Navigating the new world of retail
From understanding the new connected customer to facing the fact that Australia has long copied other retailers around the world, here is what businesses need to know in order to navigate the future of retail.
In a recent panel discussion, seasoned industry experts discussed the importance for retailers to become a modern, customer-centric organisation in order to compete with Amazon when the mighty force arrives Down Under.
During the event, which was organised by Retail Directions and Inside Retail, the presenters analysed how Amazon’s impending entry will amplify the challenges faced by local retailers, caused by rapidly evolving technology and shifting expectations.
Here are three of the key takeaways that came to light during the discussion.
A board-level look
Board-level insights into the shifting consumer landscape were delivered by Wai Tang, board member of JB Hi-Fi, kikki.K and Melbourne Festival.
Tang offered a boardroom perspective on the current retail environment, looking at the multi-faceted industry disruption by technology and international competition, combined with changing consumer behaviour and a sluggish economy. These forces are forcing retailers to question, review and redefine their business models.
In parallel, high debt levels, low wage growth, higher underemployment and rising energy prices are putting customer demand under stress.
Retailers must now navigate an increasingly complex environment. Technology and socio-demographic shifts have resulted in new patterns of consumption, with consumers placing shopping experiences and convenience high on their lists of demands. The modern consumer is also greatly influenced by social media.
From a technology perspective, technology innovations are motoring ahead – digitisation, big data, mobile world, and e-commerce are deeply integrated into the retail ecosystem. But the second wave of disruption is just around the corner, bringing with it artificial intelligence, the internet of things, advanced robotics and virtual reality.
Despite all the above, joint with Amazon’s looming entry into the Australian market, Tang signalled that company directors are challenged but not perturbed. In her assessment, the markets appear to have overreacted to the confirmation of Amazon’s arrival.
Tang discussed presented the reasons why retail boards must broaden their agenda
to remain relevant in the marketplace and consider reactive and innovative strategies to augment their business models and strategic thinking.
She also suggested the proliferation of digital needs to be reflected in revised corporate structures and the current board composition may need to be altered as well, to bring in additional expertise needed to engage successfully in the digital space.
The elephant in the room
Retail Oasis founder Stephen Kulmar discussed the elephant in the room –
Australia has long been a pseudo ‘globalisation’ market, where we have copied a lot of what we have seen around the world. Across every category, buyers travel the world, take what is hot in the northern hemisphere, and copy it in Australia nine months later.
However, Kulmar warned that while copying internationals may have worked well until a few years ago, two correlated phenomena have emerged to make the strategy ineffective:
- The global expansion of ‘originals’ which have now arrived in Australia has placed immense pressure on the ‘copies’; and
- Digitally sophisticated millennials are now the dominant generational group in terms of dollars spend in retail.
Kulmar challenged attendees to think differently, noting that the definition of insanity is going down the same path as everybody else and thinking you can somehow achieve better results. Many Australian retailers are now paying the price for their lack of originality in the past.
As a consequence of the above shifts, growing a retail brand through more openings has reached its saturation point, with shopping centre traffic in decline globally, particularly in the US.
Australians are definitely still shopping – just not in the same way we previously did. Fifty-one per cent of people think that online is the best way to shop and 49 per cent prefer online to shopping in-store.
Kulmar pointed that we are not witnessing the collapse of retail, but the collapse of old business models. He quoted the words of entrepreneur Peter Thiel: “All happy companies are different; all unhappy companies are alike because they can’t escape the sameness of competition”.
Kulmar then shared his approach to identifying the opportunity areas: assess three angles to find where you could provide customers with something original, which customers want, and do it well.
The new customer-centricity
Retail Directions managing director Andrew Gorecki discussed the role of technology in enabling customer-centricity.
While the concept of customer-centricity has been around for many years, it has had somewhat vague interpretations.
“A way of doing business with your customer that provides a positive customer experience before and after the sale, in order to drive repeat business, customer loyalty and profits” is probably the most accurate description of traditional thinking.
Some organisations took this concept beyond a mere corporate statement of direction (think Scandinavian Airline and Nordstrom), but even then, the focus was still limited to opening up the general flow of information from customers, and on strengthening staff’s ability to recover upset patrons.
Today in our tech-enabled world, a focus on customers as a core value remains essential, but we now have the ability to engage with all customers, in a meaningful and personalised way.
Many retailers and businesses in general, are struggling to comprehend the full scale of the changes catalysed by the explosive proliferation of digital. Often labelled as ‘digital disruption’, it can be truly confusing.
However, Gorecki proposed an alternative approach to gain better understanding of this new world – instead of looking at the changing environment, he looked at its product. He suggested that what we are witnessing is human evolution towards cyborgs.
Just a glance around a busy street is enough to realise that practically everybody is now carrying a networked computer chip in their hands – a smartphone. The chips are not plugged directly into our brains (yet), but they have seriously augmented our natural human abilities with superpowers, such as instant global communication, photographic memory, immediate access to global memory banks, massive computational ability and much more.
Gorecki then pointed out that the ‘cyborgs’ are plugged into a number of hubs (mostly social networks), and as a consequence, have become partially disconnected from reality. If you want to reach them, you need to go through their hubs. The best way to communicate with a cyborg is via an interface – their social network.
This new breed of customers increasingly takes a digital path to purchase. According to recent research, about 60 per cent of all purchases in retail started with a digital engagement, with the majority of sales still occurring in brick and mortar stores. This shows how customers now engage with retailers and this number will likely hit 80 per cent within the next two to three years.
According to Gorecki, retailers must focus on facilitating a digital path to purchase to successfully engage with this new generation of customers. They need to change their business structure to create a single marketing department, focused on digital engagement to drive business into all channels, not just e-commerce. At the same time, modern retail operations and logistics need to offer business-wide order fulfilment.
The two silo model of e-commerce and bricks-and-mortar needs to be replaced with a business composed of two interlinked components: digital path to purchase and enterprise-wide fulfilment (either over the counter or via delivery). The old paradigm of bricks-and-mortar and e-commerce is dead, Gorecki argued.
In fact, humans as we used to know them are becoming extinct. We need to study and learn how to engage with the new connected customer.
Retailers need to work on integrating two digital spheres – their internal systems and the digital external world – the social networks used by the new customer, Gorecki said.
Justin Cohen has been working in marketing and media for over 15 years, mostly in the digital space and looks after Retail Directions’ marketing direction, brand positioning, digital content and community.
Inside Retail Polls
Inside Retail Directory
We chat with the veteran retailer and CEO of the fast growing tool chain. https://t.co/KW8aYhYXtA2 days ago
Global brand and e-commerce giant team up for holiday experience. https://t.co/RPBGQhB3rf2 days ago