The New Rules of Retail and Creating Shared Value

My awakening began while reading "Punk Marketing" a while back. The first sentence read "There's a revolution brewing." You wouldn't think it but Sears is at the cutting edge, the peak of the wave, in this revolution in commerce, society and retail. Revolutions begin with hearts and minds. Some are bloody while others border on reactions to external force evolutions. 

The evolution of retail also paralleled what many economists cite as one of the most important economic shifts in history: a century long power shift from producers to consumers—from those who make and sell to those who buy.

Three Waves of Evolution of Commerce in America

Wave 1 (1850-1950), known as the "era of producer power" characterized by demand being greater than supply and limited distribution of products and services (production-demand driven markets).

Wave 2 (1950-1980's and 2000), the post WWII era of economic growth of massive product, retail, brand, distribution expansion. This expansion of choice for consumers required businesses to create demand for there offerings marking a shift to a marketing-and-distribution economy from an economy of production and scale. 

Wave 3 (now into the future), consumers have unlimited choices and access to goods and services. This has lead to a demand shift from stuff to experiences, customization and personalization of products, immediate availability, and most importantly, product providers who value community interests over self-interest (see shared value creation). 

Wave 3 is where we are now. Companies must go beyond simple clear value creation, cost-competitiveness, efficient production, superior supply chain management to clear engagement and rapport with their customers over longer periods of time.

Shared value... Recognizes that societal needs, not just conventional economic needs, define markets. 

"The days of trying to get a consumer to come to you are over. You really have to be in the consumer's world, wherever, whenever and however." — Mindy Grossman, HSN

The winners hold two distinctions:

1. they understand their customers and have systems and processes in place to continually learn about and from them to develop a deeper emotional (empathic) connection with them in the creation of experiences; not just product lines and distribution channels. 
2. they understand how to be there when needed as opposed to attempting to create a need and be there. Context and relevancy are the new content is king mantra. 

There are three steps any company should take in attempting to achieve the winning edge:

1. Define what customers expect and desire beyond the brand or products or services. This is done by continually re-conceiving products and markets.
2. Develop value from primary, contextual research analysis and synthesis coupled with insights gained from secondary research and analysis. A company not in control of the value chain at all stages will not be able to value from this step. Redefine productivity in the value chain both externally and internally.  
3. Deliver precise and perceptual experiences that form neurological connections with human beings. Creating shared value through local cluster development facilitation. The best companies once took on a broad range of roles in meeting the needs of workers, communities, and supporting businesses.

This is where "Creating Shared Value" comes into play. 

Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth.

The competitiveness of a company and the health of the communities around it are closely intertwined. A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment. A community needs successful businesses to provide jobs and wealth creation opportunities for its citizens.

A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has merged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. 

[For the past two decades] Firms focused on enticing consumers to buy more and more of their products... The results were often commoditization, price competition, little true innovation, slow organic growth, and no clear competitive advantage.

(The New Rules of Retail: Competing in the World's Toughest Marketplace)

The challenge in this revolution is not technology or infrastructure but harnessing both to shift perspectives and cultures within and outside corporations towards longer-term sustainable thinking and human-centered design approaches over short-term growth. This also means that companies must become local as they expand globally through community involvement and outreach that goes beyond sponsorship or fundraising.