If you are in retail, the last 15 years or so have brought enormous change. Let me call out a few profound shifts:
- Winning business model bifurcation: Price and dominant assortments at one end (Wal-mart, Amazon); remarkable experience and assortment curation/product differentiation on the other (Nordstrom, Louis Vuitton). The result is death in the middle.
- Digital retail: What started as an electronic catalog is now not only a high growth channel approaching 10% of many categories’ sales–and much higher if the product can be delivered digitally–but an increasingly important medium for promotion, interaction, customer reviews, price checking, etc.
- The constantly connected–and inter-connected–consumer. As more and more consumers are armed with powerful mobile devices the notion of anytime, anywhere, anyway retail has become a reality–and expectation. Social networking, product review sites and pricing apps are creating greater and greater information transparency. The brand is no longer in charge. The consumer is.
- The omni-channel blur. Most of your customers will engage with multiple touch points in their decision journeys. As mobile commerce grows–and it becomes easier for consumers to seamlessly move between various applications to gather product information, check prices, confirm inventory availability, get product reviews and the like–the notion of distinct channels breaks down. It’s a frictionless, compelling experience that matters, not making each of your channels better. New ways of consumer engagement, new ways of organizing your business, new ways of measuring and incentivizing become mandatory. Silos belong on farms.
While it is true that remarkable new business models sometimes emerge quickly and unexpectedly, most winning concepts that have gobbled up market share from industry incumbents did not come out of nowhere.
Amazon launched in 1995. The off-the mall and specialty formats that have made life difficult for the Sears’ and JC Penney’s of the world have been important competitors since the late 1990’s. Anybody paying any attention to customer data during the last 10 years has known that the so-called “multi-channel” customer outspends a single channel customer by a factor of 3-4 times.
With the benefit of 20/20 hindsight it’s clear that many Boards and many retail executives were asleep at the wheel. They failed to gain sufficient awareness of the competition and seek truly actionable customer insight. They failed to accept what was happening. And of course they failed to act. And now it’s too late.
So here’s the new reality. While many of the companies I mentioned–and countless more I’m sure you can offer up–had some 15 years to see what was happening and make the necessary changes, chances are you will have less time. A lot less time.
So I guess the question is: what are you going to do to make sure the next 5 years don’t happen to you?