February 28, 2007, 12:00 AM

Learning the lessons of Detroit

With household brand names, global purchasing power, logistical and other operational efficiencies, American retailers stand today where the American car companies once stood.

As a long-time enthusiast of the American auto industry, I confess I get depressed looking at the current state of U.S. automakers-what with Toyota breezing past Ford this year into the #2 spot and poised to challenge the supremacy of General Motors. Detroit’s erstwhile “Big Three” have surrendered 20 points of market share in the last 30 years and today only 55% of the cars and trucks sold in this country carry GM, Ford or Chrysler brands.

When I learned to drive in the late 1950s, about the only foreign vehicles on the American roadway were European sports cars and that funny looking bug my uncle drove. American consumers were in love with-and very loyal to-their Fords, Chevys, Olds, Caddys, Pontiacs, Plymouths, Mercs and Dodges. When the Beach Boys rhapsodized about their “Little Deuce Coupe” and “409,” you can bet they weren’t singing about an Acura and a Camry. American automakers owned the U.S. car market and were the envy of manufacturers the world over.

Of course, they have no one but themselves to blame for their current position. The Germans built more roadworthy luxury cars and the Japanese produced better and more fuel efficient family sedans. But as these foreign manufacturers got more in tune with the market, American companies were slow to meet the changing needs and mores of American consumers. The Americans got stuck with too many gas-guzzling sedans in the late 1970s and are stuck with too many gas-guzzling SUVs and trucks now. Even worse, while American brands have begun to close the quality gap that separated them from better-made foreign cars, there’s still a widespread perception that American cars are inferior.

So what’s the lesson here? It is simply that markets always change in response to cultural, economic and political forces. A marketer’s dominance in one period is never assured in the next period, no matter how strong its brand is. Yet it is the nature of dominant competitors to move cautiously to adapt to new market conditions. Companies that dominate markets do not easily relinquish “proven” formulas that produced so much success. Furthermore, the management, operations and marketing skills that are wed to those formulas run deep within a dominant competitor’s organization, reinforcing internal resistance to change. After enjoying the fruits of success at the top, dominant players become enamored of their power and favorable analysts` reports. Some develop superior attitudes toward newer competitors who are experimenting with novel approaches to respond to changing markets.

Why is this an important lesson for American retailers right now? Because after 30 years of market consolidation, the big chains have built dominant market positions. With household brand names, global purchasing power, logistical and other operational efficiencies, they stand today where the American car companies stood when I first got behind the wheel.

Yet the retail market is changing. Time-pressed consumers are getting accustomed to buying things on the Internet and the technology to facilitate those purchases continues to improve. Smaller players who are in tune with the changing market and hip to the new technology can compete on the web as effectively as the big guys and often are even more responsive to the unique needs of Internet shoppers. There’s a growing perception that shopping on the web is cool, and shopping in malls doesn’t have the glamour it once did.

What can retailers learn from the lessons of Detroit? A whole lot.

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