#23-Digital Disruption and The Future-Proof Model of Retail

2020s is the decade of the ‘contactless and the e-commerce’

COVID-2019 pandemic has accelerated e-commerce and payments growth by 5–10 years.

The world was already moving towards e-commerce, but now the shift has been expedited thanks to the rise of ‘Untact/Contactless’. Cash is infected, so are the shops. Consumption has slowed dows and the discretionary spend has fallen.

Why e-commerce is the future?

1. Convenience- Millennials like to save time (a better word for convenience loving lazy people). What can be done in a few seconds by the “press of a button” or “voice command”, should not take up hours, fuel, and a personal visit. Conveyance costs and time costs are real savings for a digital consumer.
2. Superior experience and more control- It is much easy to check “in-stock” status, demand a refund, or an exchange online compared to physical retail. Credit offers associated with your cards, wallets are also much easier to capture. You can even control the time and place of delivery if you are shopping for others or yourself in a different city. The online catalog is always richer than the physical inventory at any store.
3. Reviews and buying decisions- Reading the reviews help you make informed choices. Customers are ruthless when it comes to broadcasting poor shopping experiences online and offline. You cannot cheat your consumers online a lot, forever.
4. Lower costs and savings, loyalty points- No store rents, salaries, no store operation costs minimizes the cost of goods being sold online. Many manufacturers now can directly sell to end consumers without worrying about the wholesaler, retailers margins. Online data of consumers allows the brands to position their loyalty programs, personalized offers directly to consumers.
5. Minimal human interactions- Humans are now spending 4–5 hours on their digital devices every day. This also means that a lot of consumers do not like social interactions as much as they used to in the past. All individuals who needed some support for shopping at a store in the past (men, children, and females who could not drive, people who were not staying close to markets) can now shop through their smartphones.
6. On-demand and always on- E-commerce never sleeps. Since it is not a shop, it never opens or shuts. A consumer can shop online after a long day to destress himself/herself. Keep a wish list in the cart, monitor the best deals, and buy things when money is there or not (using credit/EMI).
7. Non-Discriminatory- Consumers can buy from the most premium websites without worrying about the experience they would have had at the store. This is barely recognized in public, but store managers and salespeople do judge you by your appearance.

Seven future-proof strategies big retailers must consider

Does it mean the end of retail? No, it's New Retail time

The recent retail bankruptcies do point towards the upcoming “retail apocalypse” but many companies are smart enough to recognize the need to change

Alibaba-New Retail

1. The New Retail and O2O integration- New Retail” is the term Alibaba uses to suggest the merger of O2O (offline and online) commerce through the digitization of the entire retail value chain for the benefit of both the seller (mom and pop stores) and the shopper and, the company enabling this transformation (Alibaba cloud, and e-commerce Platforms, payments and automation solutions). We no longer live in a digital or a physical world- the new term is phygital (always digital and always physical). We are always connected to the offline world.
2. Superior customer experience with cutting edge technology and payments systems- Stores like Sephora, Hema Fresh by Alibaba, and Amazon Go are building truly experiential stores for consumers to offer much more personalized and tech-enabled (AR/VR) experience. Nike stores help you design your own shoe.
3. Mini fulfillment centers-Stores that also act as automated mini- fulfillment centers for e-retail, will be popular. They help in reducing the speed of delivery and thus promoting e-commerce too. According to the Wall Street Journal report-Simon properties- the top U.S. mall developer and owner of many of the country’s best malls, is looking into the prospect of turning some of those stores into Amazon distribution hubs, which would aid the Internet retail giant’s shipping speed and shorten the so-called last mile in e-commerce delivery. Amazon has over 100 in the U.S. but is looking to speed up delivery with facilities closer to customers in an effort to better counter rivals like Walmart and Target which can use 4,400 and 1,800 stores respectively to assist their e-commerce.
4. Private labels - Retailers will need to expand their private label playbook to increase more profitable and fast-growing categories. Just like e-commerce players (Amazon Basics and Essentials) launch their own brands, retailers will do that too. They will also need some exclusive non-cannibalizing contracts with the e-commerce players they partner with.
5. D2C (Direct to Consumer Platforms)- Retailers and CPG brands will eventually need to figure out the D2C play with their own logistics partnerships to stay relevant against the e-commerce threat. This is the reason why Walmart and Target are so aggressive in optimizing their own e-commerce platforms, subscription and loyalty programs (Walmart+ just like Amazon Prime)
6. AI-powered Robots and automation in store- A cost-optimized retail model will be important and hence a total automation of the retail store scenario cannot be ruled out.
7. Data analytics- Big data capabilities will help in personalizing customer journeys. Shoppers data now matter more than ever, if retailers have to compete with the e-commerce players
8. Instore experiences- The Latest AR/VR tech, Smart Mirrors, and check-out /PoS technologies will optimize the in-store experiences.
9. Frictionless shopping experience and Unmanned stores will be a trend- With smart cameras monitoring, digital identities getting secured, and the rise of AI-enabled robotics, the physical stores will move towards complete unmanned experiences.

Amazon Go Experience: You enter by scanning the mobile. There are no cashiers, the AI-powered cameras on the cieling observe what you pick and left with. You get billed on the Amazon Go app.

A truly frictionless shopping experience- Enter, Shop, Go (Payments become invisible)

Social Commerce and Livestreaming will grow further

Recall the excitement of visiting shopping stalls at a carnival, concert, or a flea market? Add the excitement of the teleshopping networks and informercials that cocktail and you get the- LiveStreaming based commerce.

The Chinese live streaming shows are already a 170 billion USD a year industry. However, it requires showmanship, branding and excitement to success in the crowded platforms vying for shopper’s attention and money.

Image -24 news order

Clicks and Shows are taking the customers away from the bricks.

1. Live-streaming the store across platforms- Imagine the excitement when you local retailers will be forced to be creative salespeople with great stories and pitch to sell. Every store/owner and retailer can become a storyteller.
2. Next level of digital marketing-This is about taking your digital marketing to the next level through human, engagement, frictionless payment checkouts, and localized user experience. This permits the integration of offline/online retail.
3. Social commerce technology is in place-The technology is in place but mostly being used by Social influencers or some online sellers in China
4. Same-day Delivery option available- You can buy anything you need from a few local retailers who can bring you the delivery in matters of few hours or same day
5. Influencers with the biggest communities, brands, and most engaging content will win- Not every live-streamer will win. It will require an engaging digital community, good content, and brand appeal to win in social commerce

Kim Kardashian sells 15,000 bottles of perfume within minutes on Taobao livestream

Image -the Star

Customers also get the satisfaction of supporting the local retailers and bring back the human touch in the conversations.

The videos/streaming may start as poorly made videos but eventually, we will see a lot of Insta and TikTok star retailers.

Huge opportunity for social and e-commerce players to build the offline community as well. I see early signs of a few strategic eCommerce going after the local retail markets/communities. It is a win-win for all- retailers, consumers, fintech, social, and e-commerce players.

Best regards,

Sidhartha Sharma

Digital Expert and Ecosystem Strategist