"The retailer is trusted more than the brand"
Interview with Hans Eysink Smeets (PDF)
1. Who holds the reins of power in the retail business?
Those who are closest to consumers. It's closeness to consumers that is shifting power. The following power factors play a role:
1. Consumer data: evaluation of consumer shopping behaviour is completely in the hands of retailers. Manufacturers are often reduced to guessing or making do with second-hand information filtered down to them from others. In this way they lose power.
2. Shelf power: what gets on to the shelves, and when and where, is decided nowadays by retailers, not manufacturers. And retailers have made a science of it. This is nothing new for the Swiss, but it's a ground-breaking development for most countries.
3. Brand trust: many retailers have moved so close to consumers that these respond with great brand trust. But consumers' trust in retailers is as great as – or sometimes even greater than – their trust in top brands. In Switzerland, for instance, Aldi and Lidl seem to occupy a new level of high value/low price that had previously been dominated by Coop and Migros.
2. How is the balance of power between retailers and manufacturers?
We're now seeing a worldwide trend that we've long been familiar with in Switzerland: the dominance of retailers such as Migros is so great that they can afford not to stock top brands. This represents a fundamental change – twenty-five years ago, manufacturers still dominated retailers.
3. Who are the winners and losers of this power struggle?
The big winners among retailers are the hard discounters with their limited ranges. Then come the large international retailers and the information retailers. The losers are the hypermarkets, i.e. the full service supermarkets with their unlimited offerings. Department stores and shopping malls will also lose out.
4. In your experience, are powerful CEOs also good CEOs?
Do you mean good or successful? There's a difference. Power without vision leads to disaster rather than success. I'm not so familiar with everyday business, as I tend to specialise in stormy periods of change. CEOs who are successful in rapid-change processes are, indeed, often powerful as well. I've now been involved in such processes several hundred times and can pretty confidently state that the successful CEO has something of the enlightened dictator about him: he knows what he wants, possesses charisma and inspires others. More specifically, he has a clear and simple vision. And he's able to adapt the everyday business to this vision. It's all a question of style. Some people do it with manifest power, banging on the desk with their fists as it were, while others are calm and level-headed and seek a frank exchange of views. You sometimes see both these types in one and the same person. The balance must always be right: too much of the iron fist means there's no exchange of views. Too much level-eadedness means there's no vision. But the best CEOs? They actually stand out for asking a lot of stupid questions.
5. Can you describe a personal moment in which you felt powerless?
Once when I was out on my sailing yacht on the North Sea on a stormy afternoon. There was a strong wind, force 8 on the Beaufort Scale, and I was several miles from the Dutch coast when the engine suddenly overheated and eventually gave out. At the same time my GPS system gave up the ghost. It really was a case of Murphy's Law: I suddenly found myself in a low fog-bank. I had no precise idea where I was. I just knew that there were sandbanks lurking everywhere, with huge waves crashing over them. The wind was in my face and I had no chance of setting sail. At this moment I felt very small – and powerless. Just as I was about to transmit an emergency signal by radio, the fog cleared. The wind changed direction and I was able to sail back to the harbour …
6. Can you describe a personal moment in which you felt powerful?
When the first outlet of a new brand opened in eastern Germany – only three months after the first meeting! It was shortly after the fall of the Wall. A West German retailer asked us to draw up a concept for a new discount business for the new federal regions of Germany. The idea seemed right and we immediately got down to it. When the store opened three months later in Frankfurt an der Oder, a three-kilometre long queue had formed. We felt powerful then. These three months felt like a long and glorious day spent on my sailing boat somewhere out on the Atlantic. It was stormy, but this time everything went off without a hitch: the equipment bore up well, the teamwork was perfect and the whole crew sang loudly out of joy at having risen to the great and wonderful challenge of nature.