Through a special arrangement, presented here for discussion is an excerpt from a current article from Insight-Driven Retailing Blog.
In a recent article in Fast Company, Jeff Katz, a former airline industry executive, suggested that retail is bound to follow the path of airlines. Seeing their customers driven by price more than any other factor, airlines have lowered prices and stripped down service accordingly. Then they let their customers pay for the things that matter to them, basically relying on add-on services, like preferred seat and bag fees, for profit.
The retail landscape isn't that much different with today's customers myopically focused on price. Traditional retailers can't expend the effort and dollars to provide service to customers that whip out their phones and buy from lower-price competitors (Hello Amazon and eBay) that have lower overhead.
Marc Andreessen, co-founder of Netscape and venture capitalist, has been trumpeting the coming downfall of brick-and-mortar stores based on the fact that the overhead doesn't allow them to compete with online retailers. And, while I understand where he's coming from, I don't agree at all.
Competition has and will continue to cause retailers to change. Traditional brick-and-mortar retailers are leveraging new touchpoints (notice I'm staying away from the dreaded "channel" term) and understanding how to provide greater personalization. (Whenever I receive coupons from Target, I just have to wonder exactly how much they know.) And while the technology exists for my pre-teen daughter to order clothing and shoes online, she will never do it. She enjoys shopping too much.
Back to the airline industry... Retailers have the technology to track every interaction with me, and they can even personalize offers based on my patronage, their inventories, and the state of the local economy. So just like I know my fellow passengers in row 20 (the exit row on MD-80s) each paid a different price for the exact same flight, we could be moving toward personalized pricing in stores. And why stop there? Browse the aisles, use a dressing room, make a return — all might someday have fees associated. (Remember re-stocking fees?) Of course those fees will be waived for their most loyal customers, plus we get to use the express checkout as well.
So, will consumers put up with the airline-ification of retail? In some ways they already have. Just look at big box, rock-bottom price, self-checkout stores. The associates are about as friendly as TSA agents and yet we still buy because we are so driven by lowest price. Do you pay a fee to enter a Costco or Sam's Club? Yes, you do.
Fortunately, there's enough room in the retail industry for bare-bones retailers all the way up to personal shoppers and many points in between. So we'll take some lessons from the airline industry, but we'll also avoid some of their mistakes.
What's the likelihood that a more widespread fee-for-service model makes its way to many parts of retail over the next decade?