It was in 1997 that Harvard professor Clayton Christensen pointed out that established businesses tend to respond to disruptive innovation only when it is already too late. Retailers need to reinvent their trade, once and again, and dare to be vulnerable and dive into new business models with reckless abandon. “You have to become your won fiercest competitor and disrupt or destroy your own business before competition does,” says Indian author and consultant Rajesh Srivastava.
It’s a do-or-die time for retailers now. Old business models will be given their umpteenth new coat of paint, though there will (happily) actually be new business models too in the years ahead.
Start your own marketplace
The traditional retail titans of days gone by are desperately trying to catch up with this platform and marketplace trend. Hopefully, they go about opening their own online one-way-marketplaces and shopping portals, slightly desperate to make up for lost time. This is not as easy as it looks. eBay provides the facilities for over 25 million sellers (businesses and individuals), Amazon Marketplace does the same for 2,5 million, and Tmall Global has over 70.000 vendors. Estimates show that eBay and Amazon take 90 percent of all marketplace revenue. Other retailers such as ASOS, Best Buy, Barnes & Noble, Fnac, Otto, Sears, Staples, Tesco and Walmart who often have “only” a few dozen millions of items being sold through mere hundreds of vendors still have a very long way ahead.
Traditional retailers with a lot of square footage in-store need not lose heart yet. The way forward involves joining forces with other stores to complement what they can offer on their own marketplace. By doing so, they can confidently promise consumers a comprehensive range of goods. Offering fulfillment programs to participating retailers is another option. Thanks to bypassing the need to invest in new products, not to mention avoiding the risks of storage and write-offs, they face a huge return-on-investment (ROI).
Become a specialist marketplace
Over the next decade, niche platforms and marketplaces are going to pop up left, right and center. Built around a community or theme, these platforms will offer the exceptional and wonderful. Unlike generic platforms, they can realize higher commission percentages and profit margins.
Two-way-platforms are not just about mediating between supply and demand, but also about the actual people who are buying and selling. Fast-growing Etsy, the online niche platform for handmade goods, is a well-known example of a specialist two-way-platform. You can sell your own handmade, knitted or crafted items on Etsy. It’s also one of the most successful platforms in the sharing economy. There are others following their lead: Zalando has decided it wants to become a specialist fashion platform, and in England, a niche has been carved out by Farfetch, offering a home to independent designer boutiques.
Niche platforms and marketplaces are popping up all over the world, ranging from Swedish design, ecologically friendly items or French wines to antique furniture, gourmet food or Eastern delicacies. The platform model is appealing to startups and established retailers alike, as they are equally keen to find new and specific groups of onlife consumers. When they succeed in reaching these groups, they can charge higher commission fees than eBay, Amazon and Alibaba.
Most of the global brand manufacturers have started to succeed in the direct sales of their brands to consumers. More than ever before, brand items are being sold in their own online stores with higher margins than their physical stores could yield. This as an unstoppable trend: brands are extraordinarily well-equipped to cater to consumer experiences.
Over half of consumers now start their search for a specific item or a particular service by a brand on the website of that same brand manufacturer. Manufacturers then have all the opportunity they need to build a direct customer relationship. Using the online sales channel, they are able to blend a full brand experience with custom-built personalized services. This takes precedence over the simple sales of goods or services, which is the practice of generic and specialist resellers. Why should they refrain from constructing their own customer relationships and maintaining these? Why should they give up any margin whatsoever to generic or specialist resellers?
Over the next decade, we can expect to see the majority of global and national brand manufacturers come around and start selling directly to onlife consumers. Over half of all leading non-food brands sell goods directly to their consumers. In the service sector (travel, insurance, etc.), we should see this percentage rise to well above 90 percent in the next decade.
Source: The End of Online Shopping: The future of retail in an always connected world