What can you expect in 2020? If the rapid pace of change is set to continue, and I believe it is, then it begs the question: “What defines a retailer?”
Their very identity has been altered beyond recognition thanks to technology advances. And, based on conversations I have had with retailers across the globe, some overwhelming trends will continue to forget their new identities. Here they are:
Winning retailers will build ecosystems by accelerating the use of value-adding partners, seeking those who can supplement their product with a unique service – and adding new channels through which to sell their products. As Gartner said, these ecosystems create “connections between partners, employees, and even competitors… built into vibrant networks that can unlock value for all.”
Examples of these include:
- Sainsburys (UK Grocer) selling its own-label products through Coles in Australia.
- Coles and FlyBuys working together for loyalty and subscription services.
Retailers will use IoT to innovate and differentiate but also will realize that their IoT projects need to be connected. By connecting IoT initiatives together, they will benefit from the “network effect” that transforms individual silos, projects and initiatives to enable new insights and innovation. This can then support and automate decision-making to provide a relevant and timely response. McKinsey believes that applying the likes of IoT technology to a store environment can double store profitability.
Over the past few years, the biggest barriers to IoT have been around the business case not being big enough for the investment. IoT can be considered as a bridge – everyone wants the benefit of the bridge but no one can pay for the whole thing. What’s needed is the ROI.
Interestingly, retailers are now starting to see the potential of IoT to aid energy saving in their stores; in fact, RSR recently said, “retailers are missing the obvious…money that can be saved from preventive maintenance, smart HVAC & lighting systems & general machine status can fund projects that drive sales.’”
The similarities with smart city type projects are significant – the opportunity to learn from these projects and apply the same principles could well create the bridge that is required.
Sitting at the Top Table
Technology will sit at the top table organisation-wise in the New Year, after years of underestimating the importance of IT in enabling new digital business models. Technology leadership will start to bring innovation to the rest of the business, as visionary CIOs contribute new ideas. Retailers will need a flexible IT architecture and approach to support this.
Environmental responsibility will become a differentiator for retailers. An increased focus on the environment informs consumer choices, and retailers will respond accordingly. Amazon has ordered an electric fleet of vehicles in response to concerns over its supply chain’s carbon footprint. We have seen retailers discontinue plastic cotton wool buds and plastic straws due to concerns about littering the ocean.
Smart retailers will see technology as tool to help. This could be IoT and real-time AI response to supply chain issues, improving data visibility that drives decisions, or using process mining to understand and eliminate delays that have an adverse environmental impact.
The blurring of industry lines will continue as consumer goods companies seek to avoid using the traditional retailer. The “direct to consumer” business model focuses on delighting its customers without any intermediary involved. Think Dollar Shave Club (since acquired by Unilever) offering razors direct to the customer for as little as $1.00 per month. Even Lego is considering offering a rental service for its toy bricks.
Although technology shock-waves continue to disrupt the retail industry, we see retailers fighting back in 2020 – and there are business models out there we have not even begun to imagine. These will help to form and solidify retailers’ new identities.
About Software AG
Software AG helps retailers digitally transform their businesses. With Software AG’s Digital Business Platform, retailers can connect systems, people, and things in real-time in order to streamline, automate, and provide intelligent visibility. Leveraging vendor-agnostic integration technology, data silos can be eliminated to efficiently enable the omnichannel customer journeys demanded by today’s demanding consumer. Industry-leading API Management, IoT and AI technology enable retailers to leverage the power of sophisticated retail ecosystems and facilitate new business models. For more information visit: www.softwareag.com