the retailing industry has been facing one of the toughest eras of its history. e-tailing was born more than two decades ago, but it has never threatened the traditional retailing business as much as it is doing nowadays. Amazon’s market capitalization is now twice Walmart’s market value, the world largest retailer. along with Walmart, thousands of big and small retailers are suffering Amazon’s strength. they are not all Walmart, and for most of them, it is more a “David against Goliath”- like competition, rather than a "Clash of the Titans".
how can companies survive to this giant, who has the biggest marketplace of the world, the lowest prices of the market, huge volume of data to understand the end consumer, who has recently invested on retailing and innovating the customer journey with state-of-art technologies?
this David against Goliath war is changing the way people perceive shopping faster than expected. the Davids of the world, however, should not feel discouraged. there is room to find their place in this world and succeed.
what should David NOT do?
the best way for David to fail is to pretend he is Goliath. retailers should not compete on Amazon’s level. e-commerce portals and omnichannel tactics are a must-have, but they should not be considered as winning-strategies.
how can David survive?
Davids should try set aside their admiration and desire of being like Goliath, and spend some time introspecting themselves to figure out what they are really good at, what their core competences are. no one has the same core competences that Goliath has, they are non-replicable. then, once retailers deeply understand the root of their competences, innovation comes naturally, and it is far faster and more effective than trying to innovate where your core competences cannot apply.
many retailers have felt the need to innovate, but the investments have been sporadic and variegated. in my opinion, when it comes to innovation, retailers are at a crossroads. they can decide to invest on process innovation or customer engagement innovation. pursuing them simultaneously can be harmful, since they address different needs of the end consumer, and send mixed signals to the market.
the purpose of process innovation is to make the consumers’ life easier, without technology being necessarily shown to the consumer. that means that, with this type of innovation, technology is just a tool to make the customers’ journey inside a store easier, faster, more efficient as well as a tool for retailers and vendors to act more efficiently, optimizing the efforts and reducing their invested capital in the supply chain (stock). the perfect example of this innovation comes, ironically, from Goliath: AmazonGo (even if it seems to have failed, it has shown to the world a perfect example of process innovation). AmazonGo makes shopping faster, more efficient and it relieves the consumer from the pain of waiting in line. at the same time it allows retailers to have leaner stores (less workforce employed). process innovation, however, has its risks. execution here, is key. the technology must work every single time, otherwise, the whole customer journey is compromised.
do you have the right partners and capabilities to take this road?
customer engagement innovation:
customer engagement makes state-of-art technology more visible to the consumer, in order to get the “wow effect” and focus on the excitement in people’s mind rather than focusing on relieving them from the pain points they are currently suffering. examples are various: from the utilization of augmented reality, to robots, to examples like Ralph Lauren's Smart Fitting Rooms. in a fast-paced world where people constantly need and expect to be amazed, giving a unique in-store experience can be really important. also, customer engagement innovations can be really powerful and have huge media attention. however, the “wow effect” is hardly sustainable either in the long term or in a large scale.
do you have the innovation capabilities and the organizational structure to keep the customer amazed and engaged in your stores in the long run?
retailers are at a crossroads. they need to innovate, but to survive, they need to deeply comprehend their core competences and descend their efforts on the path that best fits their nature: customer engagement or customer journey. there is not a better choice between the two or a one-size-fits-all solution. in my point of view, the choice should be conscious and strong. i believe that a mix of the two could be ineffective and harmful in the long run. retailers who do mix the strategies, might not keep up with their customers' "wow-effect" expectations and not focus enough on the execution.
in conclusion, my outlook for the retailing industry is positive. today's world has presented numerous challenges to retailers. however, these challenges are not only risks but also beautiful opportunities for us to reconsider the shopper's experience and create added value for the industry and the end consumer.