Evolution is driven by an ongoing need to adapt to a changing environment. In the retail trade, digitization and new technologies have spurred worldwide, an unprecedented, increasingly fast and deep-rooted shift in the industry.
As in nature, only those retailers will survive that can adapt best to the new business environment by transforming (and digitizing) their DNA. Failing that, they risk drifting in droves into extinction.
Over the past 150 years, retailers have evolved their business models. While some have successfully progressed and survived, others have moved closer to extinction or disappeared from the landscape. In recent years, the majority of retailers has moved on, primarily by adopting a multi- or omnichannel model. Players exclusively focused on offline retailing – such as pure brick-and-mortar stores or distance sellers using catalogues – now rank as endangered species or have already gone to the wall. Among those now extinct or facing bankruptcy are a host of previously successful companies of the likes of Quelle, Neckermann or Toys “R” Us, and each day brings more.
Driven by the technological progress, the industry is continuing to develop at a rapid pace. Amazon is already into the next evolutionary stage of a digital retailer and forging the new standard that meets the demands of future customers. Digital retailers are utilizing new technologies specifically in order to harvest and analyze data as a means of improving their customer centricity.
Retailers now are under pressure not to remain mired in the existing state of multi- or omnichannel distribution. The lesson both from the past and the evolution theory is that the sole option is transform or die.
Digitization is the driving force behind growth in the retail evolution. Since the turn of the millennium, digitization (technology and data) has substantially impacted the retail business – both customer patterns as well as the competitive landscape have changed fundamentally and will continue changing in the future:
Change in market/competitive structures: The dominance of the major online retailers, Amazon and Alibaba, will increase further, a continuous wave of new and innovative retail startups with specific services is moving into the market with minimal investment, and consumer goods manufacturers with direct-to-consumer business models are serving their end-customers directly.
New customer behavior and requirements: are boosting a growing demand for individuality and personalization, sustainability and traceability as well as faster and more diverse delivery options.
In this situation, a variety of technologies, not just two or three, will significantly influence the retail business in future. Our experts at PwC have identified ten disruptive technologies that will become highly relevant for retailers over the next five years.
The future survival of retailers will depend on their ability to adjust to a digitized environment. The transformation of their business DNA is now mandatory. It is essential that retailers change and digitalize each of the following five elements of their DNA so as to become a truly digital retailer. Omitting just one element can lead to failure or extinction:
The DNA Transformation
Transformation into a digital retailer and a new digital DNA also requires a complete paradigm shift.
Further development of retailers based on technologies and data
Transformation is a major challenge in the retail business. Other than in nature, retailers can choose their own path and not stand idly by as the evolution gathers pace. They must be aware of their core strengths and the services they offer to customers. The question they must ask themselves is: “Is price the key to success, is it the customer experience or convenience (for the customer)? Which competences within this dimension are the strengths I can deploy to be successful in the market?”
Many retailers must catch up with decades of digital evolution. With a technological backbone often dating back to the 90s, their infrastructure is often not ripe for digitization of their DNA. In such cases, transformation will necessitate an extensive and disruptive greenfield approach.
As retailers rarely possess inherent transformative abilities, their digital transformation requires competent partners. They need partners that can orchestrate and impart the new (digital) skills to others. The new world is an open ecosystem – so demolish your internal and external silos and create a new winning team.
Step 1: Determine your goal
Step 2: Choose the right approach
Step 3: Build Teams
Based on numerous successful transformations, we have summarized five key findings. Always bear in mind that you don´t need “a digital strategy for the business world”, but “a business strategy for a digitalized world”:
Partner, Head of Digital Services Consulting Europe, PwC Germany
Tel: +49 211 981-7412
Partner at Strategy& Germany, PwC Germany
Tel: +49 69 97167-408