The Retailer Winter_2017/18

Next generation retail: The rise of the omni-platform

Matt Clark Partner, Head of Consumer KPMG Boxwood

“It’s no longer enough to be ‘omni-channel’, we now live in the era of ‘omni-platform’, where retailers must adapt how they do business if they want to remain relevant and profitable. ”

THE ‘PLATFORM’ BUSINESS MODEL IS TURNING THE WORLD OF RETAIL ON ITS HEAD. RETAILERS MUST EVALUATE THEIR BUSINESS MODEL AND THINK STRATEGICALLY. The next generation of retail is arriving – and fast. The rise of retail platforms – think Alibiba, Amazon or even Facebook – has changed the way consumers interact with brands, and each other. It’s no longer enough to be ‘omni-channel’, we now live in the era of ‘omni-platform’, where retailers must adapt how they do business if they want to remain relevant and profitable. Change is nothing new to retail, of course. Where once consumers shopped at their local store, they can now access retailers from their own home. Indeed, we’ve witnessed a continuous evolution in retail over the years, with the rise of the chain store, multi-store, out-of-town, online shopping and even shopping via social media being just some of the notable shifts. The latest development however, has been the rapid entry and domination of the e-commerce platform, with its overarching customer-focussed ecosystem. This stage of the evolution requires a completely different view of value propositions, geographic coverage, the customer and channel. These new platforms embed product offerings and ancillary service propositions, such as payment mechanisms, logistics solutions, content production and delivery services. This kind of all-encompassing approach is designed to keep the consumer within the ecosystem and target them with multiple propositions, to maximise customer lifetime value. As well as providing the retailer with access to new markets and customers, product marketplaces are increasingly building a silent competitive advantage within their core operations through their access to vast amounts of data. To the traditional retailer, they’re also eating away valuable market share. Consumers will naturally continue to shop across all evolutionary stages of retail, but it’s easy to see how the platform business model is taking an increasingly dominant position. We may even see platforms extend their offering further, adding the likes of banking and utility services, travel and education. In essence, they are offering the customer the ultimate combination of experience, value and convenience.

Whether favourable, or not, platforms are here to stay and their power and influence will continue to grow. Choosing not to partner at all is probably not an option for most brands, as consumers will continue to seek out convenience where they can find it – as they’ve always done. This shift into the unknown is only likely to increase in pace, so all retailers really must take a structured approach to creating their platform strategy, or risk being left behind. Whether that entails buying or building your own platform, or collaborating with an existing one, it’s clear that retailers must think carefully whilst embracing this inevitable change.

This will vary from retailer to retailer depending upon their business model, but there is a certain need to think carefully about how retailers engage with platforms to generate revenue growth or valuable intelligence, without destroying existing customer experience, brand and profit. As platform businesses continue to battle it out to be the first $1trillion business, retailers simply can’t afford to sit on their hands. They need to decide whether platforms mark a threat or an opportunity. They may well present a sizable and growing challenge to contend with, but you can also argue that they hold the key to: engaging communities, innovation, creditability, faster execution, as well as lower costs. In making an assessment of the current state of play, three key factors need to be considered: profit, customer loyalty and data. Looking at profitability first, it’s no secret that platforms continue to drive down prices, given their dominance and the increasingly informed customer. However, it’s hard to compete when you’re not on a level playing field, especially when it comes to the profit levels shareholders are seeking! Every retailer will inevitably need to engage with platforms in some way, but it is the working out how that is key. Presented with an increasing amount of choice and the ability to research alternative retailers in just a few clicks, consumers are also certainly less loyal than they once were. Moreover, consumers are also more inclined to be part of subscription model today through these platforms, meaning that retailers who join an eco-system loose a degree of their autonomy in influencing loyalty through direct experience. Where retailers choose to stand alone, they also face consumers less willing to branch out of their preferred ecosystems, given the additional benefits like fast or free delivery they often provide. Data – or rather meaningful customer insight – presents another key consideration for retailers. After all, knowing your customers and their journeys is imperative in order to create a meaningful relationship. Platforms have access not only to the data generated from one retailer’s transactions, but the data of all other companies utilising their eco-system. In aggregate form, this generates valuable insights about what customers are buying or saying, and how they make decisions. This is something they can sell back to you, or use to curate their own product ranges. Both traditional and start-up retailers must give serious thought to this newapproach in order to survive, as much as thrive. Platforms clearly represent both an opportunity and a threat to a ‘traditional’ approach.

MATT CLARK // +44 (0)207 311 8149 // matt.clark@kpmgboxwood.co.uk // kpmgboxwood.co.uk

20 | Winter 2017-2018 |

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