I was warned against purchasing BigBrownBox.com.au from Thorn Group, with my peers telling me that the world of televisions, home entertainment systems and sound equipment was the place of a great pricing war, where once sound marketing strategies were being held hostage to diminished margins and loss-leading products. I was told the AV market was home to a war with no winner in sight, a land where many businesses died well before their time.
Yet I purchased the digital assets because I believe there is a place in the market for a business willing to service consumers’ needs – where a service (over the cheapest price) model would come up trumps.
It has been widely reported that electronics retailer JB Hi-Fi has slumped to a three-year low, after the chain cut its full-year profit outlook because rampant discounting has damaged margins.
Are you honestly shocked?
When your tag line is “Always Cheapest Prices” it should be no surprise they would continue to discount against other retailers to the point of not being profitable. Price has become the only trick left as many businesses swap knowledgable sales personnel for a cheapest price guarantee.
JB Hi Fi is not the only store with this cheap pricing mentality - other reputable brands stand by similar slogans and fellow online retailers even use words such as ‘cheap’, ‘discount’, ‘cash’, ‘negotiate’ and ‘price’ in their taglines.
I find these kinds of promises troubling – particularly those that incentivise negotiating or paying cash. They suggest a consumer will pay too much if they don’t negotiate – and many shoppers would rather not.
We love dialogue with our customers, but we’d much prefer to be educating them about a product and having them assured that we’ve set a competitive price to begin with. There’s something quite aggressive about ‘haggling’, and it’s not likely to result in a great experience between retailer and customer. We’re more aligned with the “Everyday low prices” angle in this regard, to borrow another retail catchphrase.
Many businesses have put everything into having the cheapest price instead of innovating and building up their retail options and investing in customer service.
In contrast, while our prices are competitive, a cheap price proposition is not our core business driver. Customer service is what sets us apart and helps us stay profitable. We have invested in expert AV sales staff, warehouses, trucks and drivers, and have $2 Million of Big Brown Box products in stock around Australia to provide next day delivery to most metropolitan areas.
I’m well aware of the conundrum: cheapest pricing devalues a customer service proposition, yet consumers deserve the best price available. Therefore we have a best value guarantee in place for people who ask for it but it is not overt, and it is not our core business driver. Our best price guarantee also includes the fact our delivery is free, and before price-matching we ensure we are comparing apples with apples. Consumers also deserve to have their products delivered on time, with an Australian warranty and after sales service – which is what our business offers.
We absolutely refuse to use loss-leader tactics to attract people to our site. Retailers who do this also use price to upsell customers to higher price products with greater perceived value. Customers are pushed to sale in haste, without having done the right research and end up going home with the wrong product. We know this because these customers come to Big Brown Box, Appliances Online and Winning Appliances for their next purchases looking for genuine customer service and advice on buying the right product.
The success of Appliances Online has led me to believe the recipe for retailing success is simple: If you put your customer into every business decision and think about how this will affect them, your retail outlet will have something its competitors don’t offer. What the AV world is lacking is customer service and expertise. When buying a TV I want to be able to ask someone about the latest technology and have them design a package that suits my needs – including a TV that is the correct size for the room it will be in, how the light of the room will affect visibility and how to get the best sound depending on where I live and the surrounding noise.
Yet many larger retailers have failed to recognise this, putting financial statements ahead of providing a wonderful retailing experience. They look at staff costs and make a move to cut staff numbers instead of investing in staff and their customer experience and cutting costs in other areas of the business. They also place the cheapest price as the key driver for business which means that over time margins have decreased so much they make serious profit downgrades.
In the words of Seth Godin:
It might be that low prices are the final refuge of the marketer who has run out of ideas and is left with nothing but a commodity.
Or it might be that organizing your business around lowering prices through efficiency, mass scale and smart choices is a powerful way to grow.
My guess is that both are true, but you better be really sure about which one you’re choosing. Hint: doing the second one successfully is really quite difficult, so if all you’re doing is writing a lower number on the pricetags, you’re probably playing the first game.
As with all my blogs, I am sure that many people will not agree with my views yet this blog is how I view the retail space. Feel free to comment and add your thoughts to the debate if you wish.
Having a fire breaking out in our main office was a great way of testing our disaster minimisation system, which thankfully stood the test. The main thing is that everyone is safe. The encouraging thing is that our sites didn’t go down at all, and our technology divisions ‘mission critical automation’ came into fruition. Unless you were in the office watching smoke billow out from a sub-station beneath the ground (or following us on Facebook), you wouldn’t have had a clue we were being evacuated.
