The Retail Divide: Leadership in a World of Extremes

Today’s market forces are shaping a global consumer marketplace that will look
radically different in 2021, affecting retailers as never before. Traditional strategies will
be eclipsed by unprecedented customer diversity, market polarization and dominant
megaretailers. This is not just business as usual, but competitive Darwinism played
out in fast motion. These trends will push the retail industry to a “world of extremes”
with big winners and losers.

What will the future of retail look like? What capabilities will retailers need to remain
relevant to demanding customers? How should retail executives begin preparing?
The answer lies in a retailer’s ability to embrace fundamental change and become
truly customer-centric to maintain market leadership in a world of extremes.

In this IBM white paper from the IBM Institute of Business Value was on target, but a little ahead of its time. . .written in 2003!

Executive summary
In the recent IBM® global CEO survey, over 80 percent of chief executives from a
wide range of industries identified revenue growth as their key focus area for the
next three years. A similar number cited speed of response to changing customer
needs as a high-priority means of driving that growth.1 For retailers, this should be
a familiar refrain, as growth has long been the primary driver of shareholder value
for their companies. Yet, as we look toward the future, the challenge to retailers to
achieve sustainable growth has never been greater.
The consumer marketplace around the world is evolving rapidly, with unprecedented
social diversity and competitive intensity pushing the industry to a world of
extremes characterized by market polarization. The “bell curve”-oriented thinking of
the twentieth century – focused on serving homogeneous mass markets – will need
to shift to a mindset informed instead by “well curves”2 as growth and perceived
customer value migrate to opposite ends of the competitive spectrum (see Figure
1 on page 6). Retailers will succeed in 2010 to the extent that they abandon the
undifferentiated middle and focus their organizations on serving the extremes of the
demand curve, even if they play both sides.