Many years ago I attended a lecture by a Dr Gunther Klaus entitled, ‘Marketing in Turbulent Times’. He quoted what usually occurred when he was called in by a client to consult. The client invariably offered to show him financials – balance sheet, income statement et al. He brushed these aside and asked to see the annual remuneration in rank order – highest paid to lowest paid. He then asked the audience who they thought was the highest paid and predictably they said it was the CEO or MD. In this particular example it was in fact the handyman.
Now before you rush to comment, please note that he was being ‘tongue in cheek’ in order to make his point. He said that the handyman received penalty rates for working on Sundays. On top of this he was paid extra if he had to stand on a table. Again he was paid penalties if he had to climb on a ladder. Every Sunday saw him standing on a ladder, mounted on a table changing light globes.
The point being made by the good doctor, was that in most organisations there is dissatisfaction amongst staff at what they are being paid and often they believe that others are earning more than they are, while producing less. Dr Klaus recommended therefore that each week companies should publish on the staff notice board the report referred to above – salaries in rank order.
The point he was driving home was pretty obvious. Transparency is good. Keep your staff honestly informed what is happening within the organisation.
Relating this to retail, in recent times supermarkets and others have been required to detail the cost per unit on their shelves so that consumers can easily make comparisons between products. Due to her ill health I have done a fair amount of grocery shopping for my wife over the past year. I enjoy making the comparisons.
For example with regards to toilet paper one can pay between 13c per 100 sheets up to 22c. When my wife shops she doesn’t look at price which infuriates me – not that I buy the cheapest. I assess the quality and price (value) and make a decision as opposed to throwing the most expensive three ply into the trolley as my wife does. (Incidentally the watchdog has got it wrong with regard to toilet paper. Not only do the sheets vary slightly in size, yes I have measured a few, but the important comparison is the weight. One hundred sheets of single ply can hardly be compared to 100 sheets of three ply).
Again before you comment that perhaps I need help, let’s pursue the doctor’s transparency rules a bit further.
What if retailers had to quote the cost price of every item as well as the retail price?
Plus markup (it’s easier than margin per cent for the consumer) and GP dollars. The label would look something like this for say a dress:
Cost: $19
Retail: $99
Markup: 421 per cent
Gross profit: $80
The consumer would now be in a position to make real comparisons.
Now imagine that this information had to be published online. Clearly there would be many products that would not be comparable such as private labels but there would be many where direct comparisons would be comparable.
Next is an app into which you can plug your shopping list and the names of say two supermarkets – Aldi and Woolworths – and it would spit out two shopping lists – with the best prices from each – which is what I do anyway.
Transparency – and nothing the consumer cannot do for themselves, if somewhat laboriously (of course not the cost price, markup and GP dollars).
Before ridiculing this concept, consider that this is exactly what has been talked about for some time now with regards to fuel.
Imagine the effect this would have on prices and efficiencies. I suspect that some companies would not survive.
Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.
