The Three Senses of Retail

Oliver Guy
By Oliver Guy - November 2, 2018

SAG_Twitter_MEME_See_Me_2018_Nov18Do retailers really need bricks and mortar for people to truly experience shopping? It would appear so.

According to a study, the vast majority of shoppers prefer to see and touch their products before they buy. So why are so many traditional retailers going out of business?

There is lots of talk about a so-called retail apocalypse, but in reality there are many retailers doing very well around the world – for example the Walgreens Boots Alliance recently replaced GE, one of the longest standing members, in the Dow Jones Industrial Average.   Coming on the heels of the company making a firm commitment to digitally transform - in order to optimise its current business and rapidly exploit new revenue-generating opportunities - the Dow Jones listing is unlikely to be a coincidence.

The financial impact of digital transformation can be immense.  Research conducted by Forrester of some of Software AG’s customers has shown a 324% return on investment and a payback in less than 6 months.  This is staggering by any measure.

But bricks-and-mortar retailers are still under a tremendous amount of pressure from online-first competitors, despite the online competitors’ inability to offer a more hands-on experience. The answer to the traditional players’ conundrum may lie in partnerships. There is a blurring of boundaries taking place, with supermarkets joining up – or competing - with meal kit providers such as Hello Fresh and Blue Apron. Examples include Woolworths, which is offering innovative meal kits that customers can pick up and carry out.

Others are offering what is called “experiential retail” where they create an environment for customers go to learn, play and experience rather than just transact. The Apple Store is a great example, Dyson, and Samsung 837 in New York – where you cannot actually buy anything. But it is also why we are seeing more grocery stores opening on-premises cookery schools, and even restaurants.

“Coopetition” is becoming another intriguing angle - with complex ecosystems starting to emerge.  For example, Abercrombie & Fitch is taking pop-up clothing stores into hotels. Google is investing about US $550 million in Chinese ecommerce powerhouse, to expand in fast-growing Asian markets and take on rivals including Kroger and Sobeys are outsourcing their ecommerce grocery sales to Ocado.

What all of these success stories have in common is that the retailers are agile enough to exploit new channels and revenue-generating opportunities. A few years ago this new opportunity was omni-channel sales, now we are seeing new offerings such as subscription retail and the need to exploit ecosystems appearing.

These models are not supported by out-of-the-box software solutions –innovative things never are until they become mainstream – so to compete and innovate retailers need to ensure their technology framework is flexible enough.  It needs to be able to support an innovation at scale by being able to orchestrate a new process across multiple existing systems, but also be open enough to allow you exploit emerging technologies such as AI and IoT when appropriate.

This article originally appeared in ARA Retailer Magazine.

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