Mass market retailers all use the same, or very similar metric to measure store performance: Dollars revenue and/or margin per square foot, or linear shelf metre. In addition, they track the size and content of the customer ‘basket’ to optimise product range against those key performance measures.
This leads to a mindset of short term profit maximisation in the buying office, at the expense of everything else. Only senior levels talk about strategy, and then in most cases, they fail to grasp the qualitative reality of ‘strategy’ and fall back on the numbers.
Shoppers do not care about your margins/sq metre, irrespective of how you generate it (price, stock turn, or supplier ‘shelf rentals’) they care about range convenience, on shelf availability, and of course, price.
But price is only one of the considerations, an important one, but only one.
Ignoring the others is asking for trouble in the medium term
Trouble is what the Australian gorillas now have.
Their domestic supplier base has been brutalised, and the leverage they can exert on international suppliers is way more limited, simply because they do not have the scale to apply the pressure. Now in the absence of a high $A, they are suffering, and that suffering is unlikely to ease any time soon as the economy is likely to flatten in the wake of the ‘stupidity blanket’ being thrown over world trade by the US administration.
In addition, they now have become populist targets for a body politic that has no idea of the economics and dynamics of the ‘paddock to plate’ supply chain.
The marketing default has become loyalty cards, an added incentive to shop at the same chain, as they will give you something in return. Trouble is you cannot buy loyalty, you can only earn it. How many do you know with a wallet stuffed with ‘loyalty cards’ who are not in the slightest ‘Loyal’?
