Joyce Kwong
Joyce Kwong 11 April 2016

Commoditization in Retail and How to Respond

Commoditization in Consumer Goods Retailing is taking place everywhere from High Street Fashion (e.g. by Zara and Primark) to Grocery and Homeware (brought about by low-cost disruptors like Asda, Poundland and Amazon - in Britain).

These “Disruptors” are entering the retail markets both online and offline with lower cost operations and processes enabled by advancing technology in supply chain and e-commerce, and are disrupting retail markets providing consumers with abundance of products of “good-enough” quality at lower and lower prices.  In order for incumbent retailers to stay profitable and maintain market share, they need to identify the “performance-defining” place to "skate" to - in "Disruptive Strategy" terms.

One company for example is Marks & Spencer's (M&S) in Britain.   M&S is a leading retailer in Fashion and Clothing, Groceries and Homeware.  At M&S, clothing sales have been falling for three years.  In the past decade, M&S has been modernizing its supply chain and embracing the internet to keep up with both online and offline disruptors in the retail market.  M&S has successfully identified a “performance-defining” place in its “food hall” segment (known as “Simply Food”, where the “job to be done” is providing “quality delicious meals options” to time-poor and skills-poor shoppers (like myself) who are increasingly opting for ready-made or half-ready made meals instead of cooking themselves, dining out or ordering take-aways – either to eat at home or at the office.  The “performance-defining” place for M&S is having created its own private label ready-made or half-ready-made packaged quality meals where consumers can get high quality, varied and tasty meals such as “Gastropub” food at lower price than dining out or take-away options for eating at home  and don’t have to cook themselves.   Naturally there are competitors providing the same products, such as other supermarket chains like Sainsbury’s, Waitrose and Tesco’s, but their products are of lower quality and compete more with instant meals and less with dining out or take-away options.


For M&S’s Fashion and Homeware departments, it has yet to identify “performance-defining” place to position itself.  In Fashion for example, with low cost disruptors from Zara providing fashionable options to Primark providing necessity clothing options, its value range and fashion range are all falling out of favour with its aging customer base and losing sales and market share.  M&S has been the market leader in UK clothing retail sales and its share has shrunk from 11% in 2010 to 9.9% now.  Its strongest foothold in fashion and clothing is in Lingerie, where it still maintains over 25% market share. 

In Homeware, M&S is the last in the top 10 list of retailers in the UK market.  It’s value proposition lags behind its specialized homeware competitors such as Dunelm, John Lewis, Argos and Ikea, who compete in the mature and “Modular” industry by optimizing their Speed to Market, Convenience, Customization and Price. 

A growth strategy forward for M&S will be to reinvent its private label brand in Clothing and Homeware to provide high quality products at low price to time-poor and skill-poor consumers similar to what its achieved for its “Simply Food” business.  It may need to further specialize within Fashion and Clothing (e.g. in Lingerie) and within Homewares (e.g. in kitchenware) to compete successfully in an increasingly commoditized and modular industry.  Good luck to the incoming new CEO Steve Rowe.

Written by Joyce KWONG for Harvard Business School's HBX certificate course in Disruptive Strategy with Professor Clayton Christensen.  

Joyce Kwong is a Professional Business Consultant specialising in:
1. Strategy and Business Development,
2. Transformation & Change,
3. Performance & Talent Management
4. International Expansion
She runs a "30minutes Business Clinic" as part of her Coaching and Mentorship program for Entrepreneurs and SME owners.
Joyce graduated from the University of Oxford and has a MBA from INSEAD.

She is a Member of Institute of Directors (MIoD) and Royal Institute of International Affairs (Chatham House) in Britain.

She is also a Freeman at Worshipful Company of Marketors in the City of London. 

References to this article:

The Guardian

Retail Economics UK

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