How will Digital Transformation fuel innovation in Retail?
Digital transformation has become a near inevitable phenomenon for businesses to stay competitive and deliver a consistent and seamless user experience in every distribution channel. For retail, the story isn’t much different.
The retail industry has an extremely large and competitive landscape with a data-driven business model. The change is imminent and hence, choosing the right business model becomes critical to a retail company’s sustenance.
Changing Business Models in Digital Transformation
With the social media and other digital channels being used extensively for lead generation, engagement and conversion, businesses are discovering new channels and models to flourish in. Each retail business has a different problem to solve. As a result, there is a need for a unified model that connects all different channels and allows the customer to engage in the process of buying. The internet and emerging technologies such as Artificial Intelligence, Machine Learning, Blockchain, Robotics, Automation and so on have thrown open new ways of conducting businesses virtually. Selling something you don’t even own has become a reality and legal. Take for instance AirBnB – it does not own a single real-estate plot, yet it is considered the most successful hospitality business. Retail biggies such as Amazon and eBay are offering virtual marketplaces for brands across the world.
Here are some proven and evolving digitally disruptive business models to consider for a successful digital transformation:
The Subscription Model – Netflix, Apple Music, Escape Monthly, Stitch Fix etc. are subscription model businesses wherein the purchaser subscribes to the business for a specific period during which he/she gets to order premium products and services.
The Freemium Model – In this model, there’s something for free and something for a paid premium too. Obviously, the paid premium members also get to enjoy premium products and services which the free members do not get. Zapier, MailChimp, Dropbox, Hootsuite and LinkedIn are popular examples of the Freemium model of business.
The Free Model – Everyone uses Google, because Google is free. The idea is to offer products for free that come with promotions for other products. Many games and mobile apps can be used for free but they do come with Ads attached. Google and Facebook are the most popular examples of the Free model.
The Marketplace Model – Amazon and eBay are letting small and big retailers and brands to use their platform as a marketplace to sell their products and services online. It works on a commission or fee for the space which is paid either per transaction or periodical. Other examples of this model are Uber, AirBnB, and iTunes App Store.
The Access-Over-Ownership Model – This has taken the world by storm, thanks to AirBnB and Uber. In fact, it is the most convenient business model as you only act as a facilitator connecting the consumer with the retailer or service provider. There is no ownership of space, real estate property, or car involved. But you offer a medium that connects the customer with the car or property for a temporary usage. This model basically works on the trust-factor.
The Hypermarket Model – Even though this model is a regular with the retailers, it works perfectly online too. Amazon and eBay function as an online hypermarket, selling everything from pins and needles to cars and computers. As they eliminate the distributors and connect the buyers and the sellers directly, the margins are gained by both sides, offering the buyers the best ever prices and the sellers a lesser cost.
The Experience Model – Once you use an Apple phone or a Tesla car, you will not think of another brand! The experience model cashes in on this superior experience offered by the brands which is made available to the premium buyers. The price doesn’t matter in this model, but the exclusiveness of experience does.
The Pyramid Model – Under this model, the resellers and affiliates are paid a commission. Amazon, Dropbox and Microsoft function in the Pyramid model sometimes.
The On-Demand Model – This is very popular among TV subscribers. It involves paying for on-demand movies to watch them on your television or online. Similarly, Uber and Taskrabbit are also on-demand business models that offer you their product/service when demanded. The beauty here is that when there is a higher demand, the charges are extra.
The Ecosystem Model – Under this model, the business sells independent blocks of products that can be put together and used such as Google and Apple suite products. They can be used individually and can be interlocked for a value-added experience.
Customer experience is a key differentiator in the retail industry. In a digitally disruptive retail model, the journey begins much before the customer actually buys a product. It begins the moment he/she responds to the engagement programs aimed at attracting leads. The digital age will present several opportunities for retailers, such as reducing the lead time in capturing and delivering an order, collecting timely knowledge of stocks, moving from traditional logistics model to an omnichannel environment, and an improved customer experience. All of this will bring in greater level of operational efficiency and customer -centricity. Bringing digital technology into your retail business will be a doorway to connected nodes of business workflow that will increase cohesion, agility and responsiveness, thereby keeping your business ahead of the competitive curve. For a digitally transformed retail business, there will be no looking back.