Differentiating Product In The Retail Space

Differentiation, competitive advantage, exclusivity—however you say it, every business needs to have something that distinguishes itself from competitors.

In the early days of the high-tech industry, there were so many hardware manufacturers that differentiation was easy for the channel via the brands it carried. But for years now, there has been just a handful of brands left in the PC, printer, monitor and other peripheral areas, so the value-added channel has long since abandoned differentiation by supplier brand.

But in the retail space there are fewer options. Sure, there is some ability to differentiate via store layout and shopping experience, but in the end many customers search for the best price. In recent years, most manufacturers were reluctant to build exclusive lines for particular outlets given the cutthroat competition and the need to drive cost of manufacturing and distribution as low as possible. That's changing as the retail market is consolidating in its own right. With fewer outlets to sell through, the survivors have more clout with manufacturers.

Retailers want differentiation, and that means exclusivity if only for a period of time. It has been happening slowly over the past few holiday seasons but now we are beginning to see acceleration, and it's a trend that is not likely to slow. Wal-Mart convinced HP to build an exclusive PC for it during last year's holiday season. Staples is working with HP on one deal and with Dell on another.

My discussions with executives at DSG International, a dominant retailer in Europe, during our recent RetailVision trade show indicated it is pushing on exclusive deals as well.

While this is certainly not a new concept, the fact that we have fewer retail outlets and those that we do have are adding services and looking for some relief from pricing pressure brought on by Internet shopping means this is more important.

The ability to quickly compare pricing online and then shoot out to the local retail outlet to buy is driving everyone's margins lower, including manufacturers.

So product that is not easily compared because it's not sold in multiple outlets even if it's merely the skin and model number that's different is mutually beneficial.

We are headed toward a market where there are going to be lots of these deals made around the world in an effort to drive respectable margins and give retailers the ability to differentiate product once again. For manufacturers, the danger in all this is that their cost of manufacturing needs to remain low and too many of these deals may make that difficult. But if they can pull it off then it certainly is something that is going to improve their retail partner's bottom line and very likely their own as well. What do you think of the drive toward differentiation?
Make something happen. E-mail Everything Channel CEO Robert Faletra at [email protected].