The Drum's Day Before Tomorrow documentary series exploring digital disruption wrapped up last night with the screening of the sixth and final episode, looking at disruptions and innovation in the retail sector.
An audience including high street retailers, online stores and companies with both online and physical shops, as well as retail property owners, analysts and retail consultants gathered to watch the programme, written and presented by The Drum’s head of TV Dave Birss. After the screening, Birss and The Drum's editor and founder Gordon Young threw the discussion open to the audience, inviting questions and comment from the floor.
A range of themes were aired, including the role of government in facilitating – or obstructing – digital innovation, how big retailers find it difficult to handle rapid change, how small innovative retailers find it equally difficult to scale up their successes, the power of the retailer brand and the retail experience and mobile’s impact on the future of the high street.
One key message from the audience was the fact that existing bricks-and-mortar retailers may not be able to switch to online retail easily and quickly because they have long leases on their physical outlets.
An audience member from a retail chain with both online and physical stores suggested that many retailers who do not currently have a major online presence will switch as soon as their leases expire. “So the real challenge is how to make omni-channel work. It’s our main agenda item every week.” Another audience member agreed that “traditional bricks and mortar retailers are struggling with what to do with their physical retail estate”.
Another issue raised was how retailers – whether online or physical or both – can deliver a consistent brand experience, because, as Guy Elliott of SapientNitro said: “Consumer promiscuity is driven by a lack of affiliation to brands. If a retailer, whether online or on the high street, delivers on the brand promise and gives shoppers the experience they expect, then those consumers will be loyal. If the brand breaks its promise, then they will desert it.”
The recession has changed consumer behaviours and has helped the continental discounters like Aldi and Lidl establish themselves in the UK – but Elliott stressed that this was actually due to them delivering on their brand proposition, providing “a reasonable quality for a low price,” and the failure of the UK’s native discounters to deliver on theirs.
One audience member challenged the idea that online and bricks-and-mortar retailers are somehow different species – “Surely pure-play online sites like Amazon and eBay are retailers as well? Why do we treat the two types of business separately?”
This comment drew general agreement, with Birss saying: “The separation of online and mobile and in-store is screwed up – even within the same group, it forces the two channels to compete, when they should be working together."
This sparked a discussion about why big retail groups are less innovative than smaller ones, particularly start-ups.
A number of those present felt that while small companies may find it easier than large ones to implement innovative and disruptive new technologies because they can move more quickly and because they don’t have to struggle with legacy issues, like physical stores, where they fall down is in scaling up their successes and coping with the transition from being a small company to being a medium-sized one and the implementation of the necessary new business models and processes to keep delivering the same levels of service and experience.
And, as an audience member from one of the UK’s biggest retailers said, “that’s what a brand is all about – being able to deliver consistency of experience.”
While consumers are a key driver of innovation, many people in the audience felt that retailers seem to find it difficult to exploit their connections with their shoppers. A representative of one of the UK’s largest supermarket chains made the point that “all that shoppers is what we all want, because we are all shoppers. We want range, we want choice, we want a consistent brand experience, we want the ability to exchange things easily, whether that’s online or in-store.”
A key area of innovation being driven by consumers is their demand for apps and services that exploit technology to make their lives easier, she added. This point resonated with many in the room; as one retail consultant argued, “most consumers are ahead of retailers in their use of mobile. The iPhone has been a big driver.” Consumers are also demanding change in loyalty cards – “Consumers would like not to have 20 different loyalty cards in their wallet. They would like to have them all on their phone.”
The audience agreed that consumers have to be involved in the innovation process, in particular younger people who are growing up with technology and are more familiar with innovative approaches.
So, as one audience member said, using her own teenage son as an example, the levels of personalisation they are exposed to on some online sites, like Nike, where they can design their own sneakers, will mean they will increasingly expect the same from other retailers.
The general consensus among the audience was that technology is undoubtedly disrupting traditional retail, but that it is not going to lead to the death of the high street. It will change, though, with bricks-and-mortar stores becoming much more places where a retailer brand can be experienced and where people can see the physical products they may then buy from the same retailer online or via their mobile.
“Technology will not lead to the disappearance of the physical store,” argued a representative of one big retailer, “but we will have many different paths and channels to purchase.”
All of these issues and more will be discussed at The Drum's Disruption Day held on Thursday 27 November.
Watch The Day Before Tomorrow series on The Drum's YouTube channel.