There are three significant trends happening in retail that can provide a significant avenue for companies to grow. Ecosystems, direct to consumer subscription models and the simplicity of a customers experience with the brand are the three core trends that retailers can adapt to help them beat the pack.
Walmart and CarSaver have teamed up to provide CarSaver kiosks for Walmart customers to research, purchase, and finance their next vehicle. Another example of a smaller two-company ecosystem is Kraft’s extension of its recipe app to generate a shopping list that automatically connects with grocery delivery service Peapod. It’s not hard to see further extensions of these kinds of partnerships to include, for instance, a housewares partner to provide the requisite bowls, mixers, and baking sheets for Kraft’s consumers.
These mini-ecosystems offer the opportunity for companies to quickly and organically increase their presence, relevance, and exposure to prospective customers at the exact moment that a purchase is being considered. In addition to the increased sales opportunities, brands can also develop extremely valuable one-on-one relationships with their best customers… along with the massive amount of customer data that comes with that direct engagement.
As a result, many brands may make the decision to not make all, or any, of their products available on some marketplaces for fear of commoditization of their flagship brands. They may instead choose to embrace smaller “mini-ecosystems” by teaming up with the “right” brands that match their values and serve their customers’ needs.
Many brands may choose to avoid mega-ecosystems in favor of smaller ones customized to their customers’ specific journey.
The key to ecosystems from a business strategy perspective is finding a way to extend the customer journey—and the customer relationship with the brand—with a seamless experience across multiple businesses. For most companies, the question is not whether they should build alliances and ecosystems into their business model, but rather how. It’s not a slam dunk to just set up distribution and selling relationships with every marketplace or ecosystem available. How, when, and where to develop or participate in ecosystems is a complicated, and existential, business decision for every retailer.
Retailers can choose to fully participate, partially engage, or fiercely oppose massive marketplace ecosystems like Amazon. But they cannot ignore them.
2. Direct-to-Consumer & Subscription Models
Direct to consumer and its close cousin, subscription services, have been taking retail by storm with rapid adoption across the industry. Both models carry the great promise and significant risks.
2.1 Direct-to-Consumer: Direct-to-consumer sales are expected to continue to increase in 2019 with over 50 percent of all manufacturers launching a direct-to-consumer program. The reasons are manifold, but the biggest ones can be summarized as consumer engagement and control of the customer experience.
Of course, these reasons are closely intertwined. By selling directly, manufacturers gain increased information about their customers, including direct and immediate feedback. This feedback is increasingly being used to shape the design of product offerings themselves. They also have direct exposure and engagement with their customers, which powers opportunities for customization and promotion. Finally, by controlling the customer experience, brands can enhance their equity with consumers.
Legacy brands rely on abstract sales figures and traditional market research whereas direct brands collect data on consumer preferences and behaviors at the source.
Beauty retailer Glossier used data from their blog, Into the Gloss, to optimize the online shopping experience. Noticing that many readers would find products on their mobile device but switch to desktop to complete the transaction, Glossier linked user accounts across platforms.
2.2 Subscriptions: According to the Harvard Business Review, subscription services will live or die by their ability to break beyond commoditization and delight customers (and command premium margins). In practice this will mean most brands will need to develop “smart” subscriptions that provide an exceptional level of curation and customization.
Clothing retailer Thread, asks consumers to fill out a short survey picking brands, styles, and price points with which they are comfortable for casual, work, or dating situations. The service then offers an increasingly customized and curated selection of clothes… with the algorithms constantly learning both what clothes a specific consumer likes… and what they might like based on similar profiles.
The service thus has the opportunity to serve two vastly different segments of the market: the “lazy” shopper who does not care what they wear and the “engaged” shopper… who is always on the hunt for something new. Thread, and companies like it, have the opportunity to act as a trusted advisor to consumers… curating products and brands.
3. The simplicity of the customer experience
Recently, Siegel & Gale’s team of branding experts conducted a global survey to understand the impact of simplicity in today’s modern world. The result? Simplicity inspires deeper trust and strengthens loyalty. Simplicity was found to drive financial gains for brands willing to embrace it. The ever-expanding choices can be confusing and can even make shopping a burdened and anxiety-filled experience. Many shoppers now crave simpler solutions and are even looking to brands to help make decisions for them.
Because customers are busy, they are surprisingly likely to take whatever option is made the default.”- Richard Thaler, Behavioral Economist & Co-Author of Nudge
SilverCar is not just any other car rental company. Imagine yourself coming out of an airport, unlocking your phone to check the alert which says: “Your car is waiting for you just to the left and next to the exit.”
A silver Audi A4 glitters in the morning light. The gas tank is full. The navigation system is configured with your next destination, the Wi-Fi and satellite radio are ready to go. With a click of your smartphone, you unlock the car, jump in and zoom away. It sounds simple – and it is. This is how SilverCar does car rental, stripped right back to the basics and delivered in a smart, high-tech fashion. The car brand is always the same – Audi.
The process has been streamlined so there’s no waiting, no paperwork, no confusion about add-ons and pricing. Call it rethinking, reinventing or changing of a lens, SilverCar realized that for customers, simplicity is a new luxury. Period.
“It’s overwhelming to go online and be faced with 8,000 search results for the stroller you want to buy for your kid,” – Lizzy Brockhoff, Masse’s co-founder
Most supermarkets stock 40,000 to 90,000 items where Aldi keeps only 600 on its shelves. This brings with it a number of unique advantages. Firstly, it drives down prices in purchasing. Secondly, it forces exact and precise checks and balances. For every item that the Aldi management wants to add to the selection, another needs to be taken out. This ensures that only the most relevant items are stocked up.
Despite the changes in the retail landscape, companies that are winning are the ones who are embracing strategic ecosystems, business model innovation, consumer-centric approaches and, a return to simple customer values.
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