Four forces disrupting retail today and ways to respond

Incumbents and new players alike are exploiting digital ways of working and technology to create new forms of competitive advantage. Here are some examples impacting retailers today…

  1. CX shifters positively change customer behaviour to drive wider engagement and sales – often through encouraging new forms of brand advocacy and self service that increase wider demand while lowering lower costs. Domino’s Australia applied this form of social commerce innovation to successfully create its Pizza Mogul campaign; where customers designed their own pizzas, self promoted their creations on social media and then shared in a percentage of any revenues generated from Domino’s selling them. An estimated 15% plus revenue growth for Domino’s Australia was attributed to this initiative by the end of last year.One approach for retailers with limited experience of such disruptive customer experience design is to engage tech start-ups to jointly create new forms of market engagement unique to its brand (with John Lewis’ JLAB initiative being one such example). Such an approach can accelerate the “ideation process” although scaling these opportunities to the level or volume required for market use can be challenging given start-ups may lack the experience or capabilities for such rapid industrialisation.
  2. Agile SCM operators combine big data and analytics with traditional just-in-time production and distribution methods to optimise their supply chains. Zara’s “rapid fashion, minimal inventory” approach levers such capabilities to control and drive synergies across its own supply chain that often results in lead times as little as two weeks from catwalk design to production to distribution of a garment to its physical and online retail stores. This disruptive approach has helped Zara become one of the world’s leading fashion retailers with a presence in over 80 countries.One competitive response to challenge Zara is to adopt “fully linked collaboration” supply chain management; where retailers and suppliers use cloud platform technology to openly share data and other capabilities to deliver goods and services together. However to be successful this may require radical new ways of working such as co-opetition between competitors for their shared mutual benefit.
  3. Instant branders use their high recognition, flexible brands to drive successful market penetration of their diversified products or services as sources of rapid growth. One such example is Amazon Web Services that not only powers Amazon’s retail business; it has also fast become the dominant provider for B2C cloud infrastructure services with a 25% worldwide market share reportedly gained over the last five years.Responding to these challengers can mean an organisation completely redefining itself as a “tech company” where its operating model is primarily focused on using technology driven innovation to differentiate and cost optimise its products or services.  Such an approach is core to the success of “Digital Disruptors” such as Uber and Airbnb where they established their own global enterprise platform brands to penetrate B2C markets in different geographies simultaneously. However, these new entrants did not need to transform their existing technology, processes or culture first to be successful unlike existing market players.
  4. Price racers lever their bulk buying power and other supply chain economies of scale to lower prices for targeted quality products to challenge established competitors. The discount supermarkets Aldi and Lidl have applied this model to grow faster than the “big four” UK supermarkets including opening more new stores than these established players combined during the last year.One way to challenge these discounters is to offer competitive prices with greater convenience – same day grocer delivery at home (a model currently being piloted in the UK market by AmazonFresh).  However, effectively delivering this complex supply chain and distribution of potentially hundreds of product lines from multiple suppliers is challenging; it took Ocado over a decade to turn a profit using a similar model. In addition, successfully replicating an individual customer’s preferences for picking fresh goods in-store arguably requires more sophisticated personalised experiences using emerging digital technologies such as big data analytics or even virtual reality.

What are your thoughts on these examples? Leave a reply below or contact me by email.

If you would like more information about how Digital Transformation can benefit your organisation please contact the Sopra Steria Digital Practice.

Published by

Mark Howard

Mark advises on user centric digital service design & transformation with a focus on tangible business benefits realisation. His passion is helping organisations to transform how their people use digital ways of working to interact with users to deliver an seamless, integrated customer experience. Mark’s recent private sector experience includes delivery of a mobile application prototype for a European business services company and advising a major UK high street retailer about using enterprise social media tools to drive competitiveness. Mark has 10+ years consultancy experience advising blue chip Telco, FMCG, Retail and Pharma clients as well as UK Central Government. Mark holds an MBA from Open University. www.linkedin.com/in/mark-howard-mba/

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