A couple of days ago my printer went out of ink. I was in a hurry and I decided to go to an electronics shop in the neighborhood. Within 20 minutes I would experience none less than six different irritation moments along my customer journey.

First I had to physically go to the shop. It was snowing and it was cold. First irritation.

Then, when I entered the shop I discovered a wall covered with ink cartridges placed in no apparent order.  Irritation moment number 2.

To my surprise, I didn’t find it. Irritation number 3. 

The clerk just couldn’t help. He couldn’t tell me neither wether I could use any other of the cartridges on display.  Irritation number 4.

He wasn’t sure either whether another store of the same franchise could help me because «the IT system is not accurate».  Irritation moment number 5. 

Finally I bought a pile of paper that I also needed and went to the cashiers. There were two employees standing there. One of them was busy attending a customer. The other one didn’t bother lift her eyes from the computer in front of her. After. while, I had to actively make her aware of my presence. Irritation moment number 6. 

I left the store swearing I would never enter that place again or a physical store for that matter. Online shopping. Forever.

Looks like retailers still think they can retain their customers and their relevance based on the same factors as they has before. The fact is that they can’t.

Traditionally, retail stores have relied on five different factors to stay relevant, attract customers and gain competitive advantage.

  • Location – Securing the best locations with most traffic
  • Scale – The factor that shall secure best prices from suppliers and savings through standardization across shops in the same franchise
  • Knowledge & service– recommending the right stuff to an uninformed customer
  • Customer loyalty -Based on coupons and loyalty clubs and discount-points
  • Partnerships– a network of loyal suppliers and distributors loyal aware of their place in the value chain

None of these make much sense any more. 

First of all, location is rapidly losing value as online and mobile shopping is taking over the convenience location once represented.

Secondly, Scale is slowly becoming a weakness instead of a strength. In a business where operating margins are hopelessly thin the sheer size of their enormous structural costs makes it dangerously easy to loose money once a tiny fraction of customers disappear.

Knowledge has lost most of its power too. The concept of service relied on the Information asymmetry that benefited the clerk at the store. Today, customers have all the information they need on a screen. They compare prices through services like prisjakt.no and get recommendations from Facebook friends. As information asymmetry disappears, the very concept of service disappears with it. Digitalization wins, specially when products are bought based on specifications and price, like ink cartridges.

Retail is approaching its own «singularity moment» and digital disruption is engulfing the very essence of what made them once great.

Customer loyalty is waning too, along with the tools retailers used to win it through. Convenience trumps customer «loyalty programs» and «points» every single time. Paid recommendations and subscriptions are taking over. The online stylist Stitch Fix sends regularly clothes, shoes and complements to their subscribers that they haven’t expressly ordered. Making use of machine learning Stitch Fix knows beter than you what you need and what you want.

Finally, new partnerships are transforming the retail experience too. Before, powerful gigantic retail chains could dictate conditions and prices down the value chain. Now, digitalization has made it possible for anyone to approach the end user directly. Take digital marketplaces. In Norway we have example like Finn.no Shopping or Komplett.no. Facebook is doing exactly the same.

Retail is approaching its own «singularity moment» and digital disruption is engulfing the very essence of what made them once great. It is time to rethink all activities in their current internal and external value chains, create new useful partnerships and apply data based decision-making in order to transform their business.

Digitalization si not here to take away jobs, It is the only way to keep them. 

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