Balance of power between retail and manufacturing has “fundamentally shifted” says Sir Martin Sorrell
The rise in ecommerce has "shifted” the balance of power between retail and manufacturing irrevocably, ushering in a new era in which manufacturers can have a direct-to-consumer relationship for the first time, according to WPP’s Sir Martin Sorrell. Speaking at WPP’s The Future of Retail event in London this morning Sorrell said it is a “tough time” for legacy retailers, but that they must adapt their formats to ensure survival. He likened the challenges retailers are facing, brought on by the rise in e-commerce, to those faced by the music and newspaper industries, and increasingly to the free-to-air TV industry. Outside London high streets have been “decimated” by the rise in online shopping and the cyclical changes in the economy, according to Sorrell. “Online executions and structures have always been about disintermediation – they are all about trying to give you and me as consumers a better deal by disintermediating established structures. “If you think that P&G sells 75 per cent of its diapers online in the US – that’s amazing. The development of mums packs or family packs of diapers, and things like that, are revolutionising the way people think and shifting the balance of power. “For the last 20 years the retailers like Walmart, Tesco, Carrefour, have altered the balance of power, giving manufacturers little room to manoeuvre – I think the manufacturers will now have more room to manoeuvre - the e-commerce revolution will make things easier for them as they can now have a direct line of sight to the consumer,” he said. Sorrell also said the PRISM scandal which erupted last month “changes the game” when it comes to privacy perceptions. He believes it won’t end here but that there are likely to be more revelations like this to come. “I pride myself on knowing a bit more than the average person about these kinds of things and even I was surprised,” he added. He referred to the last G8 meeting held at which WPP argued on behalf of the Internet Advertising Bureau (IAB) that data collection should be modelled on an opt-out basis. “There is an inertia argument there in that a person has to opt out to say don’t use their data. But that didn’t happen anyway so you have to opt in." Sorrell said the current status quo in which consumers must read through dozens of pages of text-based terms and conditions is a "farce", adding that people don't read them properly but click 'I accept' anyway to get to what they want faster. "We must devise an opt-in framework that works. It's a very serious issue and it will become even more important now," he added.