Chris Daplyn
Chris Daplyn 14 September 2021

How Traditional Retailers Can Compete with the Digital Natives

Unburdened by brick-and-mortar, 100% online businesses have been reshaping retail markets for the last decade and taken full advantage of their digitally native status to drive venture capital, customer growth, and brand impact.

Faced with digitally native competitors many traditional businesses have at best struggled or, at worst, been beaten into submission – probably none more dramatically than Arcadia. 

Around 5 to 10 years ago, it would have been inconceivable that Arcadia would have plummeted, and so quickly. The jewel in the crown, Topshop, seemed unbeatable, boasting collaborations with the likes of Kate Moss and Beyoncé.

Although Arcadia seemingly owned the high street, it failed to innovate. Brands like Asos and Boohoo came along offering a much wider set of choices at lower price points with a slick digital experience and an ability to build their brand where many of the target consumers were living – social media.
From an outsider’s perspective it appeared as though Arcadia lost touch with its customers’ needs and how the high street was changing around it – both in terms of general consumer behaviours and attitudes towards technology-enabled experiences. It crucially failed to innovate the retail experience, with only the TopShop flagship store in Oxford Street showing real commitment to innovation. 

Turning the Tides 

The truth is that legacy retail brands don’t need to become another Arcadia or Debenhams. They can compete and win in a digitally native world by combining their brand heritage with what these ecommerce giants have taught us – the importance of driving transformation and agility. 

Born in the online environment, digitally native businesses are experts at seamlessly combining digital experiences with a physical product or service. Part of their success is down to their unique business models, designed to drive rapid innovation and to easily pivot around ever-changing customer demands.

To stay agile, digitally native brands tend to sell a few high-volume commodity products, keeping the number of different offerings to a minimum and mastering their unique niche. 

Digitally native brands also create competitive advantage by providing a better customer experience than traditional businesses, driven by their understanding of data and customer insights. Meanwhile, older retailers are relying on marketplace giants such as Amazon to make sales.

By doing so, however, these businesses give away their valuable customer data and transactional relationships. This helps digital powerhouses like Amazon to grow while starving themselves of the insights they need to compete.

The need for traditional businesses to accelerate their digital transformation is not a new conversation, yet many are still failing. Here are four ways that well-established businesses can prove their value and compete with the digital disruptors without rebuilding their businesses from the ground up:

1. Own your Insights

Owning the entire transactional process and customer journey will ensure that positive relationships built through your great products and services are associated closely with the brand itself (rather than with a third-party marketplace). Paired with strong brand awareness and a reputation that’s been carefully built over the past few years, you’ll be in the running to achieve the same capital as digitally native brands.

2. Sell with Service

Learn from your pandemic experience, by ensuring your services are scalable and can adapt to a large influx or decline in customers. A good tactic here is to invest in a chatbot to help filter through queries and concerns, answer simpler requests and take pressure from customer services teams to allow them to better deal with the more complex issues.

Thanks to AI and machine learning, chatbots have come a long way over the past decade and are becoming better at talking ‘human’. 

3. Shift Customer Mindsets

Digital disrupters may well have done a better job initially of changing customer perceptions, opening their eyes to new possibilities and setting new expectations for service and innovation, but that doesn’t mean traditional businesses can’t raise the bar themselves. Try to offer customers something new, or something that acknowledges the perceptions they already have whilst challenging this mindset. 

4. Reshape your Technology Stack

Most traditional businesses have technology stacks and team structure types that impinge innovation. Creating the best digital experiences through a modern MACH (Microservices; API-first; Cloud native; Headless) approach. This means that the customer experience can be de-coupled from the back-end tech stack, removing the limitation of the experience by technology.

It also means the different platforms that deliver the experience are “composable”, so platforms can be plugged in, removed, scaled or replaced to ensure the best solution to specific problems. MACH architecture allows you to quickly adapt as new technologies evolve without disruption to adjacent systems.

Any new technologies and solutions introduced must be compatible with the skillset and toolbox of employees. From developers and tech people needed to understand new tech stacks and platforms, to store personnel that need to be familiar and comfortable with experiences such as live shopping and virtual consultations.

To prove it’s never too late to make the move to digital, just look at the Frasers Group, which began its ecommerce journey very late. It missed a few ecommerce ‘waves’ but is now leapfrogging digital competitors that were initially quicker to the game.

The uncertainty of the pandemic has rapidly accelerated digital transformation and innovation opportunities for everyone. The gap is closing. The real winners will be the businesses that create an agile and scalable organisation to continually transform.

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