When senior executives from established retailers convene around a table or share a conference platform it can often feel like a meeting of Alcoholics Anonymous where the group gain some comfort and solace from sharing their experiences and problems.
But it is not alcohol that is the problem for these business leaders at the moment it is the ongoing digitisation of retail and the relentless march towards a multi-channel world. And so it was at the recent World Retail Congress held in Rome where the great and good of retail from across the globe came together to present and network on the underlying theme of ‘transformation’.
The fact is that big companies have big challenges to deal with as they grapple with transforming their established brick and mortar models (with their attendant legacy systems and practices). The likes of Andy Clarke, CEO of Asda, Robin Phillips, omni-channel & development director at Boots UK, and Olaf Koch, CEO of Metro Group, presented a picture of a rapidly changing world that was causing them to rip up the old rule book and adapt to a world that is very much being driven by consumers and the increasingly powerful technologies in their hands.
The other fact is that small retailers don’t have these big challenges. In contrast it’s more likely that they have big opportunities. They are able to shift and turn (a pivot – in Silicon Valley parlance), helped by not being encumbered with old technology and systems that are seriously hindering them in their move towards multi-channel models.
These companies have been created in a digital world and are thus able to take advantage of their wholly 21st century business models and agile infrastructures. On the stage at WRC we heard from the likes of Shoes of Prey who announced that they had just become a vertically integrated operation having opened their own factory in order to produce goods on a mass customised basis.
Such a shift would be tough for a large retailer to make. Not only because of their legacy infrastructures but also because the scale of factories needed to make such a move meaningful would simply be too much. The reality, therefore, is that it’s not going to happen, and so the field is clear for smaller operators to pursue these innovative strategies.
But this is not to say the big company is dead and the future is with small retailers. The reality is that when we talk about multi-channel we are really talking about a business comprising stores and online. The smaller players invariably consist predominantly of an online business with very little, if any, physical assets in the form of shops.
The challenge for the newcomers therefore is to leverage themselves some physical assets – whether that be through joint-ventures or other partnerships. Dr Stephan Zoll, VP of eBay Germany, spoke about how his business has partnered with Argos to use its stores to offer a click & collect service to eBay buyers and sellers.
Like many big old school retailers Clarke recognises the value of his shop estate and suggested that despite the challenge he faces with what to do with the company’s larger format stores the advantage for Asda is undoubtedly with its “location strategy”.
It could be said that while the established retailers have their portfolios of prominently located real estate then they are still in the game.
Glynn Davis, editor of Retail Insider