This article was originally published on Kris Miller's LinkedIn.
Despite daily media headlines about store closures and retail bankruptcies, disruption in retail is not new. From one decade to the next, retailers have had to contend with disruptive shifts. I explored this topic and shared some insights at the WIRED Smarter conference in London this week. Let’s start by taking a quick look back in time.
Retail Disruption Over The Years
In the 1960s, fragmented Main Street retailers faced disruption by general merchandisers who appealed more to families buying homes and moving to the suburbs. They offered everything from home furnishings to apparel — all in one place. Take Sears, for example, whose market value was at its highest in 1965; the merchandiser made up one percent of the US economy by 1969.1
In the 1970s, malls grew in number and in popularity thanks to department stores as their anchor tenants. Malls were considered more convenient shopping destinations and suburban families took to their cars to spend their money at their nearby JCPenney’s or Macy’s. One-third of retail revenue was attributed to malls in 1975.2
The big disruptor for department stores in the 80s? The rise of specialty stores that catered to the changing needs of upper middle-class baby boomers and their children. In the 90s, it was off-mall discount retailers like Walmart and Kmart, offering value and convenience at expanded “supercenters” that housed thousands of products under one roof.
The 2000s were marked by the emergence of online shopping. Companies like eBay and Amazon started to gain traction, offering a new type of convenience — buying from your home — and greater price transparency. Then, following two major recessions in this decade, there was a resurgence of extreme value retailers like Dollar Tree and Dollar General. Today, 75 percent of Americans live within five miles of a Dollar General store.3
Change, as they say, is constant — especially in retail where innovation around consumer needs trumps stagnation. But what’s new is the rapid pace of change. And this acceleration is driven by the convergence of technology, consumer and commerce trends.
Today’s Trends Driving Accelerated Disruption
Over the last decade, we have seen a shift from physical to digital, and from desktop to mobile platforms. These shifts were massive but are simple compared to the disruptions that lie ahead. The next big wave of change will be driven by four technologies that will work together— artificial intelligence and machine learning (AI/ML); Internet of Things (IoT); virtual and augmented reality (VR/AR); and crypto/blockchain.
AI/ML is becoming mainstream, helping to reshape the end-to-end shopping journey with contextual commerce (think: shopping bots), visual search (think: image recognition) and highly personalized experiences. With IoT, we’re seeing an explosive growth in connected devices that will power new digital lifestyles and always-on experiences. No longer will you need your mobile phone or desktop as the interface for your digital life. AR and VR will enable immersive experiences like virtual shopping with your friends or virtually trying on an outfit before you purchase it. And crypto/blockchain will move beyond payments to new use cases like data privacy and item authentication.
In consumer trends, “Digital Natives,” those who have grown up with smartphones, are on the rise. They demand simplicity, personalization, and seamless experiences across devices and platforms. They embrace a sharing economy mindset — a preference for access over ownership — that speaks to a focus on purpose and a stronger support for brands that align with their values.
And finally, commerce trends are marked by new business models and new commerce entrants. Commerce is becoming distributed — anytime, anywhere — and less of a destination play, enabling social commerce and voice shopping. Digital ecosystems are gaining momentum, making it easier for the consumer to stay within one platform. New business models are emerging, like omnichannel, recommerce and subscriptions, addressing the demands of today’s consumers.
How Retailers Can Navigate this Latest Era of Disruption
So what should a retailer do? How can a retailer today navigate this perfect storm of disruption caused by this convergence of trends?
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Be Customer-Obsessed — Start with your target customers and a deep understanding of their needs. Ensure your value proposition is sharp and relevant for them. At eBay, we obsess over our customer’s end-to-end shopping journey, from investing in highly relevant messaging to creating a seamless checkout experience.
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Embrace Your Superpower — Find your point of differentiation and invest to create a proverbial moat. Our marketplace model and diverse seller base allow us to offer amazing value across a broad selection of items, from pre-owned luxury watches, to in-demand and hard-to-find fashion, to the comic book that completes your collection.
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Use Technology and Data Strategically — Focus your technology investments in specific use cases to solve pain points or delight your customers in meaningful ways. Invest in data analytics to understand your buyer funnel and improve customer value. With over one billion items on our platform, we use AI-driven personalization to help you discover exactly what you’re looking for.
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Create a Repeatable Model: Find Your Flywheel — Create a repeatable model for customer engagement and lifetime value. eBay’s “buy-to-sell” flywheel allows buyers to become sellers and bring differentiated inventory to the site, which then attracts other new buyers. This also promotes the circular economy, a purpose important to many consumers today.
In addition to “what” retailers can do, there are also some perspectives on “how” to navigate through this disruption. Here are a few simple approaches:
Have a bias for action: Speed up innovation. Test and learn. Be agile and nimble. Above all, be averse to bureaucracy.
Lead through change: Bring your employees along the journey. Do this by setting a clear and compelling vision for the future, and ensure individuals understand their role in this journey.
Avoid the “squirrels”: Don’t get distracted by emerging technologies that may not yet have a relevant use case for your business. Focus your technology investments on those things that will matter to your customer.
Be “all in”: After you set a direction, be willing to dive in, making the changes required to reinvent your business to remain relevant.
And don’t believe the hype. Despite the chaos portrayed by headlines, disruption creates opportunity. And it’s those retailers who can successfully innovate for their customers who will emerge as winners.
1 https://fortune.com/longform/sears-self-destruction/
2 https://finance.yahoo.com/news/the-rise-and-fall-of-the-shopping-mall-161420118.html
3 https://fortune.com/longform/dollar-general-billions-revenue/