Sales Trend 1 of Barrett 12 Sales Trends for 2016 is “Beyond Profit Erosion”.
After decades of revenue and profit growth markets are no longer what they used to be. The current situation of profit erosion has been decades in the making with a combination of factors including:
- Low interest rates and the abundance of cheap money creating the conditions for growth mainly through Mergers & Acquisitions
- Cost cutting to reduce duplication and redundancies and grow profits
- Technology and automation having taken over many labour intensive processes
- Buyers’ stripping apart of complex offers into their individual parts thus diminishing or dismissing the real and tacit value of experience, expertise and insights of suppliers
- Off-shoring of labour, manufacturing and other services to cheaper countries
The first Sales Trend for 2016 looks at the impact of profit erosion and the move by consumers and market conditions pushing businesses, large and small, towards selling and delivering genuine value beyond ‘cheap’. These changes and moves signal that we have entered into a world where the Davids are able to compete successfully against the Goliaths of industry.
Factors and Changes
Over the last few decades lower interest rates have meant that many companies grew through Merger and Acquisition strategies, buying other companies and capturing new markets, new businesses and new customers. This meant that big companies became bigger and with it the advantages of global reach. These large companies bought technology, ideas, customers and markets; a privilege that only came with size.
However, now with the plethora of e-commerce platforms across the world, any company, no matter how small, can trade globally. They can easily access these platforms which act as a virtual global market place offering payment systems, assistance with logistics, marketing and sales technology, and much more, to attract and retain customers. And with markets becoming more niche and targeted, smaller companies can find and adapt to pockets of opportunity more easily than larger businesses and win the hearts and minds of their target customers.
We have also come to a point where costs have bottomed out and companies can no longer generate profit from cost cutting alone. Interest rates cannot go any lower and the cost of labour will also start to even out across countries, making ‘cheap’ labour a thing of the past.
The conscious consumer
Whilst many consumers, especially in the Western economies, have enjoyed the ‘cheap’ bonanza, more and more people, are questioning the actual costs of things. For instance, they are noting that if they pay $2 for a t-shirt, someone else somewhere in the world is ‘paying’ for that difference in price with their time and labour, often at their own expense under adverse conditions.
Cheap labour is under increased scrutiny with greater demand for better minimum wages across the globe and much more intense scrutiny from customers, NFP organisations and government agencies in terms of labour conditions, child labour and slavery.
With the new consciousness and the growing transparency of supply chains, consumers are now growing increasingly suspicious of ‘cheap’. They are beginning to ask:
Is someone not being paid fairly? Is the company following safety regulations in terms of their people and the environment? Is the company paying the right taxes? What materials go into these products and are they healthy for us, our families, our communities, the planet? and so on.
More and more companies are paying attention to this and taking responsibility by responding to the demands of better working conditions and better sourcing of materials, not only in their own factories and manufacturing plants but also across their supply chain. They are also responding to the need to innovate and offer real value beyond cheap.
There’s a new landscape appearing on the horizon and old truths don’t seem to be holding true anymore.
Being bigger is no longer a given advantage. Today small and medium businesses have some very distinct advantages over big business, especially if they remain under the control of their founders and work towards longer term goals and vision without the pressure that publicly listed companies have to report quarterly shareholder returns.
So, what can we do?
These smart companies and their sales teams are ready for the new emerging landscape:
- They are making the most of these opportunities, looking to and already operating in growing sectors and markets;
- They have clarity, they know where they are going and how to get there, and they are also agile and flexible to adapt to changes in markets if necessary;
- They are paying attention to the entire supply chain and their impact on their staff, customers, communities in which they operate ,and the environment;
- They build intellectual assets out of data and build intellectual property out of their knowledge and know-how which they sell as part of their value add;
- And last but not least, smart companies know that they need to sell value beyond cheap prices because the era of being the cheapest is disappearing fast. Their sales teams are well equipped with market, business and product knowledge, and intelligence. They listen to and respond to the priorities of a prospect or client and help them find, design or develop the right solutions for them. Their salespeople can advise on a range of issues and opportunities related to their own product, service or systems that improve the performance of companies and the lives of their clients.
Remember everybody lives by selling something.