WSL Future of Health Event

Market innovations demand a response

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Market innovations demand a response

A recent report from Accenture highlights a troubling fact about most retailers — they are so hemmed in by existing operating models that they are unable to respond quickly or effectively enough to changes in the marketplace that have a direct bearing on the business, undercutting their competitiveness and growth potential. Companies hindered by that limitation are increasingly vulnerable at a time when consumers have more options than ever in terms of where, when and how they shop.

MMR OpinionConsider these recent developments. Unilever last month paid a reported $1 billion to acquire Dollar Shave Club. Founded in 2012 by Michael Dubin, Dollar Shave Club has shaken up the men’s grooming category by marketing razors, blades and related products directly to consumers at very competitive prices. Some 3.2 million people now subscribe to the service, which is on course to generate $200 million in sales this year.

Retailers indicate that Dollar Shave Club’s success has put a crimp on the razors and blades business by eating away at demand for established brands, especially the category leader, Procter & Gamble’s Gillette. Speaking off the record, even some P&G executives admit that the company failed to recognize the disruptive innovation that Dollar Shave Club represents.

With the acquisition, Unilever accomplished several things. Dollar Shave Club gives the company a beachhead in the American razors and blades market, along with a wealth of consumer insights in the category. More important, the deal brings Unilever a subsidiary that has a proven track record in direct-to-consumer marketing of personal care products. The success of Dollar Shave Club and efforts to unlock its potential will no doubt prompt Unilever’s management to think about how that model might be applied to the other consumer products it manufactures.

Not to be outdone, P&G is testing the waters with a direct-to-consumer paradigm of its own, the Tide Wash Club. Focusing on Tide Pods, which combine detergent, stain remover and brightener in dissolvable pacs, the program, which is currently available only in Greater Atlanta, offers free delivery to subscribers on a regular basis based on the individual needs of consumers. The initiative is similar to the Gillette Save Club, which the company launched last year in response to Dollar Shave Club.

If the nascent competition from CPG suppliers weren’t a big enough concern for mass market retailers, Amazon continues to ratchet up the competitive pressure. For instance, the company in June added 50 brands to its Amazon Dash Button program, which enables customers to order merchandise, including groceries and H&BAs, with the touch of a button. More than 150 brands now participate.

The implications of the steps being taken by Unilever, P&G and Amazon and its supplier partners in the Dash Button program represent a very real challenge to the traditional mass retail model. As digital technology and delivery capabilities — perhaps one day including drones and robots — are enhanced, and individuals to whom such devices are second nature come to comprise the majority of the consumer base, drug, discount and grocery stores will have to adapt and give people a reason to shop their stores that goes well beyond the need to replenish supplies of household staples.

Mass market retailers realize that. Eighty-eight percent of them are now streamlining operations to free funds to reinvest in the future, according to Accenture. With the pace of change around them accelerating, they will have to move expeditiously.


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