It is a conventional notion that all markets are ruled by commoditization. In a mature product category, competitors steal one anothers advantages, price becomes the great discriminator, and “consumer goods lose altitude until they are mere “commodities.
Technological innovation is one way to fight commoditization. Trends are another. (Innovation from within versus innovation from without, you might say.)
In a perfect world, we do both. We innovate fiercely from within. P&G is a great example here. And we respond to shifts in consumer taste and preferences as these are variously driven by new, sometimes conflicting, cultural trends. Somebody ends up playing the commodity game. But its not us. We reap value by adding value through our creation or responsiveness to innovation.
There is a nifty little essay in todays Wall Street Journal by Adam Hanft on the bankruptcy of Winn-Dixie, the 900 store supermarket chain.
if you are in the supermarket business, one would think youd be vigilant about trends, monitoring consumer behavior with [care].
Thats what makes the inability of Winn-Dixieand in many ways, the entire super market industryto track market changes and adapt to them such a stunning failure.
Hanft thinks Winn-Dixies problem is endemic.
This lack of marketing sophistication and a consumer-driven approach screams at us from the entire super marketing buying experience. (What other industry rewards those who spend less, which is what the 10 items or less Express Lane does?)
Supermarkets dont manage the shopping experience well, that dont build their own brands, and they dont monitor trends.
In sum, Hanft is accusing the industry of consenting, of manufacturing, the commodity effect. Its a radical argument. It says that commoditization doesnt have to happen, that marketing sophistication can pull the centre of gravity upwards. Some players will always play the commodity game, but it doesnt have to be the general approach.
Interesting, interesting, interesting. This is the new economics meets the new economics, I guess.
Hanft, Adam. How Super in Your Market. Wall Street Journal. March 1, 2005, p. B2.