Dropping in-store sales or the “Death of retail”
Obviously the thing everyone has to mention during an event about retail pertains to the alleged death of retail. Brands all over the western world are seeing the in-store sales drop while we also see the online market growing substantially.
The largest challenge right now for the big brands with brick-and-mortar stores is that the shift to online also means new competition is popping up mainly companies that are digital natives. The large retailers have to shift their attention to online while offline sales still add up to about 80% of their total business which creates interesting strategic problems. Furthermore – should retailers assume that offline will keep declining or will we see a plateau effect? It is unlikely that online will stop growing anytime soon but that doesn’t mean that offline will always be on the decline – maybe there will be room for traditional stores in the future as well.
The value of being agile
We are in a time of unprecedented potential when it comes to scaling a business. Never before have start-ups had the possibility to challenge large established brands for market share this quickly and digitalization and the shift to online is a big reason why.
During the event it quickly became clear that many big retailers simply do not have the flexibility and agility to quickly adapt to a more digital environment, and digital natives such as e.g. Zalando.com are able to capitalize on that – by being agile in their mindset and processes. Now that many traditional brands have lagged behind when it comes to digitalization they will have to utilize their massive resources to catch-up to the digital natives and win some of that market share back – the most agile brands are in a position to win big while those who cannot adapt will likely face serious problems down the line.
So what exactly is it that the large brands should be doing which requires agility & flexibility? Simply put they need to accept that online is here to stay and start thinking in terms of omni strategy. Currently online and offline often live in silos, at completely different places within a company with separate budgets, managers etc. Working in these kind of silos prevents the organization from being able to capitalize on synergies created between those silos.
With both Facebook & Google providing offline measurement tools there is really no excuse anymore to ignore the online to offline effect of marketing.
The big orange elephant in the room
A very clear signal that many large brands are not keeping up is the simple fact that not a single person mentioned Amazon during the event. This is of course because the event was hosted in Stockholm and many of the companies attending are active in markets that Amazon hasn’t reached yet, however that is just a matter of time. We know that Amazon has a tremendous impact on any market it chooses to enter and many brands are struggling to deal with this new channel.
Does it make sense to invest heavily in your own online platform when consumers might just shift to shopping through Amazon? Is it better to work with Amazon as a vendor or seller? These and many more are complicated yet important questions to be answered, hopefully, before the orange elephant comes trampling down the smaller players. Speaking of size – how will brands that are used to pushing resellers around react when faced with a partner that is bigger and stronger? We currently don’t know when Amazon might enter the Nordic markets but it is sure to happen one day, and when that day comes we will once again see the most agile companies be quick to grab the largest possible slice of the pie while the others are yet again forced to play catch-up. To prevent that from happening – now is the time to start thinking about these questions and how to build teams that are ready to adapt to change.