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Wednesday, May 14, 2014
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by Bryan Nella, GT Nexus
Amazon recently announced an initiative to cover the "last mile" to the consumer's doorstep. The retailer is testing its own delivery network of trucks, packages and drivers. The Wall Street Journal reported that "The new delivery efforts will get Amazon closer to a holy grail of e-commerce: Delivering goods the same day they are purchased, offering shoppers one less reason to go to physical stores. With its own trucks, Amazon could offer deliveries late at night, or at more specific times."1
Last month Alibaba announced a $692 million investment into a local department store, marking its first brick-and-mortar investment. According to The Wall Street Journal, the 25% stake in Intime Retail gives Alibaba access to high-end consumers in China.2 Brick-and-mortar, in this case, is essentially a small investment to complement its vast online retail business.
It used to be that retail expansion typically meant opening more stores and expanding to new markets. But this is changing – fast – driven by two major phenomena:
The New Transformation
- Consumers placing a premium on options and convenience. Shopping decisions are made based on available choices and an experience that fits their needs.
- Technology is disrupting the way retail businesses are built. Online retailers have a clear advantage. Even small start-ups based on more agile business models are emerging fast and eroding the traditional retail business.
Retail expansion and transformation has taken on a completely new look. Online retailers like Amazon and Alibaba operate agile businesses built far from the brick-and-mortar model. As a result, they can react faster to changes and shifts in the retail environment while delivering a unique customer experience. But perhaps more intriguing is their ability to disrupt the market by expanding out in new ways that traditional models struggle to support, such as same-day delivery. Amazon and Alibaba certainly do have challenges of their own. For example, Amazon grapples with very thin margins, but what they are doing well is changing consumer expectations. That disruption is rippling across retail.
The future world of retail will look more like the Amazons and Alibabas we see today. In fact, we're seeing start-up retailers entering the market with entirely different business models. Look at websites such as kickstarter, which reduces the barrier to entry and enable retailers to deliver new and innovative goods direct to consumers. In today's viral, social media world, a good product or assortment and a unique customer experience can drive start-ups to rapid growth and slowly erode the traditional players. Convenience and unique assortment – tailored to the consumer – are positioned to be big winners.
Here are a couple of examples of retailers doing this well today:
Two weeks before Mother's Day, Pro Flowers sends an e-mail reminding me to order flowers. The note includes my mother's name in the subject line. I click, select an item, and my mother's address pops up. I submit my order and I'm done. I never had to enter the store. Flowers and a vase will show up that day at my Mother's door. The difference maker here is the retailer knew how to leverage my prior shopping habits and made it as easy for me as possible.
Then I pivot to my wife. I go to Zara.com, select a dress and size. Shipping is free, it will arrive in less than two business days. I go to Zappos and order shoes. I sort by size, since that's the biggest challenge (she's a size 5 ½). Select a pair, free shipping both ways – delivery and return – in case she decides to send them back, and they will arrive in two business days. I'm done.
Customer as Center of the Universe
All three retailers fit my needs. Probably most impactful was the "experience" of shopping at these retailers. It was convenient. I got what I needed, delivered when and how I wanted it. I felt in control and empowered as a consumer. What's unique about all three of these retailers is none of them operates a traditional model. They all rely heavily on technology, supply chain and logistics to engage customers and deliver goods. The concept of "consumer as center of the universe" simply cannot exist without the disruptive technology and innovation we're seeing today.
The concept of the "Internet of Things" brings to mind a picture of everything in our lives being connected. It's still a broad vision but the path is in place and we're all heading there, further each day. The retailers that take that same approach – connecting all parts of business to a central nervous system built to react to consumers – will have an advantage, not only in their ability to react and respond, but to proactively leverage data to engage customers. Pro Flowers knew from existing data that I tend to order a certain style of arrangement this time of year and the retailer had sufficient personal data to engage me with a tailored offer. Picture the retailers of tomorrow plugging into the Internet of Things where aspects of our lives, families and work will be reflected in data. Our tastes, decisions and shopping patterns will be mapped from various sources. Retailers that find a way to harness that information and build a customer centric model where everything offered to a consumer is based on their needs and wants will be light years ahead of the traditional brick-and-mortar stores.
 http://online.wsj.com/news/articles/SB10001424052702304788404579521522792859890  http://online.wsj.com/news/articles/SB10001424052702304157204579472243618362248?KEYWORDS=retail&mg=reno64-wsj
Bryan Nella is Director of Corporate Communications at GT Nexus, the world's largest cloud-based supply chain network. He has more than 12 years of experience distilling complex solutions into simplified concepts within the enterprise software and extra-enterprise software space. Prior to joining GT Nexus, Bryan held numerous positions in the technology practice at global public relations agency Burson-Marsteller, where he delivered media relations and communications services to clients such as SAP. In previous roles he has worked with clients such as IBM, MasterCard and U.S. Trust. Bryan holds a BA in Mass Communications from Iona College and a MS in Management Communications from Manhattanville College.
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