod  @ Gaping Void

Courtesy High McLeod @ Gaping Void

Retail has changed, very quickly and in a fundamental way, but not for everyone.

Retailers, the blokes with the bricks and mortar still hold sway in most markets, but to varying degrees, and can continue to do so if they are as smart as they have been in the past.

Consumers no longer have to go down to the store to buy much of their stuff, their store increasingly is in the palm of their hand. That is fine for cameras, refrigerators, and perhaps baked beans in a can, but not so good for fresh produce, meat, fruit & veg, and dairy, categories that are driving the profitability of supermarket retailers.

If we know anything, we know new models will come to light.

In the past, producers needed retailers to break down their bulk product, whether it be jeans, baked beans or refrigerators, and sell to consumers, but now consumers can go direct. So, it is not just the retailers who face change, it is the producers.

Held to ransom for years by retail that in effect sold them retail real estate while selling to the consumers, suppliers have some leverage back, and a few of them are game enough to love it.

The question both needs to answer is how they can best meet the needs of the newly empowered by information, consumer, who does not really care who supplies them the product, it is just about the convenience, choice, delivery and price of a transaction.

Looked at from this perspective, the retailer has a role to play in the relationships consumers have with brands, and suppliers, but they must make their money from a different model, one that relies on the manner in which they “touch” the sales process, rather than being the one solely in charge.

Sales leads that come from social media and the web are still just as likely to generate a sale in a physical retailer as they are on the web, and given that web sales are still a small proportion of total sales, using the web should be a seen as an opportunity, a bonus, not a threat, as Tesco in Korea has demonstrated.

It is perhaps telling of the times that the ACCC is mounting a case against Coles for beating up on its suppliers to improve its earnings. Nothing new there, but Coles management has an obligation to maximise earnings for shareholders.

The horse has bolted.

SME’s in the Australian food supply chain are now a rare breed, killed off my the high $A, retailer housebrand strategies, the scale of multinational competition, and poor management. The two retailers seem to have realised that without local supply, their long term options are limited, and so seem to be softening their short term demands in recognition that the sustainability of the food production value chain is in their interests.

PS Earlier today, after the initial publication of this post, I became aware that Big Sister Foods had been put in the hands of the administrators. While Big Sister is an Aussie company, part of that small club of natives, it spent 20 years as a part of Reckitt & Coleman in the 70’s and 80’s. ¬†¬†Sadly I am not surprised, as their current website is about the worst I have ever seen, perhaps indicative of the declining state of the business.