Scarcity and hype: You’re only human

photo 3So, what do Hennes & Mauritz AB, Unique Clothing Warehouse, Krispy Kreme, New Year’s Eve, and the AFL Grand Final have in common?

Scarcity. Well, at least for a short time.

And a little bit of hype, plus some tribal instincts and social modeling thrown in for good measure.

If you’re one of those people who lined up in the rain last week so that you could get some Scandinavian bargains at H&M in Melbourne, you’ll have a sense of what I am getting at (and you may also be open to the idea that maybe the future of traditional shopfront retail is not all doom and gloom).

If you one of those hundreds of people who queued up for three days at Fountaingate in Narre Warren to be there when Krispy Kreme’s first Melbourne store opened at 6:30 AM on 22 June, 2006, you will also know what I mean.

If you were one of those thousands of people who lined the harbour in Sydney, or squish into a tiny spot down at The Rocks, just so you can get a glimpse of the fireworks through a gap between two huge buildings, then you’re already on this journey.

And if you lined up for AFL tickets… You know where I am going with this.

But don’t be too hard on yourself. It’s an evolutionary thing, and it is actually quite useful.

As human beings, we assume that if lots of people want something, then we need to be part of it – it is the scarcity effect at work. Humans are social animals, and although we would like to think that we are all independent thinkers, the reality is that it would simply be impossible to think about everything we do in isolation, and on its merits. So, we look to others to help us to decide.

If we see that “our people” want something, then we tend to give that something (what psychologists call the attitude object) more value. If we are looking around and everyone is grabbing for towels, even if we don’t need them, we feel that if we miss out, we will miss out on something important.

Similarly, if everyone in our “in-group” is lining up to buy from H&M, Zara, Uniqlo, or even Krispy Kreme, then we assume that the group knows best, so we should do the same.

Yes, we are all sheep.

But you shouldn’t be worried about that. We all do it, depending on the attitude object. For example, those people criticizing the crazy young people lining up to buy something from H&M might be the same people who travel the world, spending thousands of dollars to see an opera that finishes where it started.

So much for human behavior, there is also something more specific to retail at play that is less clear.

The arrival of Zara, H&M and, now Uniqlo, are likely to be striking fear in the board rooms and strategic planning bunkers (I’m sure they have these) of our more traditional retailers, such as David Jones and Myer. But, once the hype dies down, will these new models of retail be sustainable or will they simply go the way of the big box department stores?

It’s clear that not all of these brands are the same, and there are a few different business models in there, with Zara, Topshop and H&M being about fast fashion, while Uniqlo sees itself as having a broad mass market, and low price model.

That said, it’s not really the detailed elements of the different brands that is drawing consumers to their stores at the moment. The key to the excitement around these openings is simply the novelty of these brands being in Australia. Although, as far as Australian consumers are concerned, it shouldn’t be that way.

As more Australians travel the world, and as we travel the internet gathering more information about retail around the world, we simply now have an expectation that we should have the same access to products that the larger markets of the US and Europe have, whether it is clothing, technology or entertainment. The digital revolution has been thrust upon sectors that never thought that they would have to grapple with it; they were in the business of goods – “things you can drop on your foot” – as far as they were concerned. But the reality is that the service and the digital economy are a perfect match.

In a way, you could argue that the retail sector needs to somehow reconfigure its business models to emulate the digital economy. Tricky, I know. I’m not sure how you reduce a pair of jeans or a nice top into a sequence of 0s and 1s.

But like all things in business, it shouldn’t be about copying another sector, it will be about building in the expected value from the perspective of the consumer. Postmodern marketers would say it is a complete reversal of the modernist managerial mindset, where you would simply produce something and your customers will buy it.

I would argue that while we are not seeing an end to the traditional managerial approach, it is definitely an evolutionary step in the way that businesses should be run, and it is the benefits that their customers gain from consuming their products that should be at the centre of managerial strategy. The digital economy has lots of opportunities for smart executives and directors of these companies.

Whereas in the past, anyone who did an MBA was taught that the key to management was Planning, Leading, Organising, and Controlling (PLOC), the reality of the consumer economy is now that managers have to also Listen (to their customers), Anticipate (disruptive innovation), Evaluate (everything you do), and Learn (from your customers, your staff and your competitors).

So much of our expectations as consumers in a global economy has been driven by the digital revolution, simply because we now have access to information about how the rest of the world works. So although Gerry Harvey may think there is no future in Internet retail (or maybe he does), it is not the Internet retail outlet that is going to determine how the future looks, but how we use this access to knowledge, in all its different formats.

 

 

 

This entry was posted in Human Behavior, Marketing Strategy, Social Psychology, Tribal, Uncategorized and tagged , , , , , , , , . Bookmark the permalink.

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