It’s a long, hot summer; time for holidays and beaches and pondering what is going to happen to the retail industry in the coming months. Retailers have had a hard time of it lately, with bankruptcies and pressure on sales. But as Florence and the Machine might ask, are the dog days over?
It’s encouraging to see many retailers embracing retail ecosystems - with partnerships and unanticipated mergers shaking up traditional business models and overcoming barriers. A few examples are: HelloFresh and Ahold; Ocado and Kroger; Tesco and Carrefour; Google and JD.com. Most recently we have seen Abercrombie and Fitch popping up in hotels.
Where do we go from here? I think we will see more surprises in terms of collaboration between different retailers but also between a retailer and a NON-retailer. Here are my, somewhat outrageous, predictions for the rest of this year:
- Your Money’s no Good Here. A retailer will lose the ability to trade because its outdated software will crash. Just like what has been happening in banks, under-investment in technology will come back to bite retailers where it hurts. If it can happen to Amazon on Prime Day, it can happen to anyone. As RSR advised us last year – “if you averaged spending 2% or less of revenue on IT during any of the last 20 years, you have been under-investing in IT and it is probably the largest threat to your business today”
- Barbarians at the Gate. Ocado will be acquired by hostile takeover. Someone will want to get their hands on Ocado’s technology and customer base, recognizing that technology is key to the future of retail. (The question is who has pockets deep enough - Amazon? Microsoft? One of the Chinese – JD.com/Alibaba?)
- Existential Angst. “New retail” will arrive in Europe or North America in time for Christmas – this will be JD.com or Alibaba. How they will appear, is however a mystery – they may appear as a direct brand or they may buy an existing brand in retail - Debenhams, Nordstrom, Sears perhaps. But most likely it will appear as a service provider to an existing retailer or brand – offering Retail as a Service.
- The Mother of all Hackathons. There will be another data hack that will hit the headlines, further cementing shoppers’ concerns about technology and the protection of personal information. This may continue to be a barrier to new technology adoption like IoT. Focus on this during solution and investment evaluations will become greater with companies seeking highly secure “carrier grade” technologies.
- Your Heart’s Desire. Predictive shopping is coming as a form of extreme personalization that has the potential of being a massive differentiator for retailer who get there first. Somewhat beyond subscription retail, it offers the potential of a retailer analyzing your purchase history then the item appearing on your doorstep before you realize you need it.
This year has been a dramatic one so far and it looks to continue. Retail, and specifically the technology that powers it, continues to be the most exciting sector on earth right now –with Gartner saying that it has the highest risk of disruption of any industry.
While there is talk of a “retail apocalypse,” I prefer to borrow the words from the Harvard Business Review that summarize things better: “The current retail environment is neither a red nor a blue ocean, but more like a dead sea, killing off existing life but providing a new ecosystem in which different organisms can thrive.”