The Pundit family spent the summer touring parts of Europe and Asia. It was a wonderful trip, visiting industry members and historic sites from Tokyo to Edinburgh, from Beijing to Barcelona. We even got to visit every Disney theme park in the world and attend the Biannual D23 fan convention!
One thing that became evident was how dramatically the airline industry has bifurcated. If you are flying first class on airlines such as Emirates on the giant A-380, you travel in quite extraordinary luxury. They have an onboard shower:
But on the other hand, when we traveled on discount airlines such as Ryanair, we didn’t know that it was possible to put seats that close together and that it was possible to charge so many extra fees. The experience was miserable, but we did it time and again because it was cheap.
It strikes us that this kind of bifurcation is very interesting and teaches an important lesson about business. The same family, under different circumstances, spends very differently.
So this Pundit, who is perfectly capable of showering in luxury with his family when traveling from Europe to Asia, is also happy to take the super discount carrier when we leave the family at the beach in Barcelona to hop a same day round-trip to Stanstead to do a business meeting.
This complicates marketing greatly because it means there is no such thing as an airline, or a store, that is “the one” for a particular customer. The reason Aldi can grow as it has in the UK, and the reason discounters are such a threat to conventional retailing around the world, is that discounters are not for poor people.
Discounters such as Aldi position themselves as an acceptable alternative for middle income and affluent people, and once discounters break through the psychological barrier — once an affluent person wouldn’t be ashamed to be caught buying in Aldi — those chains are positioned to see market share zoom.
And supermarkets trying to appeal to everyone, all the time, are a weak alternative to consumers looking for specific offers at specific times in their lives. If a consumer, when looking to save money, goes to Aldi and the same consumer, when looking for an experiential shopping trip, goes to Whole Foods and, when feeling lazy, orders on Amazon Fresh and, when looking for a treasure hunt, goes to Costco… you rapidly run out of moments for that consumer to go to the mainstream something-for-everyone, local grocer.
There is much evidence that we are now in the age of specialization, and retail specialization will reverberate down the supply chain as vendors that thrive will develop products and packaging which helps niche retailers serve their “consumer moment.”
Still, the change from old patterns to new can be bracing and lifetimes of expectations overturned. So consumers who expect certain products and services and don’t get them at a discounter may grumble — but that doesn’t mean they will switch. The reason they went the discount route is compelling, and they will keep going and keep complaining. Catch this great little video ridiculing the discount airlines and their extra fees.
A hat tip to the lovely Eileen Leighton, mother of our UK Managing Director Tommy Leighton, for passing this along.