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REASON WHY · The biggest mistake in the retail battle: Thinking it’s a battle

Four ways physical stores can stay relevant in the current environment

The owners of physical stores shouldn’t think of operations like Amazon or Alibaba as enemies. Brick-and-mortar stores are now facing numerous challenges from a variety of “monsters,” and blaming their problems on one or two digital companies is a risky oversimplification.

Realizing the size of some of these “monsters” can be paralyzing at first. When you read that online sales worldwide grew by more than 23% during 2018 (following similar growth during the previous four years), or that by the end of 2019 there will only be 15 countries in the world with a GDP greater than Alibaba’s revenue, you might not want to bother with rolling up your sleeves and getting to work. But you must, because it is the physical distributors who can prevent the  “retail apocalypse” that many people are anticipating. And denouncing those online companies is really more of an excuse for not doing what must be done. So what decisions have to be made? I’ll try to describe them in what follows.

 

Adapting faster

We’re in a new environment for retail, especially regarding the speed with which it arrived. What used to take place over a period of 50 years now happens in five. This disproportionate acceleration has made many people fall behind. It’s not that they’re unaware of the new situation. At this point, it’s clear to many that this is serious, that technology has changed the rules of the game and that it will continue to do so. Although most people realize this, they aren’t coming up with the right solutions. Their solutions – are usually incomplete or unambitious. For example, many traditional businesses decide to set up a website, but they do so without any strategy behind it or without any connection between the website and the physical store.

But to stay relevant in this environment, it’s not enough to just apply patches. In many cases, a company must enact a complex turnaround or profound restructuring, which may require consulting with professionals. If that’s the case, managers must not hesitate to do so.

 

Collaborate

Another problem many retailers have is that they get their claws out when they see approaching change, some new player on the scene or a successful competitor. For years, we’ve been taught to protect our turf, but in the present environment, that no longer works. You only need to attend the retail forums and events to see that there are very young entrepreneurs with spectacular ideas for how to improve different aspects of the retail chain: logistics, customer experience, etc. In the past, I would have loved for someone to have put those ideas on the table. But that didn’t happen, and now I’m convinced that progress will come through collaboration. Collaboration with people who, through their adaptability, fill those gaps that companies with top-heavy structures don’t even see; collaboration between professionals who are in the same situations; collaboration with companies in countries that are leaders in e-commerce. That’s the form competition must take today.

 

Use technology intelligently

We frequently hear about new technologies. Every day (in articles, studies, conferences), we get information about them. It’s exciting to learn about everything they will be able to do – and already can do. In the future, fitting rooms will give you your clothing size automatically; robots will deliver merchandise to your doorstep. Although there are examples from all over the world of cutting-edge uses for technology in retail, it’s also true that companies should be careful about installing these advances. It’s obvious when technology is added just for the sake of adding it. Once again, this is a makeshift fix. Technological innovation should be adopted in a common-sense way: always to meet an existing need by the company or the client. Only then will it align with the company’s strategy and can really be considered an innovation.

It’s worth taking a closer look at the digital giants mentioned earlier. They spend almost all their profits on innovation, which is why they are leaders in these areas.

But technology isn’t only found in online business. Physical stores can take advantage of new technologies to create sensory experiences. With new technological integrations (artificial intelligence, augmented reality), as well as creativity on the part of physical stores, a shopping trip can become a game or a cultural adventure. In some stores, for instance, salespeople place related, recommended products into cupboards in dressing rooms – a human version of the website feature. Radio-frequency identification (RFID) tags and other technological innovations can also make the bricks-and-mortar experience more attractive.

 

Treat the customer as you always have (or better)

And in the midst of all this innovation, here is an enduring idea: Physical stores have to go on doing what they’ve always done. I’m talking about anticipating the customer’s needs, surprising him, and giving him a smile when he comes in the door. Also study the competition so you can pick up new ideas and adapt. This is the same as when small businesses had to adapt when department stores appeared and when these department stores adapted to the arrival of specialized stores for clothes and furniture. None of the old ways of doing things have disappeared; the stores have simply adapted to find their competitive advantage, the thing that makes them unique and kept a spot for them in the market.

If you have a shop, think about what your niche is. Ask yourself, how am I different from others, what do I do better than they do, what added value can I give the customer? In these answers, you will find out where you should innovate and invest.

 

Analyze, learn and improve

This isn’t the time to complain, but to analyze, learn and improve. Amazon or Alibaba cannot always be an excuse; if anything, they should be an incentive to do things better. I like to believe there will be a stimulating period full of collaboration (between retailers, big players and startups) and opportunities.

Inevitably, this digital transformation of companies requires flexibility. We must constantly evolve. The transformation also involves creativity. The people who come up with big ideas are always thinking of ways to do things better.

Dimas Gimeno

Spanish retail leader with more than 20 years of experience in the sector. A specialist in digital transformation, omnichannel and new business models. From 2014 to 2018, President of El Corte Inglés, one of Spain’s leading companies and a leader in the European retail sector, with a turnover of 16 billion euros, 90 stores in Spain and Portugal, and more than 92,000 employees.


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