Wallet Share is the Omni-Catalyst
Most people will agree that the omnichannel phenomenon has driven major disruptions in the retail and consumer goods industries. As pure-play e-retail players grew, they forced traditional brick-and-mortar players into a new online world. Then, as brick-and-mortar players rounded out their ability to connect to consumers online, e-retailers found themselves wanting for a physical network to complete their ability for customer connections.
As the pace of change accelerated, the drama of big name failures and fascinating growth stories captivated the headlines. Many observers in the business media obsessed with the destabilizing effects of technology, new procurement models, the democratization of pricing, or simply the incredible pace of Amazon’s growth. Omnichannel, and all its accompanying technology, was to thank or blame.
But was omnichannel really the catalyst for change, or was this change underpinned by a more seismic shift in business strategy — specifically, to the importance of Customer Wallet Share in the executive suite?
Jeff Bezos’ oft-quoted line, “Your margin is my opportunity,” is often misconstrued as a one-dimension price-cutting ploy. It’s much deeper. In effect, he’s warning other executives that, if their standard of success is to be a top-three brand or the most profitable company, then that standard limits their ability to grow.
Yesterday’s MBA teaching has trapped many executives into not understanding the threat — retailers who don’t understand that owning multiple consumer spending levers, sometimes at lower volumes and margins, lays the groundwork for dominance. Bezos isn’t concerned as much about the profitability of a sale, nor the volume, as much as he is about the percent of customer spend he commands.
If Customer Wallet Share becomes the objective, then an omnichannel presence is the natural outgrowth since it simply “completes the whole” for customer interaction. “The whole” is now the goal, and the ability to be everywhere the customer is, at the time the customer wants to buy, is key to large-scale success. Technology advancements, connectivity, procurement models (subscriptions) are simply enablers, much like mass catalog printings were a technical advancement and a means to an end for Sears. One major difference is that now, more than ever before, tracking Customer Wallet Share has become feasible and actionable.
So, in reality, the shift toward the importance of owning a customer’s total spend as a key performance indicator has been driving the industry for a generation. As this mentality permeates more and more retail strategies, it drives different behaviors than would the traditional measures of volume and/or profit alone. Large consumer product manufacturers would be wise to understand this dynamic shift in retailer philosophy as they plan their own strategies to stay relevant — much less grow.
Retail’s Customer Wallet Share strategy and the resulting drive to omnichannel consumer interaction are the catalysts to four major trends we currently see in the retail & CG industries:
1. Driving power to the consumer.
2. The re-thinking (and reemerging importance) of brick and mortar.
3. The “balkanization” (fragmentation) of the consumer base.
4. The emergence of multiple alternatives to serve this newly fragmented market.
Each of these trends represents an extensional threat to large consumer products companies and, predictively, companies are employing a number of strategies to counter — and sometimes leverage — these trends.
How can large, branded goods manufacturers grow in a market where your customer is now your competitor … Where you’ve lost messaging power to micro-influencers who can enhance or degrade your brand in an instant … Where startups with zero inventory can gain national prominence and distribution in rapid time … Where everything you do and everything you are gets boiled into the consumer purchase decision process?
These are the questions we need to ask. I look forward to exploring them with you in the coming weeks.