It’s no secret that many Australian retailers are under pressure. In recent years, more than 20 have cracked with a few subsequently disappearing. Poignantly, Australian retail sales fell again in February, the second decline within a three month period.
In a previous article, I touched on five important trends affecting retail, identified from the NRF and other retail events, which I’ve attended and dissected as part of my mission to explore the future of retail. Understanding how to navigate these trends will assist retailers in arresting the downward trend.
A central theme across all five trends is a permanent shift in consumer behaviour, fueled by the digital revolution. Novel ways to obtain and share information, new methods to transact, and innovative business models have emerged – all challenging retail conventions.
The recent sales data confirms that the retail industry is struggling to keep up with the pace of change. While some retailers stride boldly forward, others remain complacent. To strike a stark observation, adapting to the ‘new economy’ isn’t mandatory, but nor is survival…
So, what does it take to remain relevant?
Research by KMPG identified three main drivers behind emergent consumer behaviour: the search for value, convenience, and unique brand experiences. Seemingly nothing new, except that the technology now at the disposal of modern consumers massively amplifies their ability to act on these motivators.
The perennial nature of these three drivers tells us that retailers leading the way in the new economy haven’t reinvented retail. Quite the opposite, they’ve simply figured out how to navigate the digital revolution smartly, realigning their offering to capture the modern, tech-enabled consumer.
Below I spotlight a few of the most impactful business models adopted by successful new economy retailers.
Subscription commerce and DIFM lifestyles
The consumers’ quest for ownership has been replaced by pay-per-use convenience. Consequently, consumers have flocked to retail-as-a-service business models, and thousands of subscription retailers and peer-to-peer service providers have now arrived on the scene.
The biggest players in this space have literally transformed the categories in which they operate – think Netflix, Spotify, Airbnb, Uber, etc.
Other models are taking advantage of the rise of DIFM (do it for me) lifestyles, offering experience-oriented services that augment traditional offerings with bespoke customer service. For example, ecommerce trendsetter Bonobos uses physical showrooms to help ensure its clientele get the right style and fit, in a very personalised way. Similarly, the Trunk Club offers individualised styling advice nurtured through a one-on-one relationship with your ‘very own’ stylist.
Interestingly, both Bonobos and Trunk Club were founded by the same guy.
And, then there are the many food services like Hello Fresh that enable you to
eliminate the dinner time household rush by completely outsourcing your food planning and preparation. Ready-made meals are delivered to your door, quite handy in our time-poor society.
With online payments becoming more seamless and convenient, the growth of social commerce within the ecommerce landscape has emerged as another important trend.
Players in this space have created sticky experiences that enable their clients to transact directly from their social platforms of preference – giving them the means to view, desire, and acquire without having to navigate to another website.
For example, with the Facebook’s “Buy” button a customer can make a purchase without leaving their social account. In the US, you can now order an Uber directly from the Facebook Messenger app. Buying on Instagram and Pinterest is also commonplace.
Retailers can’t afford to ignore this ‘sCommerce’ trend. According to a study by Forrester Research, online retail sales in the US will total more than $530 billion by 2020, with social media driving a significant portion of the continuing growth.
With experience being an important attractor for the modern consumer, the desire to add a personal touch to everything – including shoes, bags and clothing – keeps getting stronger. Advancements in manufacturing have now enabled retailers to meet this demand and include their customers in the design process.
Shoes of Prey was an early player in the personalised footwear space – starting out as a small online business, now backed by Nordstrom.
Mon Purse did the same thing with bags and purses.
But, if want to look at a convincing case study showing that product personalisation has progressed beyond a mere fad, check out what’s possible with NIKEiD.
Voice-activated is next
Siri seemed almost comical when she was unveiled by Apple back in 2011, but the potential of voice interface was evident.
After five years of exponentially evolving technology, Amazon Alexa and Google Assistant have now moved into the living rooms across the US and Europe, settling sibling disputes, calling cabs, selecting the tunes, placing ecommerce orders, even helping people find their keys.
In retail, UNIQLO’s voice interface, AI-powered customer assistant shows the possibilities. The system has detailed knowledge about UNIQLO’s range, store locations, and more.
However, let’s be pragmatic – despite these impressive advancements in voice interface, we still can’t have real conversations with our machines… yet.
The message for retailers that I’m picking up from all directions couldn’t be clearer: as the new economy builds momentum, traditional or ‘last economy’ retailers must start to seriously participate or face the consequences.
However, a word of caution. Survival isn’t about revolution and reinvention, it’s about smart augmentation. Identify what your business does well (value, convenience, experience, or a mix), then leverage technology wisely to amplify your key strengths to stay relevant in a digital age.
It’s about continuing, focused effort to make the business better, but not necessarily radically different.