How retailers can evolve their business models
AI is deepening the divide between personalized, enhanced shopping experiences and automated, bot-driven purchases of commodities. With capital constraints becoming a potential issue, companies will need to align their business model with their customers’ buying behavior.
At EY World Entrepreneur Of The Year™ 2019, mold-breaking entrepreneurs explored how to prepare for the NextWave of industries as new technologies fundamentally change traditional ecosystems and business models.
Here are some key highlights of the discussion:
- Leverage customer data to drive competitive advantage. In the past, retail outlets owned all the customer data, and this data was beyond the reach of companies developing and selling their brands. Now that technology-enabled channels have given companies direct access to the consumer, they can own the data and those relationships themselves. As a result, companies can adapt to customer wants and behaviors more quickly and comprehensively, whether customers want a simple transaction or something more.
- Offer customers an interactive experience and sense of community. Ultimately, to succeed in the shopping environment — rather than the buying environment — companies should sell a sense of shared experience to their customers, not just a product. With millennials increasingly focused on the desire for “social shopping,” companies that develop and drive a sense of community to reinforce their brand and what it offers may avoid being commoditized.
- Tell your story to build brand strength for the future. If companies want to defend their brands against erosion from online marketplaces, they should embrace content and storytelling. Think of the shopping experience as being part-education and part-entertainment, not just a transaction. Customers respond to narratives and characters, and brands that double-down on this thinking will be better able to retain their importance to their audience.
- Personalize and differentiate products to succeed in the future. The foundations of the billion-dollar, one-size-fits-all business model are eroding rapidly. The availability of online channels for direct-to-consumer selling means that consumers can find the niche products they prefer. While it would have been impossible for niche brands to win shelf space in the past, they can now succeed as long as they can use data to acquire customers. Products that can’t be highly personalized will thus lose value and become more rapidly and thoroughly commoditized.
- Think beyond basic e-commerce and how user interfaces will change the business model. The use of voice-based interfaces could shorten purchase times (and thus accelerate the commoditization of some products) while giving customers the sense of an immersive, personal experience. People want to touch, taste and feel the products they buy, which is a challenge for online selling. To succeed, companies will have to find ways to deliver a richer experience to customers. They may also need to consider how they market to AI algorithms rather than just to consumers.
- Emphasize strong ethical values to stand out in the marketplace. Having strong values that are identified with a brand can be critical in a highly competitive marketplace — millennials are inclined to place high importance on company values. Many consumers say they will only buy from brands that do good in the world.
- Decide which business model offers the best chance for success. No company has the capacity to do everything. As business models in the retail sector become more complex and divergent, even industry giants will have to reckon with a finite amount of capital. While it’s easy to envision possible futures for the retail experience, it’s difficult to realize that vision at scale. Nobody has yet succeeded in combining the e-commerce and brick-and-mortar retail models and dominating both.
Thank you to our discussion leaders:
Jo Horgan, Founder and co-CEO, MECCA Brands, and EY Entrepreneur Of The Year 2018 Australia
Miah Kiat (MK) Goh, CEO, Karex Berhad, and EY Entrepreneur Of The Year 2016 Malaysia
Ryan Burke, EY Global Growth Markets Leader
Stasia Mitchell, EY Global Growth Markets Entrepreneurship Leader