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who will survive the disruption in retail?

"The definition of insanity is doing the same thing over and over and expecting it to come out different”

Albert Einstein

Ask retailers why they are in trouble, most will blame Amazon and Alibaba or e-commerce in general. They are right and wrong. They are right that e-commerce, mobile commerce, social commerce are disruptive forces and they changed the retail space forever. However, that simple, obvious and gloomy realization does not help. The interesting question is not who was successful at disruption, but how traditional retailers can survive it.

Sleeping with the enemy

Most brands recognized the power of the online platform and decided to try e-commerce. They cannot help but sell on the leading online platform. Some have consistent and well thought out Omni-channel strategies, others give in to the disruptive forces of online, as they do not see a way out. The second approach can maintain revenue, and give a feeling of resistance. However, that strategy puts brands at risk of losing the battle by surrounding to the enemy. In that scenario, brands can lose control of their distribution, and become highly dependent on the platform and its operators. In the worst cases online platform dictates product selection; decide by best sellers status, comments, recommendation, etc.

A stunning example is how Alibaba’s massive online promotional day SINGLE DAY”, also known as “11/11”, leads retailers to make a promotional day in their offline world. This is the type of influence that retailers need to worry about!

Which retailers died and why?

Retailers who disappeared did not only die because of e-commerce. They went extinct because they could not evolve with what the market became. They just could not renew their product line, streamline their distribution, adjust their brand, etc. So one can argue that e-commerce was the last straw that broke the back of a very sick camel. Borders did not die from being an offline retailer; it died because it did in invest properly in technology, which gave away control to Amazon along with other reasons related to management and finances. Circuit City did not pass away for being an offline retailer; it died because of bad customer experience, lack of innovation, and poor management.

Reducing the risk?

Several major retailers are closing shops. That means that retailers are trying to save their model by stopping the financial leakage and creating room to survive. It makes perfect sense, closing your bottom 20% performing stores will improve your overall performance and free up some cash. Expect that, when you finish, you still have 20% bottom performing stores in your remaining stores. By closing stores, a brand reduces its footage in the market, its visibility, weakening the brand. This may start a downward spiral movement, unless the brand starts making some changes, and use the freed up resources to innovate.

Who will survive?

There is really, only one strategy to survive disruption: evolve. A disruptive approach attacks the status quo of the old model. Brands can survive the disruption if they make a resolute decision to change. It is challenging to make that decision, especially for successful brands. It means to question the very basis that leads to earlier successes. It must start from the top, and result in profound changes.

Brands who will survive are the brands that are ready to re-examine, in depth, the experience they offer their customers, and willing to look closely into the mirror. Are they as customer-centric as they think? Do they offer the best customer experience? On both questions] Can they collect more information to know their customers better? Do they always inform the customer of their options, rewards, possibilities?

Shops of the future

It is hard for brands to apply everything recommended by experts: to get a deeper level of introspection and honesty, keep themselves up to speed on what new experience they can offer thanks to new technologies, experiment in an agile way and deploy new customer experience.

This is why we have created shops of the future. To help retailer evolve to survive the retail disruption. To book a workshop with us, you leave a comment here, use the contact form on our home page, or send us an email at sales@system-in-motion.com.

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