Want the good news or the bad news?
Let’s start with the good. Retail innovation is at an all-time high. In the past 18 months, more than $4 billion has been invested globally in retail startups; established retailers have launched innovation labs or incubators; and more than 750 investments or M&As have been driven by technology vendors’ retail innovation roadmaps. So what’s the problem?
Retailers aren’t thinking big enough (or widely enough). By that, I mean two things. First, the new wave of technology—IoT, artificial intelligence, augmented reality, 3D printing, et al—has blown the doors off the art of the possible for the industry. The potential is huge, evolving much faster than most retailers’ thinking and creating a new digital value chain with completely new ecosystem partners. And that brings me to my second point about not thinking widely enough. Most retailers in Europe completely underestimate how important it is to nurture and monetise their digital ecosystem.
Let me give you some examples. Conglomerates have granular insight into those stores where consumers are buying particular types of clothing, such as workout clothes, which can provide valuable knowledge about the best place to open a new gym, for example. Likewise, RFID means retailers that sold high volumes of Elsa dolls from the Disney movie “Frozen” could tag consumers to invite them to the “Frozen” sequel at specific cinemas. Or think a bit further ahead with connected vehicles that allow retailers to extend real-time interaction with customers in an omnichannel context, providing them with innovative use cases.
Retailers must start thinking beyond just websites, loyalty programs, and customer experience, and start thinking how to better use the customer information in their own organisation, working with external partners to address the bigger market opportunities in front of them (and trust me, they’re everywhere). In other words, look beyond your own doorstep, your own channels, and your own brand, and find the symbiotic connections with companies around you.
But very few retailers in Europe are even recognising the opportunity, let alone acting on it. A new research report from IDC Retail, “Evolving The Digital Core,” sponsored by SAP, found one of the biggest areas of concern is that retailers in Europe consider partnerships and cross-industry collaborations as their lowest business priorities. Let that properly sink in for a minute. A whole new digital ecosystem is emerging all around you, just waiting to be monetised, and it’s the lowest of your business priorities. For me, this is incredibly frustrating because it represents a short-term, blinkered view. In the same way that new technology innovation opens up new incremental opportunities for retailers, some of it will also be taken away from current retail sales.
In a connected world, you’re leaving money on the table if you’re only working (and thinking) in isolation. Regardless of the speed of your own transformation journey, a critical success factor for retailers will be finding new ways of innovating and incorporating use cases that can scale results quickly, drive omnichannel profitability, and blaze the trail for the next decade. New digital ecosystem opportunities are forming through platform extension marketplaces. But the IDC research found that there’s a lack of framework for this new level of business innovation enabled by a retail omni-channel commerce platform. Industrialising innovation and fostering creativity at scale requires a new innovation model, new thinking, and a new platform to drive implementations at scale and at speed.
The march of disruptive innovation is already happening across Europe. In Germany, 25% of retailers are already using IoT, with a direct impact on business operations. In the Nordics, 28% of retailers are reporting that IoT is leading to new business models and additional revenues. And by 2019, artificial intelligence will change how 25% of merchants, marketers, planners, and operators work, improving productivity by 30% and KPIs by 10% – 20%.
Whether it’s increased store traffic, conversion, transaction value in stores, mobile, knowledge worker productivity or organisational agility, leveraging these new technologies, new partnerships, and new business constructs requires both a new framework and a new mindset. There’s a new digital mantra for the industry: “Innovate, think bigger and play well with others.”
For more, download a copy of the IDC Retail research.