RETAILERS NEED TO REACT FAST TO CONSUMER TRENDS OR SUFFER THE CONSEQUENCES
Written by Zahid Jiwa, VP UK& Ireland, OutSystems
With the economy in recession since 2008, many businesses have lowered their expectations on profit and have gone into survival mode, often at the expense of progress and innovation.
In retail this has been particularly acute. The scale of Woolworths’ 800-store collapse in 2009 and the speed of its demise sent shockwaves throughout the industry. Retail casualties culminated in 2012 when 54 retailers went into administration including household brands like Blockbuster, HMV, Jessops and Comet.
By the middle of 2013 however we saw retail sector prospects start to improve. As the economy starts to recover businesses will need to take a hard look at how they can take measures to benefit from the long-awaited upturn and what this means to their business. Many retailers failed to innovate during the recession and this directly contributed to their demise.
I believe that retailers in particular need to intensify their focus on the customer. They need to better understand customer expectations in order to anticipate how they should evolve their businesses. Blockbuster, Comet and Woolworths were guilty of becoming complacent thinking that customers would be prepared to continue to shop in their stores. These retailers clearly lost touch. They stopped listening to their customers and they stopped innovating – to their ultimate detriment.
Woolworths totally underestimated its customer’s appetite to shop online and use smart devices. Woolworths and other supermarkets like Morrisons who focused on working class households, totally misread their ambition to get online. They didn’t consider that through the Internet and smart devices lower income customers had the same buying power and access to products as middle income consumers. So by not offering internet services these shoppers took their business elsewhere via the Internet. And, as other retailers were slowly eating Woolworth’s lunch with new convenience store formats and internet offers, Woolies continued to focus on its traditional strengths while outwardly admitting that it had to make itself more distinctive in shoppers’ eyes.
If I look at Blockbusters, Comet, Dixons and PC World, it is a similar story. All failed to act on changing consumer behaviour. Blockbuster for example didn’t understand that customers were moving away for good from movie rental stores and instead logging in online and downloading films from Netflix from the comfort of their own home. In fact, Blockbusters had the opportunity to buy Netflix but it walked away and ironically today Netflix is worth $21.5 billion and Blockbusters is bankrupt.
Today retailing is a multi-channel experience underpinned by innovation and technology. Buying research is done before the shopper even enters the store. Smart devices mean that in just three clicks we can purchase goods and we can do this very efficiently. If we buy online, it is delivered next day. We don’t have to wait.
Looking at successful retailers you can see that these organisations have truly embraced innovative technology to ensure that they can deliver the services their customers demand. A great example is Amazon, who I regularly shop with. Amazon is extremely price competitive, it delivers my goods to me at multiple addresses depending on where I intend to be. I can click and collect from drop off centres or lockers and the tracking and delivery information is superb. Other great examples include Waitrose and John Lewis with their click and collect service. Integrated back-end logistics and distribution with front-end ecommerce technology allows me to collect from my local Waitrose store. Likewise eBay has recently tied up with Argos, using their stores for collection.
At OutSystems we have a strong history of helping retailers to innovate in a variety of ways across the business. With our web and mobile application platform we have helped retailers create a highly flexible and adaptive environment and, where necessary, retire legacy systems. For example, OutSystems helped a European retailer bring 15 new built-for-change applications to market over the last few years, whereby the key imperative was for each of these applications to not only adapt, flex and change but to integrate with its ERP systems.
My closing thought is, are retailers adapting fast enough? At the start of this year like-for-like sales at Morrisons fell 5.6% in the six weeks to 5 January, sending shares tumbling. Morrisons admitted it had seen a “disappointing” performance stating that the difficult market conditions were intensified by the accelerating importance of the online and convenience channels, where it is currently under-represented. So what that tells me is that one of the 4th largest retailers in one of the largest economies in the western world has only just realised that it needs an ecommerce strategy.
As we move forward into a brave new world and start to gear our businesses for growth, do our customers have the time to wait when some retailers are only now starting down an ecommerce route? Can retailers continue to drag their heels when it comes to responding to customer trends? The answer is no. We must be fleet of foot, agile and responsive. We must anticipate how customer buying patterns will evolve, and most importantly, we must act.