SAG_Twitter_MEME_Retail Problem_Aug17.jpgDigital disruptors have one thing in common; they solve a problem with the customer experience.

The phrase digital disruption is overused, but the fact remains that new business models are changing the world.

Can’t find a cab on a rainy night? Uber solved that with an app. Want to stay in an apartment rather than a hotel? Airbnb solved that with a website.

These are high-profile examples, but what they did was look at a problem customers were having and provide a solution using digital technology.

Driven by Gartner’s Nexus of Forces, or the convergence of mobile, social, cloud and information, these new business models blur the lines between digital and physical worlds.

And retail, long a bastion of the physical world, is under big pressure with many problems to be solved. Hardly a week goes by without something in the media about disappointing earnings or shops and malls closing.  According to the Economist, the shopping mall and not the factory where American jobs are most at risk.

Retail is also under pressure from new business models. Amazon’s online store commands more than 40% of US online retail sales, a problem for competitors in itself. According to the Wall Street Journal: “Massive investment in Amazon’s warehouse and delivery infrastructure makes its position increasingly difficult to challenge. Newer endeavors into music, groceries and apparel are starting to pay off, too.”

Amazon recently bought Whole Foods, solving the problem of how to better compete in the grocery market. And its Prime Wardrobe service lets you order and try on clothes, receiving a discount depending upon how many items you keep. This helps the retailer to address the problem of returns

Walmart has been investing in both technologies and partners. Its purchase of Bonobos, shops that stock everything in each size and color but you cannot buy in-store, solves the problem of keeping vast stores of clothes at retail outlets. It acquisition gives Walmart access to innovative pricing software, solving the problem of trying to keep up with Amazon’s prices.

Competition from startups such as Thread and The Chapar, offering mens’ clothes as well as online stylists, solve a problem for men who hate to shop.

The warning signs are there, telling retailers that they must invest to stay relevant. The trick is to identify the problem and invest in the technology that can solve it.

In my next article, I will look at whether or not retailers have lost their knack for innovation.

Disrupt Retail

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