The High Street & Digital Disruption - How the Digital World is Forcing Change
Online fashion retail group Boohoo this week published its quarter one performance figures, and they’re attention grabbing for a couple reasons. The numbers speak for themselves. As a group they’ve delivered £183.6m for the first quarter, a 53% increase from £120.1m posted in the same period in 2017.
These results are reported less than a week since House of Fraser, once a high street institution, revealed details of emergency measures being taken to secure the future of the business. The rescue plan sees the 169 year old retail giant seek to close over half of its store estate, placing in up to 6,000 jobs at risk.
Compounding yet another challenging week on the high street, Poundworld entered administration following the collapse of negotiations with a potential buyer.
Delivering engaging online offerings
The fact that the high street proposition is under challenge is not new news. The BBC recently published an article detailing the ‘six reasons behind the high street crisis’. The observations reiterated the importance in delivering engaging online offerings, and reinventing the retail spaces. Digital disruption is increasingly becoming a mainstream strategy. Boohoo’s results are indicative of the impact digital disruptors are stealing a march on more traditional retail propositions.
The $64,000 question is therefore how ‘traditional’ retailers respond. Digital disruptors have tapped into the burgeoning opportunities presented by millennials and the digitally native. Indeed the question is worth rather more than $64,000. The response is far from futile.
In March Asda reported that they were talking to Google, in every sense of the word. A key digital partnership has been created between Walmart and Google, which has delivered voice-activated shopping through Google Assistant. Illustrates Walmart’s intent to take the fight to arguably the biggest disrupter of them all.
Jump to a truly frictionless user experience
Morrisons are also clearly looking to maximise their wholesale tie in to Amazon. The Morrisons Alexa ‘Skill’ now enables customers to link their Morrison’s online account with Amazon, offering the ability to search and add items to a basket, confirm order total and check whether a delivery is on time. It doesn’t quite close the loop yet. Customers still need to book slots and pay for goods online. A jump to a truly frictionless user experience which will surely be made in the not too distant future.
Walking through House & Fraser it’s hard not to notice the extent to which the proposition feels dated. Parallels can be drawn with comments made by Simon Thomas of Moorfields Advisory, Toys R Us chain's administrators. The stores are large, impersonal and don’t resonate with customers looking for evolving shopping experiences. Equally, given shopper transience, customers are increasingly likely to see an item in store, check price comparisons online, and buy at cheaper prices.
Retailers are challenged to make innovative use of physical retail space. Alibaba offer an excellent example of retail spaces being used to converge digital and physical services to create a compelling shopper experience. Their ‘New Retail’ strategy aims to seamlessly integrate online and offline shopping through their Hema Stores.
Hema stores enable consumers to shop, order groceries for home delivery and eat in-store, all via a dedicated Hema app, which is linked to Alipay.
In store, consumers scan barcodes using the dedicated Hema app. The app will offer detailed product information, and present the consumer with personalised product pairing recommendations, tailored to location.
Become digital destinations
It’s well known that the quality of fresh produce is the predominant factor in customer selection of retailer. At Hema customers can select fresh (and living, in the case of the fishmongers!), take the products to Hema kitchens, and have meals cooked there and then, to be shared whilst still in the supermarket. The stores have become digital destinations.
They’ve also become critical cogs in the supply chain. Hema have launched 24-hour delivery services to consumers who live within 3km of a store. Currently under trial in 25 Beijing and Shanghai stores, customers can order products between 10pm and 7am when the stores are closed.
Adapt to the continuing challenges
Two things are clear; 1. Digital disruptors will continue to challenge the market to evolve in line with customer needs and 2. Those who aren’t equipped (or prepared) to adapt will face the same uneasy future as the likes of Toys ‘R’ Us, Maplin, Poundworld and House of Fraser.
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