Many commentators, myself included, have shared their thoughts on retail-week.com on “the future of retail”. We all conclude that retail is undergoing rapid transformation. And yet, we have all missed the point.
For retail is not just changing – it is dissolving. In a decade, will there even be a discrete retail industry with its leading players, career paths, trade body, conferences, magazines or even, dare I say, consultants?
WeChat is China’s “app for everything”, starting with messaging but now including video, gaming, advertising, payments, micro-stores, city services and so on. It both competes with and provides a channel for retailers. Do we call it retail? A platform? A super app?
In the US, Amazon’s ecommerce revenues are as big as those of all other retailers put together. Yet it can hardly be called a retailer. Amazon’s most recent trading statement gave 78 mentions to AWS, 26 for Alexa and 24 for Prime – but mentioned retail only twice.
While it is true these ecosystem giants are disrupting retail, that is to misunderstand their aim. They don’t tend to think of conventional industry definitions at all. They have been successful because they have created customer journeys that stretch seamlessly across old boundaries.
Disruption of traditional industries is the collateral consequence, not the objective.
As these digital trends make themselves felt, retail is both unbundling and reaggregating beyond any traditional boundaries.
Segments of the value chain such as curation (video bloggers or Instagram influencers), digital merchandising (such as Flywheel), logistics or payments are becoming roles for newly formed specialists, slotting frictionlessly into the ecosystem.
And as brands such as Nike build on these new players to extend their direct-to-consumer experience, they move away from retail.
Retailers have always added new revenue streams in media, services or finance. But now these entire worlds are colliding
Meanwhile, a retailer of beauty products might integrate previously disconnected sectors like content, advice, tutorials and celebrity-led social media into a customer-centred solution.
Of course, retailers have always added new revenue streams in media, services or finance. But now these entire worlds are colliding and merging into a consumer ecosystem.
The traditional retail black-tie dinners, a friendly forum for competitors to toast their industry, have begun to take on the atmosphere of the besieged fearing the existential threat without. Too many of their retail compatriots have fallen prey to lateral moves from other industries.
And yet, the best response may not be to patch the walls and defend the retail fortress but to abandon it, at least as a definitional constraint. Blockbuster thought it was in the business of renting DVDs, whereas Netflix defined its purpose as always-on entertainment.
How to survive
How should retailers respond to the dissolving boundaries of their industry?
First, focus at least as much on players beyond retail as your conventional competitors within it. Pay special focus to those who know more about your customers than you do, even if they don’t appear to overlap today.
Retail as an industry has been shocking at allowing others to abscond with its data
Second, in this new world collaboration is as important as competition. Succeeding in an ecosystem means joining up offerings to complete a customer journey.
Third, define yourself and your opportunity by reference to customers, not to a vertical industry. Take the offensive, not the defensive. Your market is your customers’ total consumption and your path to it is their attention and trust.
Fourth, invest heavily to build unique data and insight that allows you to predict customers’ underlying needs. Retail as an industry has been shocking at allowing others to abscond with its data, from Visa and Mastercard to IRI and Nielsen, to Nectar, to Google and Facebook.
Finally, build new talent and capabilities, not just in digital skills and extra-sectoral experience, but for the diversity and creativity needed to break down old boundaries.