As published in ‘The Retailer 2010’ (http://www.retail.org.sg/Retailer.htm)
Retailers in the region are continuing to face up to a demanding market environment and an uncertain outlook.
As buying behaviours continue to evolve, customers are making more complex trade-offs and the traditional methods and trends established over the last five years are no longer holding true as customers become harder to predict. Regional strategies in targeting these customers are also being tested as “the one size fits all” approach can no longer capture the intricacies of the differing customer groups in an increasingly competitive environment.
Synonymous with being able to respond effectively to a more sophisticated customer in a demanding market, is the ability to successfully map out the competitive landscape to ensure your business is well positioned to react to potential threats. The ability to understand your competitors is even more relevant in an environment where the onus on delivering a unique service proposition (USP) to the customer is a key priority. The differing characteristics of the Asian region provide yet another level of complexity, as a competitor in Singapore, for example, may well be very different than one in Malaysia as the business infrastructure such as income levels, religion, demographics and cultural values of the country impacts the buying patterns of the consumer.
We often ask our clients of the value of understanding their competitive environment, and the resounding answer is always ‘extremely valuable’. We then ask if they feel that they use competitive intelligence insights effectively. This time, the response more often than not is that they do not.
What does competitive intelligence (CI) mean in relation to your company? The broad based description of CI focuses on answering three main questiongs:
· Who are my direct competitors and closest rivals?
· What information is worth gathering and analysing?
· How are insights translated into practical application?
Who are my competitors?
A competitor is any company that is able to meet the demands of your customers. Many companies are confident that they know who their immediate competitors are, but let us also remember that in challenging market times, when innovative methods are required to capture market share, the competitor environment, more likely than not, will adapt to these new surroundings. This may indeed come in the form of a threat from a new channel or new product. For example, the emergence of e-books has hit at the very foundation of the high street book retailers such as Borders, who have in turn now launched themselves into this market.
Regional variance also plays a significant role in determining who your competitors are; A senior retail executive recently told me the differing attributes in China that were forcing his business to think of the country in sixteen separate entities. Online retailers like Amazon battle for market share with high street stores within Singapore where internet penetration is around 75%, however that channel will be a different threat in Vietnam, for instance, where internet penetration is closer to 30%.
What information is worth gathering and analysing?
Gathering the right information will help support business critical decisions. While competitive advantage has a lot to do with leveraging the knowledge base of your own firm, it is also about determining how competitors are likely to leverage theirs.
Competitors can be analysed across all areas of their operations, including sales and marketing, new product development, distribution, logistics and procurement. Data collected may be used in developing growth strategies, in responding to and anticipating competitor moves, in validating rumours about what competitors are doing, in improving your operational performance by understanding what best-in-class companies are doing and how and why they are able to achieve their superior performance.
Translating best-practice from other industries should also be considered when looking to realise market advantage. Why don’t we try to understand IBM, Cisco and DHL in the field of supply chain – surely lessons can be learned for the retail operation? If customer service is defined as the differentiator, let us understand how financial services firms or hotels deliver a parallel experience. By segmenting the retail business in this manner, we have the ability to capture information that will ultimately support the ability to set apart your business in the industry.
Within a demanding market landscape, the so-called ‘recession-proof’ sectors have been significantly impacted and the ability to stand out of the crowd and determine your USP has become even more important. Competitive intelligence is a fundamental driver of creating this USP.
How do we translate CI into practical application?
When discussing within the intelligence community the merits and drawbacks of using CI to drive business decisions, the ability to execute strategies is where this conceived competitive advantage is lost. Often there is no dedicated resource that focuses on business to business competitor tracking but rather functions that concentrate on general market research and customer insights. Competitive intelligence often falls between the two roles and as a result it becomes consigned to discussions rather than actions.
The ability to formulate strategies and take key business decisions ought to be based on having the best available data on hand. Understanding your competitors is integral to the business decision-making process and so having dedicated competitor profiling in place ought to be integrated into the daily operational requirements of the business.
Taking advantage of the opportunities
In Asia, where there are distinct differences between each country’s buying markets, improved market knowledge through effective CI will only help retailers improve their product offering and ability to match specific market needs. The aim is to ensure your business has the competitive advantage needed to either sustain excellence in your market or enter a new one and a robust basis of information will provide you with the ability to make decisions with greater confidence.
Competitive intelligence is by no means a new discipline, but understanding what competitors will do, rather than what they have done is increasingly important in an environment that does indeed suggest insight is better than hindsight.