Times they are a changin’, so Bob Dylan professed. And never has that been more the case than in UK’s retail industry currently.
Change is nothing new to retail, of course. Where once consumers had no alternative but to shop at their local independent store, they are now presented with multiple options accessible from the comfort of their own home using their smartphone whenever, wherever.
Along the way, we’ve encountered several evolutionary phases, whether it be the rise of the chain store, out-of-town destination concepts, ecommerce marketplaces or even the uptick in urban convenience.
Today, though, all these evolutionary phases exist alongside one another, making for quite a complicated market dynamic, with customer centricity increasingly sitting alongside traditional product centricity in a retailer’s quest for market share.
The rapid entry and already omnipotent-seeming platform business model, with its overarching customer-focused ecosystem, marks the latest development.
And far from being another evolutionary phase that will simply run in parallel, the rise of the ‘omni-platform’ business model – think of Alibaba, Amazon or Facebook – brings with it a vital need for retailers to completely rethink their modus operandi, or risk being left behind. Yes, the world of retail truly has been turned on its head.
This new platform era takes a much broader approach to the market, targeting both business-to-business sales and business-to-consumer, across multiple physical and digital channels.
“Consumers will naturally continue to shop across all available options, but it’s easy to see how the platform business model is taking an increasingly dominant position”
It also incorporates social channels alongside product offerings and ancillary service propositions, such as payment mechanisms, logistics solutions, content production and delivery services and so on.
Such an operation requires some serious orchestration, and it’s therefore perhaps not surprising that platform operators are predominantly technology-led businesses that are different from traditional retail businesses that have often evolved from phase one to become what they are today.
In all honesty, it would probably be easier to ask what the omni-platform business model is hoping not to achieve, and it’s abundantly clear that this approach seeks to keep the consumer within an ecosystem, targeting them with multiple propositions to maximise the customer lifetime value.
Consumers will naturally continue to shop across all available options, but it’s easy to see how the platform business model is taking an increasingly dominant position.
As such, turning a blind eye simply isn’t an option. So, what’s the next step for those looking to stay at the top of their game?
Threat or opportunity?
Retailers need to decide whether platforms present a threat or an opportunity to their current business model and adapt their strategy accordingly.
Platforms may well present a sizable and growing challenge to contend with, but equally you could argue that they hold the key to engaging communities, innovation, creditability, faster execution, as well as lower costs.
Retailers really need to consider profitability, customer loyalty and consumer insight when revisiting their strategy.
If we look at profitability first, it’s no secret that platforms continue to drive down prices given their dominance and the increasingly informed customer.
Ultimately, you can’t truly compete when you’re not on a level playing field, so retailers inevitably need to engage with platforms in some shape or form, but working out how is the million dollar question.
“Data – or rather meaningful customer insight – presents another key consideration for retailers. Platforms will always have the advantage of their sizable aggregate data and the consumer insight it produces”
Customer loyalty has also taken on a completely different form recently, with consumers increasingly part of a subscription model.
On one hand, retailers that join an eco-system may lose a degree of their autonomy in influencing loyalty through direct experience, but those going it alone are likely to face consumers less willing to branch out of their preferred ecosystem.
Data – or rather meaningful customer insight – presents another key consideration for retailers. Platforms will always have the advantage of their sizable aggregate data and the consumer insight it produces.
Whether an independent retailer or platform, knowing your customer and creating a meaningful relationship needs to be at the heart of any strategy.
This shift into the unknown is only likely to increase in pace, so all retailers big and small really must take a structured approach to revisiting their strategy. Whether favourable, or not, platforms are here to stay and their power and influence will continue to grow.