As online retail becomes increasingly commonplace, it is vital for retailers to innovate every step of the customer journey.

From logistics to marketing, and seamless cross-channel purchasing to post-sale customer services, every aspect of the retail value chain is poised to undergo seismic upheaval over the next year or two.

This pent-up wave of innovation is driven by the convergence of a number of important factors, including faster broadband speeds, the proliferation of social media platforms, rapidly expanding smartphone adoption - the number of smartphone users worldwide is forecast to hit two billion next year - and better multi-device customer experiences.

Indeed, multichannel shopping, in particular, has become a highly significant trend. According to research carried out for Criteo by Retail Week, 68% of consumers surveyed said they used multiple devices when purchasing a product online, on more than, or equal to, 50% of occasions.

Today truly leveraging digital means taking advantage of everything technology has to offer, from automated warehousing to customer relationship management systems. Primarily, however, it’s about how brands manage their presence online.

An online retail presence encompasses three interrelated elements – ecommerce platform; community and engagement; content and brand strategy. Within each of these three areas, innovation is overwhelmingly driven by start-ups.

In ecommerce, for example, a service such as Squarespace enables retailers to build state-of-the-art, beautifully designed websites, while thanks to Adyen, ecommerce payment processing has become seamless and secure.

Community

The second area is around community, which is all about engaging a customer base via social media platforms, usually on mobile, in ways that transcend mere transactions. Again, it’s start-ups that have blazed a trail here, with social media and digital analytics company Socialbakers helping retail firms track and extract far greater value from the cacophony of social platforms.

Content and branding strategy incorporates the values a brand stands for and how these are communicated to a target market. Here, retailers can turn to a community like Trustpilot, which enables them to discover what their customers really think of them and what they are most interested in – information that can be used to pinpoint messaging with greater precision, build brand equity and acquire new customers.

Yet with start-ups sparking so much innovation across the sector, established brands face a dilemma: should they attempt to innovate from within, perhaps by establishing in-house incubators? Or should they opt to partner with start-ups instead?

While there’s little doubt that the best start-ups pose an existential threat to incumbents, only a few such companies will make the grade. And the reality is that those are more likely to be associated with ecosystems like the one we’ve developed at Index.

Last year we looked at about 6,000 start-ups and invested in just 24 of those. Which is why, in turn, there’s a third, more strategic option available for established players to explore, namely to engage with a ready-made innovation platform such as our own. In fact, we’re already connecting large corporations with our 140 portfolio companies in 20 countries across a range of sectors, including retail.

With retail at a pivotal moment, no ambitious company can afford to ignore the velocity of change in the space. Instead, they must embrace innovation as part of their core strategy and work with start-ups to deliver it. Those who realise that ‘everything must go’ today will become the category leaders of tomorrow.  

  • Index Venture’s Giuseppe Zocco shared his findings at this year’s Retail Week Live.