It is stating the blindingly obvious, but the first key to getting through downturns is to own the value reputation in your sector.
We are seeing a lot of coverage of Aldi and Lidl in food, as well as dollar stores in the US, but there are two crucial things about owning value for real.
Firstly, the value position must have been established long before the downturn, as Aldi has been doing for years, rather than trying to shout about a couple of cheap promo deals when times turn tough.
Customers really do understand pricing and reputations for value take years to earn, from consistent price reductions such as our pricing on Dulux 5-litre emulsion, which sold for£22.98 in 1992 and, if it had followed inflation, would now be£34.29. In fact today in B&Q it goes for£19.98.
The second message on value is having the confidence to back yourself in competitive tests and in advertising. Wal-Mart wrote the book on roll-back pricing and relentless communication, but many others have tried to combine multiple confusing messages in an attempt to get all their points across. Less is more – if the message is value then that’s it.
Value is the bedrock for success, but customers with limited budgets will be ever more demanding about the service they receive. In a boom market just being there will get you some share. But in a downturn the real service leaders will prevail – just look at Best Buy in the US (and here shortly) as opposed to Circuit City, which had a lot of floor space but not the expertise the customer needed. It has paid the price in the past 12 months.
At B&Q we are putting 2,000 people through hands-on skills training in areas such as wallpapering and plumbing to ensure they really know how the project works and what our customers need. The trade formats in the UK, such as Screwfix Trade Counters, are probably the most extreme example of this, where the right service is everything because the model depends on selling a lot to a few, regular customers.
Finally, there are some real challenges facing all retailers, but those teams that have some people who have seen this before, with real experience of recessions, will do better.
Actually, I am convinced we need a mix of youthful energy (they won’t give up because they don’t know when they’re beat) and steady, battle-hardened veterans who know that if they stick to the task then the storm will pass, and market leaders always emerge stronger from these phases.
I now find myself as one of the older people on a very powerful team assembled from other great businesses and this is now my third downturn. So a word to the youth of today – it won’t always be a lot of fun, but the best team will find a way to help itself through these challenges rather then give up or panic at the first difficulty.