“More is More”: Why retailers need to get even bigger to succeed in The Digital Age

With Tesco’s recent acquisition of the wholesaler Booker and Sainsbury’s buying the Home Retail Group (parent of Argos) last year, key UK market players are using inorganic growth to rapidly expand their physical retail channels. Yet given the ever-growing threat from digital disruptors like Amazon, and discounters (notably Aldi and Lidl), why would any retailer be looking to increase their bricks and mortar liabilities given this channel could be in long term decline? Here are some ideas…

The IKEA experience – perhaps ironically it is a pre-digital retail format that may offer the right approach to combining the unique strengths of the physical store experience with the choice, availability and (critically) lower prices offered by online channels. IKEA’s gigantic stores across the UK combine a compelling in-store experience where customers can physically explore a range of products with the convenience and price competitiveness of a wholesaler’s warehouse. In comparison, Amazon offers price and choice but it can’t replicate the tactical experience of interacting with a product, nor the instant fulfilment.

Sainsbury’s wants to exploit the supply chain capabilities of Argos – not just in terms of same day fulfilment, but the warehouse capacity its stores carry on the high street – physical retail as an unbeatable customer experience Amazon can’t imitate.

Best of both worlds – Arguably a challenge for both Aldi and Lidl is that their focus on lower prices constrains their ability to innovate their supply chains to deliver personalised, contextual experiences to individual customers. In response, not only can Tesco lever the supply chain capabilities provided by Booker to drive greater efficiencies across its operating model to drive stronger competitive pricing, the additional store capacity it now has available means offering greater customer convenience for its digital offerings (such as hundreds more Click+Collect points across the UK). This will enable Tesco to better blend its digital and physical customer experience together while delivering competitive pricing to rival the discounters.

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

Dawn of the Utility Triple Play?

With the fast approaching water retail competition for business customers coming to fruition in April 2017 a number of interesting dynamics are potentially going to materialise. Notwithstanding the initial challenges all the existing water companies will have to grapple and come to terms with around transforming their businesses in anticipation of market go live, one key dynamic will be new entrants into the market.

New market entrants, who potentially could be waiting in the wings? Who might be investigating moving into the water retail market? Straight away certain sectors spring to mind who are already operating in these types of market space, and as such already have much of the required infrastructure in place and understand the dynamics of how to successfully operate in these competitive market spaces. Typically, companies in the electricity and gas retail space along with telco operators, who would appear to be the likeliest new players?

As if to validate this point, Ecotricity, although ruling themselves out of entering the water retail space, for now, citing their requirement to concentrate on their core energy business, does illustrate the point that new market entrants are giving consideration to entering the new water retail market.

In light of these potential new entrants, and more importantly the areas they already operate in, could we see, what up to now has been a typical telco space offering, the ‘triple play’ (ie video, voice & data)? Could we see a new entrant to the market who offers a utility triple play of electricity, gas and now water to business customers as a bundled service offering? Is this a natural progression of the now common dual fuel offering?

This type of offering could present some interesting differentiator dynamics, especially in the areas of tariff innovation, and thus cost along with perceived customer single point of contact benefits for all utilities. When looking at different business customer demographics it’s quite easy to see the utility triple play offering appealing to the larger volume SMEs, where cost and simplicity would be key drivers in the provisioning of utility services. Large volume water users and multi nationals will present more of a challenge as they will be looking at a larger criteria of requirements than SMEs, so any potential new entrant looking at offering a utility bundled service will face the challenge of needing to broaden out their offering accordingly.

It will be interesting times ahead – monitoring over the coming months the emergence of any new entrants into the market, their background and planned strategies and, who knows, maybe we will see the Dawn of the Utility Triple Play!