The retail marketplace is polarizing into a “world of extremes” forcing retailers to reorient their core strategies. Megaretailers dominate one end of the competitive spectrum and focused specialists the other. At the same time, increasing customer diversity and individualism is creating significant demand complexity.Undifferentiated companies in the middle are facing tremendous pressure; many have failed and others are still struggling to find the path back to consistent growth
and success. In this environment, the rules for how retailers operate and compete have changed.To a large degree, the traditional means of competitive differentiation can no longer be relied upon. For many retailers, strategies based just on price have been rendered ineffective as megaretailers have mastered the “mass” end of the marketplace
with superior scale and efficiency. And traditional levers of ompetition, such as assortment, service and customer and market segmentation, which were once differentiators, can now be easily copied or competed away, if they are not somehow made proprietary. For example, home installation and repair services – like those
pioneered by Sears – are proliferating across retail as competitors such as Best Buy,Home Depot and Lowe’s offer similar services.
At the same time, customer expectations continue to rise. The Internet’s nearly unlimited wealth of information has created customers that are accustomed to having instant access to price and product comparisons, independent thirdparty reviews, and tailored recommendations based on their buying history.Their comfort with technology also continues to grow,as witnessed by the proliferation of
mobile phones,Personal Digital Assistants (PDAs),video game players and other personal devices.