Disruptive change is industry’s new norm

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The established order in mass market retailing has been shaken in recent years by the emergence and increasing prominence of Amazon and other e-commerce alternatives to brick-and-mortar stores. Online merchants continue to make inroads in one category after another — everything from books, (the foundation of Amazon’s business) and home entertainment to apparel and groceries. One result of their success is a decline in the number of shopping trips made by consumers, a trend increasingly evident in most retail channels, including food, drug and discount stores.

MMR OpinionHaving withstood that powerful blow, the leaders of traditional retail chains might be tempted to think the worst is over and a degree of equilibrium will soon return to the marketplace. That’s certainly not the case. Disruptive innovation, to borrow a phrase from Harvard Business School professor Clayton Christensen, or creative destruction, in the more colorful formulation of Austrian economist Joseph Schumpeter, is the new reality for merchants of all kinds.

Consider Amazon. The company, which has done more than any other to recast the practice of retailing over the past quarter century, refuses to be content with the status quo. It is now developing a business model that would further diminish the role of brick-and-mortar stores by facilitating the direct shipment of goods from consumer products manufacturers to customers. Amazon will host a meeting next month with a number of major CPG companies to discuss the feasibility of the concept, variations of which some big suppliers are already experimenting with on their own.

Additional pressure on traditional patterns of retail distribution will stem from advances in technology. As more devices used by people in their everyday lives are connected to the internet, and artificial intelligence analyzes and acts on the data they generate, a host of shopping decisions will be automated and eliminate the need for many store visits.

Where does all that leave traditional retailers and the brick-and-mortar store? To compete effectively in today’s environment, mass marketers clearly need omnichannel capabilities that give customers the ability to shop when, where and how they wish. Most major chains understand that and are taking steps — some more effectively than others — to meet those criteria.

The bigger question is the future of the store. Going forward, it will no longer be enough for merchants to put products — even if they are the right ones for their target customers and carry competitive prices ­— on the shelf and wait for people to come in and make purchases. The era when product and price are sufficient to bring large numbers of shoppers into the store is vanishing rapidly; those elements are too easy for online retailers to replicate and improve upon.

If, in the long run, the physical store is to continue to play a role in meeting consumers’ needs that goes beyond convenience, retailers will have to develop and leverage assets and capabilities that cannot be duplicated on the internet. The pharmacists, dietitians and beauty advisors who staff many mass retail outlets today can serve as models for how the industry should evolve. Face-to-face communication with those associates can provide customers with useful information about product options and lifestyle choices, introduce them to items they may not be familiar with, and help satisfy the human need for social interaction. In a technology-driven world, shopping the store has to be as much about the experience as the merchandise.



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