Disruptive Retailing

Per a recent world economic study, we have entered a ‘Fourth Industrial Revolution’ where industries, technologies, and jobs are getting disrupted faster than ever before.

The astronomical change in economic landscape, industry shifts, and consumer behaviors pose a direct threat to traditional business models.

Let’s consider the brick and motor retail, for instance, losing revenues to the online and mobile channels. For the first time in retail history, customers are asking for what many retailers and brands cannot provide. Today’s consuming class is simply unforgiving, craving for the best digital experiences along with price, selection, and convenience.

In the United States, almost all growth comes from online sales. One in every five dollars spent goes to Amazon. In 2015, Amazon was responsible for 50% of the growth in the United States. A study from Pew Research Center reported nearly all Americans under 50 are purchasing online.

In a letter to shareholders in Feb ’16, Sears Chairman Eddie Lampert said the impact of “tectonic shifts” in consumer spending has spread more broadly in the last year to retailers “that had previously proven to be relatively immune to such shifts. Walmart, Nordstrom, Macy’s, Staples, Whole Foods and many others have felt the impact of disruptive changes from online competition and new business models.”

The rate of speed in change is overwhelming.

Digital Transformation is a global megatrend, becoming a top priority on every retail CEO’s agenda. Gartner predicts total IT spent to touch 3.5 trillion in 2017. Cognitive Future, Design Thinking, Mobile First, Social Media and Cloud Enablement are beyond just buzz words, increasingly becoming a focus at the C-level.

Today retailers are charged up to go ‘All in’ with Digital as the guiding principle. New roles like Chief Digital Officer and new functions like Digital Compliance, Digital Operations are being introduced. Retail enthusiasts and industry experts are aggressively evangelizing how to create high performing Digital teams.

From the above table, notice the significant decline in valuation market value for BestBuy, JC Penney, Kohl’s, Macy’s, Nordstrom, and Sears. Digital Disruption is quickly eating up traditional retail businesses, adding more pressure and confusion to a departmental store format.

Technology is like money, it can make or break a business, sort of a ‘love-hate’ problem. Many retail leaders have prioritized technological initiatives over other projects. Regardless of the category, today if a brick and motor retailer is not powered by Cloud, Analytics, Mobile, Social, Cognitive it might lose customers to the advanced digital players.

Back in the day, competition came directly from the obvious rivals. In the 1900s, Neiman Marcus competed with Nordstrom and, 7 eleven competed with Dollar General in the 1930s. Today, it’s almost impossible to predict your competition. A sophomore can write a commerce app overnight using node.js frameworks and lambda functions, test it real quick, push it to her friends and start collecting orders on campus before even conventional stores open; there-by give a hard fight for traditional retail to respond, adapt to the shifting sands of digital.

Gut-based age-old retailing methods have been replaced by data-driven decisions. Many successful incumbents put data at the heart of every business decision. Winning with data is an unspoken guiding principle and a corporate philosophy at many successful companies.

What makes it even more fascinating is the constant change that adds along. Data never remains the same. It changes rapidly with time, trends, regions, forcing the businesses to constantly adapt, evolve and innovate.

Data is the oil of the 21st century. Alibaba relies heavily on the data we collect. We accumulate tons of consumer data. We know who is the buyer; we know what is his home address; we know what are his favorite brands, and we know whether he has a kid etc.” said, Daniel Zhang Alibaba’s CEO, in a Wall Street Journal article.

This is a Data-Driven economy. And, when the retailers and brands don’t realize and disrupt their working style; satisfying the ever-demanding consumer becomes an increasing problem. Be it the e-commerce gold rush in Asia or rise of the last mile delivery ‘Unicorns’, the retail industry is at the peak of Digital Disruption.

Let’s face it, we live in the day and age where all you need is a strong Wi-Fi connection to fire up an Amazon Web Services (AWS) instance and lure the digital buyer to build the next billion-dollar empire.

(Featured photo by Kai Oberhäuser on Unsplash)