Retailers need to inject urgency and talent if they are to survive the digital revolutionWednesday 06 June 2018 | News
Digital superpowers are bringing new technologies into view at lightning speed, creating a structural change in retail so profound, even large retailers need to act now if they’re to hold their own.
In spite of seeing significant decline in store-based sales – half of all electricals in the UK are sold online, for example – retailers haven’t grasped the inevitability of change or the urgency with which they need to take action. Amazon’s purchase of WholeFoods in the US, the closure of businesses like Maplin and Toys R Us, as well as recent profit warnings for Mothercare, are a salient cry to retailers to take immediate action, or suffer the severity of the impact if they don’t.
A nuclear arms race
In this climate, the digital superpowers are spending more than many retailers turnover on digital technology and investment. Amazon alone spent more than $16bn on technology and content in 2016 – a sum 100 or even 1000 times greater than the average retailer spent over the last year.
Some businesses, seeking to tackle the problem this gulf in spending is opening up, are engaging with ‘spray and pray’ omnichannel strategies, misinterpreting omnichannel as everything, everywhere, for everyone. This approach overlooks the fact that consumers use channels in quite distinctive ways. Instead of being strategic and targeted, retailers have substantially invested in making all channels deliver everything, which has led to material overspending and declining profit margins in many markets.
The digital talent deficit
Lack of experience, strength and depth at boardroom level is preventing retail businesses from responding in the decisive manner they need. The majority of senior executives aren’t digital natives and often don’t know what great digital talent looks like, how to move at the pace they need, or from where to recruit the expertise. Despite acknowledging this challenge, the traditional retail sector struggles to compete in appeal to those with talent and skill, when their alternatives are highly exciting tech businesses offering huge personal growth opportunities and future riches.
Make a treaty with a superpower
The critical mass of investment the digital superpowers have is so far beyond most retailers’ reach, access to their digital advances has to be achieved through smart partnership. Instead of trying to compete with budget and digital investment, or spreading themselves too thin with omnichannel strategies, retailers need to think critically about the role companies like Amazon, Google, Apple, and WePay could play in their business model.
Despite being the biggest retailer on the planet WalMart, for example, is making these strategic partnerships. The retailer became Google’s official partner for home shopping using Google Home voice technology. At a smaller scale, many retailers continue to buy into tech players and platforms in the hope of transplanting this digital expertise into the core of their model – Carrefour’s recent acquisition of a stake in Showroom Privé is a good example.
Use difference as a defence
Given Amazon had a 47 per cent share of the online market in the United States over the Christmas period – almost one dollar in every two spent – retailers need to ask what makes them distinctive and defensible in the presence of this juggernaut. In a world where customer expectations of price, range and service have been fundamentally reset, genuine points of difference need to be sharper than ever.
The good news is that big players can’t do everything well, particularly when it comes to specialist knowledge and helping consumers make well-researched decisions through product curation. It is more critical than ever for businesses to have a consistent ‘point of view’ they systematically project across their range, content and service. In a world where commodity purchases are being hoovered up (or perhaps Amazoned up) differentiated product, sharp and informed content, and tailored customer journeys are a pre-requisite for success.
Targeted pain relief
It’s only through a deep understanding of target customers and their product journey that multichannel retailers will be able to create an experience to compete with Amazon’s effectiveness and consistent execution.
The complete customer journey – from stimulation of need through to post-purchase service – is critical. Retailers doing this well really understand the specific pain points their customers experience and have deliberate strategies to tackle them.
Sephora, for example, used instore technology to capture individual’s exact skin tone and create an intelligent match of appropriate products. Similarly Majestic Wine used insight into the way their customers shop to implement a recommendation tool that started with the occasion the customer was purchasing for, rather than with customer type, leading to uplift in engagement and service scores.
A new hope
While this is a time of unique change in the retail industry, it’s also a time of opportunity for those prepared to seize the moment and transform. Navigating the seismic shifts requires a fleetness that may not come naturally to some, but for those that can, the rewards are tremendous.