Retail Innovation: Needed Now, On Every Level

Retail Innovation: Needed Now, On Every Level

Over the last couple of months, we have seen an array of press releases from large retailers announcing major strategy changes, often involving multi-million dollar investments and potential job losses. I can’t help but judge the announcements case-by-case with an educated gut feeling, and according to my expert Twitter timeline, I’m not the only one to sometimes doubt the timing and effectiveness of the measures taken. But judging from the sidelines is easy and perhaps even overlooks the bigger picture here. Rather than questioning a given company’s plans, it seems the real questions we should be asking are what is the overall trend in retail transformation and will it be effective?

Since the rise of ecommerce, retailers have been aware that changes would be needed in order to survive long term. At first, they all needed an online outlet, and by now, the market has found that an online presence alone is not enough. Being a true omnichannel retailer requires way more than driving business across physical and online locations. It is about a culture shift across the organization that deeply integrates every thinkable customer journey into its mindset and its systems’ back-end.

The European Union Expert Group on Retail Sector Innovation published a 2014 report on (yep, you guessed it) retail innovation. The takeaways from this report may seem somewhat generic at first glance, but it describes important insight that every retailer should consider when strategizing for the future. As the report notes: retailers that don’t innovate will lose the battle. Even an old fashioned specialty store in a medium-size town will need to adapt to the needs of the millennial consumer if it wishes to survive the long term. So much is clear. I should add that innovation does not equal technology. Technology is there to support your innovation where needed, but retailers are NOT obliged to jump on the enormous wave of tech that is washing over us. There is simply too much of it to use it all successfully.

One of the best parts of the EU research is its distinction between innovation on the customer side and on the back-end. As stated before, a true omnichannel strategy demands that the entire company adapts a new way of thinking. Just adding an ecommerce department won’t do the trick.

“Retail innovation may exist both in the front-end of the retail operation, through what is visible to customers (in order to create sustained customer preference), as well as in the back-end (to increase productivity, efficiency, and achieve a faster time to market)."

So it seems like pretty simple advice: enhance your customer experience (reduce the customer’s effort and make it more pleasant and make your systems more effective). In general, I believe that most retailers are on track, or at least taking steps down the right path, as guided by this two-year-old advice. But, when it looks too simple, it is likely more complicated.

And that is where McKinsey comes in. Last month (November 2016) its Dutch offices published an impressive and interesting report on the state of Dutch retail, zooming in on all sectors and groups involved (retailers, consumers, real estate owners, governments, etc.). You can read the research yourself, but its key takeaway is that the industry needs a greater sense of urgency when it comes to changing and innovating to keep retail alive - for example, preventing town centers from becoming desolate areas and stopping customers from shopping on Chinese websites. Furthermore, taking broad action now can prevent over 130K job losses in the coming few years only. So, a big nationwide plan is needed and needed fast. It doesn’t take much to realize that this McKinsey report is likely relevant to every Western country across the globe. It would not only be interesting to learn how the named bodies will be following McKinsey’s guidance in the Netherlands but also whether or not similar initiatives are being taken in other markets.

The good news? In the recent months, I have been speaking to numerous heads of innovation at large retail chains in the EMEA region, and change is underway. More and more companies have mapped out their technology in an impressive way, and there increasingly seems to be an innovation agenda. And that’s great for a company like Mobiquity that is out in the market to help, because it means we are starting to move in the same direction, making the start of innovation projects way more efficient in every way.