Digital Connectivity: Reimagining Retail Business Models With Retail-As-A-Service

Tom Redd

In the ever-changing world of retail a fundamental shift is occurring. Retailers are moving away from a product-oriented world and toward an outcome-oriented one—a world that’s based more on experiences than products. Digital connectivity is a crucial player in this transition.

With digital playing a bigger role, newer business models must rethink the use of technology in creating and capturing value. This improves customer-centric merchandising. Retail-as-a-service (RaaS) is a primary example. Trends are developing around the convergence of business models. Ecommerce retailers such as Amazon and China’s Alibaba are redefining retail-as-a-service.

But what is retail-as-a-service? It is the bundling of payment processing, service and support, loyalty programs, and gift cards all in one package. Amazon is rolling out new tools that allow brands to own their presence on Amazon.com while providing these retail-as-a-service means.

Retailers understand that data-driven strategies are the keys to value creation. Those rising to this challenge are moving in three strategic areas:

Reimagine business models

Business models are evolving. The shift from product-based retail to a more customer-focused and experience-based strategy is driving this change. This evolution means more opportunity to find value.

Retail-as-a-service such as the men’s personal shopping service Trunk Club, focus on an outcome. Fashion rental service Rent the Runway offers another example. Under Armour’s new digital health platform has created a large community of users who share fitness data in real time. This data has many uses and is crucial to the future growth of the company. It also increases its ability to create alternate revenue streams.

Through business networks like Alibaba, eBay, and Amazon, retailers can to cut physical inventory. The shoppers need for thrill, speed, and instant gratification is giving rise to new retail-on-demand models. These models include flash sales designed to capture consumers at the moment of impulse.

Reimagine business processes

Retail companies are reinventing the process of buying, selling, fulfilling, and servicing merchandise. This occurs when consumers, sellers, and suppliers digitally connect. This is driving new insights from large volumes of data. Based on a shopper’s digital footprint, retailers can offer automated, dynamic, and contextual pricing.

The hyperconnectivity is bringing new meaning to retail. Through the collection of data, engaged vendors can see customer demand in real time. They can adjust production, shipments, and promotions to drive sales. This will improve merchandise planning and boost personalized shopping. Transparent supply networks enable short lead times and “make-to-order” assortments that reduce inventory. This also improves on-shelf availability and delights customers. Connected warehouses cut costs by tracking the supply chain from production to sale. For example, manufacturers can alert retailers of faulty or expired goods.

Flexible payment methods that enable wallet-less shopping aid anywhere, anytime consumption.

Reimagine shopper engagement

Retailers can engage customers by incorporating technology in a meaningful way. This happens across all touchpoints and will be at the heart of survival in the digital age.

Tailoring shopping experiences for a particular shopper lets retailers highlight “segment of one” loyalty, helping retailers alert consumers to designer pricing, promotions, and loyalty rewards in real time. Using interactive technology to boost in-store experiences is key. This not only improves satisfaction, but it also enriches the shopping experience.

Key to tailored shopping experiences is the education of both customers and employees. Knowledgeable staff will enhance the shopping experience. Social media is an important method to build brand loyalty and can be a powerful recruiting tool. It can help a business attract top talent. In-store technologies improve productivity by reducing tasks and maintaining compliance with pricing and displays.

Retail-as-a-service

The traditional business model involved selling products and services at a markup to cost. Newer models rethink the use of technology in creating and capturing sources of value. This will accelerates as digital plays a larger role in commerce.

Subscription-based companies can determine with high accuracy what consumers want and when they want it, which in turn enables retailers to deliver the right product at the right time and place. This focus on relationships over sales transactions is revolutionary. Services such as Amazon’s Subscribe & Save are already doing this. Graze.com and fashion management retailers such as Nordstrom’s Trunk Club are on board as well.

Retail-as-a-service has set the foundation for the reawakening of the sharing economy. It has proved once again that consumers are much more comfortable renting and sharing products than buying them. The shift to retail-as-a-service -continues to revolutionize the industry, providing unique opportunities for retailers to attract and maintain new customers while also growing margins.

Learn more about digital transformation in retail.

Tom Redd

About Tom Redd

Tom Redd is the Global Vice President of Strategic Communications for SAP Retail. His specialties include business development, product management, marketing strategy, marketing management and CRM.