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Digital Survivors—Death of the Retail Culture


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The landscape of retail players and consumers has been drastically reshaped and the end-to-end consumer value chain is expected to transform beyond recognition in just two to five years. With online commerce growing at four times the rate of the overall industry, many traditional retail giants have made significant investments—upwards of $70 billion USD—in digital channels.So, why do their market caps continue to decline?

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Digital Survivors—Death of the Retail Culture

  1. 1. Digital Survivors — Death of the Retail Culture Author: Shamayun Miah
  2. 2. 2 Introduction The emergence of new digital technologies, leveraged by the likes of Amazon Go, Amazon Key and pop-up stores, are disrupting the way consumers shop and the competition has proliferated. Demand for digital services and personalised experience challenges incumbent traditional players across all industries. Democratistion of technology and data have led to a decline in the average lifespan of S&P500 companies — now less than 20 years, compared to an average of 60 years in the 1950s. The landscape of retail players and consumers has been drastically reshaped and the end-to-end consumer value chain is expected to transform beyond recognition in just two to five years. With online commerce growing at four times the rate of the overall industry, many traditional retail giants have made significant investments — upwards of $70 billion USD — in digital channels. So, why do their market caps continue to decline? Digital Survivors – Death of the Retail Culture To answer this question, we need to first understand that today’s consumers represent a complex and unique set of personal preferences, shaping how consumers want to engage — and be engaged. It’s these needs and expectations that are catapulting new and unlikely entrants into the forefront of retail, forcing traditional players to reimagine their business models.
  3. 3. 3 Power of the Purchase
  4. 4. 4 Power of the Purchase The purchasing power of millennials is expected to be a $200 billion USD spend in 2017. With an affinity for technology and a preference for experience over ownership, 57 percent of millennials are using technology-based comparison services to ensure they receive the greatest convenience at the lowest cost. Then, there is the rise of generation Z. The Z-ers, born between 1995 and 2005, prefer to interact with brands solely using technology, like Snapchat and Instagram. Today, 55 percent choose brands that are eco-friendly, 29 percent are more likely to make electronic purchases than millennials, and  most Z-ers are spending up to 11 hours a day on social media. Furthermore, we shouldn’t overlook the generation X buyers and baby boomers. Those empty nesters and retirees with larger disposable incomes are also looking for innovative products and services. Today’s Retail industry is being impacted by digital natives and new entrants. This includes increasing pressure from large tech firms (e.g. Apple, Microsoft, Amazon, Google), with three out of four having a thriving retail presence. Digital Survivors – Death of the Retail Culture Global digital giants like Alibaba and Amazon have quickly created and adapted to new business models and market opportunities, their platforms offer unprecedented breadth, depth and speed. Each brings the promise of new, innovative and personalised experiences that are already changing the shopping and buying behaviors of today’s modern retail consumer. Take Alibaba. Alibaba changed the customs of China’s 2017 Singles’ Day Shopping Festival, netting $25 billion in one day only (a 40 percent increase from the previous year). They achieved this by adopting an innovative fanfare approach that leveraged celebrity entertainment and interactive apps to download coupons, raffle tickets, gift vouchers — and more! This innovative giant successfully created an atmosphere of exponential excitement leading up to the event. Traditional retailers will need to adopt innovative approaches to stay in lockstep; this includes forming new partnerships and adopting emerging technologies to unleash fresh ways of engaging consumers to drive endless opportunities.
  5. 5. 5 From Fiction to Phenomenon
  6. 6. 6 From Fiction to Phenomenon Our lives are quickly evolving from what was once fiction to a new reality. Leading-edge retailers, using emerging technologies, are rewriting the rules. One such example is the use of mobile payments and artificial intelligence to provide enhanced personalisation, product transparency and seamless experiences. Virtual reality (VR), and augmented reality (AR) have opened the door to a whole new world of immersive shopping. Blockchain offers the potential for greater transparency into a product’s pedigree, from origination to destination. In addition, buyers are truly influencing brand authenticity and credibility — in the moment — using powerful social influence (e.g. Twitter, Facebook, Instagram, Snapchat). Together, these technologies are completely changing the consumer experience across the entire supply chain. Digital Survivors – Death of the Retail Culture
  7. 7. 7 Companies like, Macy’s, Target, Sears, Nordstrom and JCPenney, are all great companies that have been around for more than 100 years. All have played a pivotal role in defining the American retail culture in the last century, and all have been innovative in their time, employing more than a million people between them. Yet, between 2006 and today, these retailers have significantly declined in market capitalisation (Sears and JCPenney, both by more than 90%). Some might argue that they haven’t moved to the Digital Age. But, the answer is not that simple; they — like others — have invested in digital technologies, mobile, commerce platforms, in-store digital kiosks, employee-tablet computing and more. So where’s the difference? Digital Survivors – Death of the Retail Culture Market Value 2006 Market Value Today Change Best Buy 28.4B 16.9B -40.5% JCPenney 18.1B 1.1B -93.7% Kohl’s 24.2B 7.5B -69% Macy’s 24.2B 6.5B -73.1% Nordstrom 12.4B 7.0B -43.7% Sears 27.8B 682.3M -97.5% Target 51.3B 34.2B -33.3% Walmart 214.0B 264.8B +23.8% Amazon 17.5B 469.1B +2590.0%
  8. 8. 8 If you look at Amazon or Alibaba, they are growing at phenomenal rates — and not just because they are digital. They have won the mindshare of the customer and their wallet. These companies are succeeding because: Digital Survivors – Death of the Retail Culture Market Cap Today Share Value Nov 2007 Share Value Oct 2017 Growth over 10 years Alibaba 530.53B 90.56 1,107.32 +1142% Amazon 462.39B 88.85 181.58 +108 They have new business models that are disruptive, technology-based and data driven. 1. Their brand is the experience - valued by the consumer and made up of many end-to- end components tied together through frictionless integration (e.g. logistics, online, mobile). 2. They are built for speed and continuous innovation.3.
  9. 9. 9 Attention All Shoppers
  10. 10. 10 Attention All Shoppers Recognising that these companies are never going to stand still, the next leap in their continuous evolution and disruption is to infuse cognitive technologies into the very fabric of their businesses. They understand that democratisation of technology and how data is making the whole world smarter, healthier, and perhaps even happier, is creating new economic and social value. One thing is certain. Retail is standing at the leading edge of technology transformation and digitisation. As it has for centuries now, the Retail industry will continue to nudge convention and drive innovation to meet consumer demands. However, investment in technology alone will not slow down the decline of traditional retail giants. Instead, they will need to innovate, adopt new business models and assure frictionless integration. They will have to disrupt themselves by recreating the shopping experience, and they will have to move from a monolithic presence to a culture of agility, speed and continuous reinvention. They must succeed in creating both, a personalised experience for one — as well as a shared experience for all. Welcome to the new reality of retail. Digital Survivors – Death of the Retail Culture
  11. 11. Author: Shamayun Miah @shamayunm The article does not represent the views of people, institutions, organisations or the employer that the author may or may not be associated with in professional or personal capacity, unless explicitly stated. All content provided on this article is for informational purposes only. The owner of this article makes no representations as to the accuracy or completeness of any information, data on this article or found by following any link on this article. The author will not be liable for any errors or omissions in this article, information, data, nor for the availability of this information. The author will not be liable for any losses, injuries, or damages from the display or use of this article.