October 4th, 2019

REthinking Disruption in the Retail Sector

We don’t have to let Amazon write the story of retail disruption anymore.

Of course, Amazon’s Prime Day and delivery deals require retailers to adapt. But all retailers now have the potential to disrupt. The tools and tactics of retail disruption are well understood. Indeed, legacy retailers can be just as disruptive as VC-funded start-ups.

Disruption typically happens via three avenues:

  • Platforms: Digital destinations where people buy, sell and collaborate. Examples: Amazon’s Marketplace and Apple’s App Store.
  • Crowds: Masses of people who buy products or services that solve a problem in their lives. Examples: Airbnb and the ride-hailing companies.
  • Machines: Technologies that improve people’s life experiences or make businesses more efficient. Examples: Smartphones and cloud services.

To shake up their industries, retailers can take any or all of these routes. That will require a mindset shift that might not be so easy for retailers who have spent years focusing on other priorities.

Consider one of the most popular retail metrics: ROCI, or return on capital invested. Retailers tend to obsess over ROCI because it helps them assess the value of investing in new stores. But in the era of disruption, you might not need any new stores. Instead, you might invest in digital technologies that are not capital in the conventional sense.

Remember omni-channel?  It was hot a couple years ago but already seems ready for retirement. It’s not that retailers won’t keep investing capital and selecting marketing channels. But they will have to adapt to an era where disruption is inevitable.

Getting the Right Perspective on Retail Disruption

Though platforms, crowds and machines are vehicles of disruption, they are not in the driver’s seat. As the author Thales S. Teixeira explained in a recent Harvard Business review article, customer dissatisfaction is the prime cause of disruption. Innovators identify gaps in customer satisfaction and launch services to close those gaps.

This concept gives retailers a straightforward question to ask: What are you doing across your entire value chain that has a positive impact on your customers? Keeping today’s customers happy is a short-term challenge — you also have to think about future customers.

You’ll need a framework to explore and adopt new retail technologies. And you’ll have to measure how these and many more factors affect your customers’ bond with your brand.

Retailers hoping to become disruptors have to remember the big picture. Disruption cannot be a quick fix. It has to be an engine of long-term growth, competitiveness and customer satisfaction.

At DMI, we’ve developed frameworks to help retailers evolve in an era of perpetual disruption. Our expert consultants and technologists can help you simplify your application portfolio and adapt your company culture to do more than keep the lights on.

With our help, you can take the lead and stay there.

 — Varun Ganapathy, director, commercial/consumer: digital technology office

Tags: Amazon disruptor retail technology

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