How the Internet is changingthe retailing landscape
Retail is not just in another period of evolution– we are experiencing a fundamental shift of theentire landscape, driven by the global scale andpopularity of the Internet. The new reality is:
No longer dependenton their location, consumers now have accessto an almost unlimited set of brands andproducts. For most categories, consumers arevoting with their mouse; online is now a largeand growing part of the retail mix.
Brand owners no longerneed to rely on retailers and can now adopt aradically different distribution strategy basedon a combination of online, ﬂagship storesand selective wholesale distribution.
The effects for retailersare mixed:
–The Good news…
greater access to morecustomers. Traditional retailers are takingtheir operation online to beneﬁt from accessto customers outside the catchment area of their physical stores.
–The Bad news…
more competition. Theﬁght for customers is just heating up withbrands selling direct, international retailersand small shops all competing for customers.This is made worse by restricted access tosome products as brand owners reduce theirwholesale activities.
How the Internet is changingoperating models
Physical retail is characterised by a set of wellunderstood activities and an established proﬁtmodel. Today, operating models are having toadapt to:
Online introduces a completelynew set of retail disciplines– from managingpaid search on Google, to optimising searchresults on a website, to managing fraud. Theserequire completely new skills – pretending theyare simply new ways of doing traditional retailis not a recipe for success.
The ﬁxed costs of ofﬂine retail havebeen replaced with a set of variable and semi-variable costs – from picking and packing anddelivery, to returns and marketing, all of whichtransform the proﬁt model.
The changing retail landscape