Tuesday, April 21, 2009

Act Vertical or Be Vertical: Gaining the Competitive Edge in Retailing

According to a recent study by Kurt Salmon Associates, those retailers who “act vertical” are in a greater position to weather the recession because of their ability to offer unique product, demand higher prices, react more quickly to consumer trends, and replenish hot sellers more quickly.

"The recession is forcing retailers to radically rethink their businesses, and many are in survival mode," said Cari Bunch, a retail strategist at Kurt Salmon Associates. "However, in our view, the economic downturn has created much greater clarity about what retailers must do to be successful over the next decade."

“Act Vertical retailers have learned to collaborate internally (by breaking down the barriers between functions), externally with manufacturers and suppliers (without owning production) and externally with consumers by redefining customer research as a continuous conversation rather than a one-off event.”

Although this study recommends that retailers act vertically not actually become vertically integrated, the success of American Apparel, which boasts that its products are “Made in Downtown LA,” has used vertical integration not just for competitive advantage but also as a basis for cause marketing, mostly by calling for immigration reform among several other causes it supports.

As the above quote shows, as well as comments on the American Apparel website indicate, collaboration with manufacturers and customers is central to catching the curl on the new wave of retailing. SA VA, a semi-vertical women’s apparel company that will launch in Philadelphia and online in September, has recognized that true collaboration with customer necessitates her involvement with design as well as the company’s ability to react quickly her needs. To do that, SA VA will develop regional, domestic Garment Centers that will localize production and, in the process, work toward reducing the large carbon footprint affixed to most clothes, most especially the least expensive, as well as creating local jobs.

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