There has been a lot of chatter recently about the need for retailers to embrace the startup lifestyle: innovate, move quickly, be nimble, challenge conventional wisdom, fail fast.
It was a big theme at the National Retail Federation’s annual Big Show, where more than 30,000 retail experts gathered to share, learn and plot the way forward. It was the subject of a webinar last week presented by e-commerce expert Brian Beck of Guidance and TeeFury Senior Marketing Manager Caitlin Molinari, who stressed the wisdom in being nimble when adopting digital tools and when thinking about how to communicate with customers.
The “act like a startup” mantra, in fact, is the sort of thing that could drift into the overexposure zone, where everything begins to sound like, “blah, blah, blah.”
But if you ever needed a way to frame retail’s mandate to pick up the pace of innovation and change, take a look at the recent work that Silicon Valley networking company Cisco has been doing with a handful of other firms.
The company, along with the Institute for Management Development, helped form the Global Center for Digital Business Transformation, which led a study to lay out the potential for digital disruption in the near future. The work resulted in a Cisco report that takes a broad look at a dozen industries and a Global Center report that outlines the effects of what it calls “the Digital Vortex.”
Yes, vortex. Scary stuff.
In some ways, we’ve seen this movie before. From Cisco’s report on the survey results:
“As digital shopping experiences become mainstream, retailers need to act quickly to ensure they are not disrupted by innovative, online-only players or traditional competitors that adapt faster than they do. In particular, mobility and apps now represent a disruption similar in scope to what we saw with e-commerce in the late 1990s and early 2000s.”
The situation is dramatic. When the researchers ranked the 12 industries in terms of which were most likely to be disrupted by digital technology, retail ranked No. 3, behind the “technology products and services” and “media and entertainment” sectors.
For its part, Cisco concluded that digital innovation could create $2.8 trillion in new value in retail between now and 2024 and that the industry has been slow to capitalize on the opportunity. In 2015, by Cisco’s math, the retail industry took advantage of only a fraction of the added value that it could have created through digital innovation.
That can be seen as a glass-half-full or half-empty scenario, given that the potential is still there. But the work by Cisco and the Global Center for Digital Business Transformation indicated that retail executives have a fairly pessimistic view. The global center survey found that 47 percent of retail executives believe disruption could put them out of business. And the center itself has little in the way of encouragement to offer, predicting that four out of the top 10 retail firms will be displaced over the next five years.
And why not? Consumers are rapidly changing the way they shop, embracing mobile devices and moving seamlessly among different sales channels. And then there is Amazon, which like Harry Potter’s Lord Voldemort, is rarely mentioned, but always lurking.
Consider an autumn survey that shows that consumers searching for products online turn to Amazon first, more than any other source. In fact, 44 percent of consumers in a 2015 BloomReach survey conducted by Survata said they go directly to Amazon when shopping online. Meanwhile, 34 percent rely on search engines and only 21 percent go directly to specific retailers’ websites.
A more recent survey, conducted during the first part of the holiday shopping season, found that 87 percent of consumers comparison shopped on Amazon and that 73 percent actually made their purchase on Amazon. In fact 71 percent said they’d spend more than one-quarter of their holiday budget on Amazon.
That is not to say that Amazon is the only disrupter out there — and in fact, more than half the retail executives surveyed by the Global Center said they expected to be disrupted by startups, not incumbent competitors.
So, what to do? The Cisco report lays out 10 broad areas, including targeted ads and marketing, deeper online and in-store analytics, cyber security, loss prevention and mobile payment systems, that can be enhanced with digital technology in ways to improve the bottom line.
And Cisco points to a retail partner, The Dandy Lab of London, that is dabbling in several digital initiatives — from interactive mannequins to in-store cameras — to improve its customers’ experiences. You can read more about The Dandy Lab and its strategy for success in this sidebar.
Here’s the quick version for the impatient among you: What the London retailer has done is harness technology to better understand its customers. And once they are better understood, it tailors every experience in the store to the individual.
It’s always striking, isn’t it? No matter how advanced retail’s tools become, it always gets back to the customer and offering him or her relevant products that resonate with them personally.
Mike Cassidy is BloomReach’s storyteller. Contact him at firstname.lastname@example.org; follow him on Twitter at @mikecassidy.