A borderless, brilliant retail boom beckons

Posted on 15/07/2020 by vmwareemeasmt
DISCLAIMER: this article is older than one year and may not be up to date with recent events or newly available information.

We have invited our industry partners and collaborators to present their views as part of our ongoing spotlight series on the retail sector.

by Jack Stratten, Senior Trends Consultant, Insider Trends (June 2020)

I’ve been looking at major retail trends for well over a decade. And despite all the changes we’ve seen so far in 2020, I don’t see anything surprising.

Click, click, boom

Without a doubt Covid-19 is accelerating change. The first and most obvious example being the way in which ecommerce has boomed. Though the interesting thing is that it has exploded in markets so differently. China was already advanced in this space but in countries like Italy, Spain and France, where e-commerce penetration had been as low as about 5%, we’ve seen remarkable changes. This is because there has traditionally been a reliance on physical retail in those countries due to a combination of people’s attitudes towards the internet and data privacy.

Across Europe there’s definitely logistical issues and challenges that vary from country to country. The UK, as a small island, is very strong in its supply chain. We’re able, especially in major cities, to click, collect and deliver very easily. But in other countries, the infrastructure simply isn’t there. There are also more borders to consider. For example, when consumers buy items (from some suppliers) in Switzerland, they tend to cross the border (to Germany) and collect them instead of getting them delivered to a local location on account of taxes. Even as an individual element, click and collect is a fascinating area on its own. Suddenly there are customers who had never bothered with online shopping that are being forced to use it for almost every purchase. In France click and collect from the major outlets is capped because they want small stores to be competitive.

But it is an area ripe for change. In China Alibaba has created something entirely for small independent businesses, where it allows independent businesses to use an app to fulfill click and collect orders for any type of product in any kind of store. It has been so successful that around two million classic mom and pop corner shops have signed up. It has, in essence, taken click and collect to the mass market for independent stores turning small businesses into a mini version of British high street store Argos. It’s keeping them relevant, allowing them to compete with big retailers and all the time changing the perception of Alibaba as a high-street saviour. One of the few things Amazon has failed to do.

Not ready for Ecom dom

However, the last six months have also highlighted that the world isn’t ready for total ecommerce domination. For the changes we’ve seen to be sustainable, we need supply chains that can fulfill orders for everyone all the time and that is just not possible.

In the UK, there were 250,000 customers of Ocado before the outbreak of Covid-19. When the panic buying was rife around 800,000 people signed up in around two weeks and crashed the site. It made around 500,000 (potential) customers quite angry in doing so. For companies that have successfully scaled their deliveries and logistics, what happens when the world is back to work? For example, at the end of April, UK supermarket chain Tesco delivered more than one million orders in a week, becoming the first retailer in the UK’s history to do so but this is putting massive pressure on our road network not to mention the sustainability impact – another trend that was gathering massive momentum in a pre-covid world.

Building communities

Of course, there’ll be more ecommerce, but there will always be people and goods that thrive on personal contact, touch and service. In essence, we’ll see a reset of omnichannel shopping and a balance between online, and offline engagement.

This will include things like online investment to bring more people into the physical stores. One brand that does this incredibly well is the beauty company Glosier.com. This is a digital brand that focuses on engaging young people through social media and YouTube. It became a billion-dollar company by being a 100% online business. Yet, pre-Covid-19 it was opening physical stores that were extremely busy. It’s the perfect example of debunking the myths that digital engagement is confined to online and that it is impossible to get young people that spend a lot of their time on social media, into a physical space.

Probably the one above anything else I’ve noticed is this idea of retail is building communities and turning customers into fans. Creating a whole experience around a brand where, as customers, you want to be part of that team. Lululemon is a good example. Whether it’s by getting customers involved in classes, giving them free things or making its physical spaces multifaceted so shoppers can do more than simply purchase products. Peloton is another. This is now a $5bn company that sells bikes but in doing so gives people access to a community like no other. This is particularly significant when it comes to establishing relationships that will last. Sweaty Betty doesn’t just have customers, it has fans and, as a brand it is a big part of their lives – there is no way these people will sit back and see that company disappear. These are businesses that will come out of the Covid-19 crisis much stronger.

Smaller businesses too will feel this ripple effect with the galvanisation of a local following. All these pubs and shops that have spun out into takeaway venues are no longer just bricks and mortar but people and a core part of the local community. The flipside to this is that some transactional brands that haven’t been prepared, will take a hit. One UK high street clothing brand has been incredibly successful, but not only did it not invest in online, it also failed to foster a deep-set loyalty in its customers.

Long term economy

We’re starting to see innovations for when physical spaces start opening again. Both John Lewis and Curry’s PC World are trialing a technology that enables the in-store staff to be available for online shoppers. It means consumers can have a live chat with someone in that department, in the store. It’s like glorified FaceTime or Skype, but it’s a brilliant idea because it helps convert online sales by allowing really good staff who know everything about their product to be even more useful to all those people at home.

All of these developments and innovations are about fading the borders between the channels and making everything one channel. It’s very human and it’s very simple and, done correctly it will vastly improve the world of retail.

For any VMware retail related conversations please contact Jarek Matschey at jmatschey@vmware.com and Lenka Kanakova at lkanakova@vmware.com or your assigned VMware account manager.

For more information on VMware retail solutions, please visit us here.

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