Despite 6,809 mentions of “retail apocalypse” in news articles last year and bankruptcy filings by big name brands such as Toys “R” Us, RadioShack, and Gander Mountain, the retail industry is anything but dying. By the end of 2020, retail sales worldwide are predicted to reach $28 trillion, with most of that still coming from in-store sales.
Retail is evolving. However, in an era of Digital Darwinism, organizations are moving from a company-centered strategy where the brand defines the product, to a customer-centered one where personalization and convenience reign.
According to Accenture’s Painting the Digital Future of Retail and Consumer Goods Companies, adapting retail business models to accommodate new trends could add $2.95 trillion in value for both the industry and consumers. Digital business models leading the way in this evolution include:
- Sharing economy: products are used for an occasion and returned rather than purchased (think Rent the Runway). 52% of U.S. consumers say they’d use a rental subscription for clothing, renting an item for a single occasion and returning it after, instead of purchasing it outright.
- Personalization economy: products are tailored to an individual’s likes and dislikes and delivered on a single occasion or by subscription (think Stitch Fix). 48% say they’d use a subscription for clothing where experts select and deliver items they might like based on previous purchases.
- Subscription economy: products are automatically delivered on a regular basis (think Dollar Shave Club).
- Replenishment and on-demand economies: products are delivered when or even before customers want or need them (think Instacart). 26% say they would use sensor-based digital services that pre-emptively address their needs without human intervention.
- Services economy: what customers once did or sought help with themselves is now provided as a service by the brand.
What do all of the above have in common? They use data (on what customers like and need, what customers need on a regular basis and how often they need it, and what’s about to run out or expire) to reimagine and evolve traditional business models, business processes, and the customer experience.
Now the question for traditional retailers is this: will they take the leap and disrupt themselves before another brand snags their sales and their customers’ loyalty? Numerous reports show that many brands—while they may have a deluge of data regarding their customers, their purchasing habits, product sales and current processes—just aren’t able to take advantage of it to improve, test, or enact evolutionary digital business models.
In the HBR Closing the Customer Experience Gap Report, only 15% of respondents said their organization is currently very effective in delivering a relevant and reliable customer experience. In the same survey, only 3% of respondents said they are able to act on all of the customer data they collect; 21% say they can act on very little of it.
In MicroStrategy’s 2018 Global State of Enterprise Analytics Report, 94% of retail respondents said they’re confident that they’re using data and analytics as effectively as they can be, yet only 53% cited data and analytics as very important to their digital transformation efforts (versus 71% of respondents in financial services and 70% in the manufacturing industry).
This slow change by some is leaving the door wide open for disruption by many new and/or more agile retailers leveraging advanced analytics. And the McKinsey Global Institute notes that data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.
There’s No Time to Wait
According to Innosight research, the average company tenure on the S&P 500 Index was 37 years in 1977. By 2027, it’s forecast to be just 12 years. At the current churn rate, about half of the companies now on the S&P 500 will be replaced over the next ten years.
The reasons for this accelerating turnover include “a complex combination of technology shifts and economic shocks,” notes the research, but very often, companies are simply missing opportunities to adapt or change.
For brands considering digital transformation initiatives, there’s no time to wait, says Ray Wang, Principal Analyst, Founder and Chairman of Constellation Research, and author of the best-selling book Disrupting Digital Business. “Digital Darwinism is unkind to those who wait.”
Want to learn more about how data and analytics can transform the customer experience and accelerate growth and new business model creation? Get MicroStrategy’s 18-page Q&A eBook featuring key insights and advice from analyst, Global 2000 adviser, and Disrupting Digital Business author Ray Wang. Download The Role of Data in Digital Transformation today. To benchmark your organization against others around the world when it comes to analytics use and maturity, check out the 2018 Global State of Enterprise Analytics Report.