A dynamic retail landscape

May 2015, by Giorgio Rondelli, Director

A drone flies across the sky and lands on your doorstep with a packet that you ordered 30 minutes ago: this is how Amazon is yet again reimagining the world of shopping.

With its latest experiment – Amazon Prime Air – the online retailer could finally close the ‘instant gratification’ gap that gives bricks and mortar retailers an edge over their online counterparts. Not only can your online (often cheaper) purchase be quasi-instant – it’s delivered through an experience worth talking about.

Retail has never been more exciting. A plethora of new services and experiences allow consumers to make more informed choices, get things faster, pay the right price, all whilst being inspired, often delighted, throughout the shopping journey.

In this engaging landscape, consumers have never been so confident and demanding. The perfect balance between quality and price, what’s good for the world and a memorable experience – memorable for the right reasons – is not just a wish anymore. It’s an expectation.

This means that the bar for retailers is getting higher, and the ability to reinvent themselves whilst staying true to their core philosophy is a tricky yet necessary balancing act.

 

What does this mean for business?

Sales targets are the number one priority for retail. Which makes complete sense, except for one side effect: the constant pursuit of monthly revenue targets encourages short- term thinking. Most worryingly, it creates a big gasp when change doesn’t deliver positive financial impact straight away. So when thinking of ways to engage with today’s empowered consumers there are two big challenges for business: the first is prioritising resources when the retailer’s ‘toolkit’ is now so diverse and innovation happens at relentless speed. The second is gauging how any initiative impacts the bottom line – key to getting commitment from leadership. What role should brand play in all this?

Brand powers retail – inside out. Many retailers don’t fully appreciate the power of brand, seeing it as a necessary cost to stay on the customer’s radar, to drive traffic to their stores. But brand plays a much more fundamental role, one that can directly address the challenges outlined above.

IKEA’s brand philosophy is rooted in the idea of making good design accessible to everyone. The design of every product starts from the price tag and a very specific style – designers must use their ingenuity to deliver a quality result that fulfils this simple brief. IKEA made a record profit in 2015, increasing market share in almost all the countries it operates in and showing that its relentless pursuit of low price without compromising on design is still a winning formula – 73 years after it started in Sweden.

Apple’s iPhone holds a 15.9% market share against Android’s 81.6%. However its profits shatter Android’s – taking 91% of all profits for the smartphone market. Brand here is critical to achieving the perfect combination of internal business focus and high consumer appeal.

Retailers like IKEA and Apple use brand as the benchmark that everything gets measured against. They use brand as the starting point, the brief. Brand sets the tone for how their employees interact – amongst themselves and with customers.

So on the one hand, brand shapes behaviour and sharpens focus, thus reducing the costs involved in embarking on wasteful experimentation. On the other, it creates an emotional connection with consumers, one that drives repeat purchase and triggers recommendation.

Reaching brand nirvana isn’t an easy task. It requires a genuine vision, which is often encoded within a business’s heritage, and an uncompromising commitment from leadership. This can only be gained through a rigorous approach to branding – an approach that finds its foundation in deep business understanding, and an approach that’s intricately linked to business impact.