In the last twenty years, the accessibility of the internet and the number of people connected has increased exponentially. By observing the current dominance of GAFA (Google, Amazon, Facebook, Apple), you'd be forgiven for thinking that the technological boom is over and that these companies have utilized all the possible benefits. However, the use of this technology in retail is just beginning to develop.
The next wave of disruptive innovations will be of another magnitude; there will be more complex challenges, but with them come more lucrative opportunities and greater disruption for established companies. We discuss how these opportunities can ensure retailers remain competitive against marketplaces like Amazon.
Transform access into use
Although the majority of the world's population is online, they only make a small portion of their purchases on the web, and ecommerce represents but a fraction of retail spending. However, retail will continue to evolve as this number inevitably increases.
The use of connectivity is only beginning. The development of technology and purchasing power seems to be following the same path as that of industrialization. However, much of the global economy still needs to be shaped by developments in software and the internet.
The transformation started with models that assume low internet penetration, reduced speeds, limited consumer readiness and little capital. Now, all of this is reversed. For example, when selling homes, ads would be posted online to find a buyer. Now, startups like Opendoor will buy a property directly and then sell it themselves.
Retailers as logistics vs. tastemakers
At the heart of this transformation, two major types of retailers can be distinguished: retail logistics companies (such as Amazon or Walmart) or "retail as tastemaker", brands that have a uniqueness and an authentic brand experience that outweighs mere convenience, as referred to by Benedict Evans in his talk, "the end of the beginning".
For example, you could buy products that are available in New York online, but you may not have the "authentic" New York shopping experience. This is where the tastemakers can stand out strongly from the marketplaces. For retailers, this implies a fundamental change in their purchasing journey, from a logistics retailer to a customer-centric, experiential brand.
This creates new business opportunities, especially for the fashion and cosmetics sectors. Current consumers do not just want to go to the store or browse randomly online. They now expect to be "inspired" by brands. Tastemakers prevail here against Amazon as they can present trends to their customers in a way that engages with them (on social networks, for example), while subtly encouraging them to complete the shopping journey.
Invest drastically in the customer experience
So, one of the biggest challenges is to understand how technology is changing not only your own industry, but also the industries around your business and your customers.
Twenty years ago, we didn't think that one day, consumers would buy clothes or cosmetics online without having tried them. In fact, every change in the retail model changes not only the way we buy, but also what is purchased. When you change the purchase path, users do not buy the same products; their shopping cart is changed.
The way the brand connects with its consumers through technology changes the whole customer experience. The majority of tastemaker brands understood this and were the first to adopt a customer-centric outlook. This is a strength that will allow them to remain competitive with Amazon.
Rely on AI
Technology is creating new opportunities for tastemakers. More specifically, AI (or machine learning) is a great new way to learn and predict the intentions and preferences of consumers.
While social networks and online research have largely evolved ecommerce, cryptography and machine learning will allow much more profound changes in the way we harvest and use vast amounts of data. For example, by establishing the traceability of the products, the blockchain could counter the risks of fraud and guarantee the authenticity of the products.
Harvesting this data also allows tastemakers to go further in personalizing their interactions with their customers. Many tactics are developed based on this data: the preferences-based product recommendations and customer purchase history, the replenishment that simplifies the repeated shopping journey, the upsell that increases the value of the average basket, or the predictive sizing which drastically reduces the returns produced.
Towards a race to value
As a retailer, you need to understand that the digital revolution is just beginning. The last twenty years have been devoted to Internet access, while the next twenty will be devoted to its use and the way in which technology can rethink and improve the whole customer relationship.
At present, the wave of change is fueled by machine learning (such as blockchain technology and related technologies).
What begins here is a race to value: how will your brand find new ways to attract and create value as the tectonic plates of the internet move, adjust and completely reinvent consumer expectations. In the face of international marketplaces, adopting a customer-centric approach by investing in the customer experience seems to be the most competitive strategy to date.