We have all witnessed how digital has transformed the retail market all across the planet. At first e-commerce, then Amazon and Alibaba platforms, then even more new entrants, more recently everyone is trying to jump in social media such as Instagram (courting young trendy « influencers »), etc. The consensus was that eventually this was not about being a prominent online force anymore nor about offering a fantastic offline experience, but both. The 2017 mantra was O2O or Online to Offline and pretty much everyone agreed to the vital necessity of being able to smoothly drive customers back and forth from an ‘O’ to another. This was all fine and (maybe unexpectedly) I agreed 100% with this trend.
But to be self-critical with the idea, what started to surface is that we have maybe missed something far more subtle and game-changing. I call it Chic and Mortar Retail.
3. Chic and Mortar Retail
Chic and Mortar is about how while retail is getting better and better at streamlining all operations with digital tools (think Amazon Go cashless stores), new layers of high-value, tailor-made or plain luxurious services are offered to consumers.
The first signal that started to speak to me was when I saw Alibaba start to expand Hema (Hema Xiansheng). This network of cashless stores focused on fresh products (the most difficult to process automatically) started with already 30 locations in China, up to 60 at the moment. So we’re not talking about an Amazon Go prototype shop, but real life operations.
The really impressive thing though that caught my eye, was that Hema shops have on-premise chefs who can cook what you buy by walking and scanning with your phone, while you finish your shopping tour. They also have an incredibly effective 30 minutes delivery operations of anything you shop online (remember: fresh products).
While we could pause and be legitimately impressed at how fast Alibaba is moving ahead of Amazon in cashless automation on fresh products (live wet crabs are way harder to deal with than dry boxes of cookies), I think we’d be missing the point: making the shop run with as few employees as possible to serve customers on typical operations makes other employees available to offer high-value services. The brick and mortar operation sufficiently digitalized, and the cost structure reduced to minimum, the premise and the team can be made available to create new added-value options. In term of business model it is amazing to see how as an end result, a very classic business finds ways to invent new forms of up selling « boring » products.
And there are even more interesting things about Hema strategy that you might want to follow up here.
Another striking example might be Stitch Fix that is another try at matching consumers with a personal shopper. If Stitch Fix is far from being the only player at that game in the market (we have Trunk Club, Dia & Co, Wantable, Inc, PS Dept., Luxury Garage Sale, …) they are at the moment the only one on NASDAQ with a $1.2 billion valuation. Do what you want with the number, but there’s something worth understanding which does check the ‘chic and mortar’ box.
Making personalized high-value services available at the click of a button have been tried by many entrepreneurs before, but they would end up crashing down in flame. If Stitch Fix pulls it off at scale, they will have written a new page in the retail playbook. And what I believe is interesting in term of business model is that they have theorized how to be the Uber of their category. I know that being ‘the Uber of X’ has become a stupid hat that too many startups have when they pitch their business, but Stitch Fix does pull it off by subcontracting the high value part of their business (style recommendations) to freelancers and part-time workers (the drivers in Uber model):
This is quite another take from Hema, at the Chic and Mortar strategy, but in essence it’s also about solving the conundrum of bringing a high value experience within the cost structure of a typical (if well digitalized) retail business.
These examples in fashion and even luxury e-commerce platforms are numerous. There is a backstage war ramping up on what could be brought as added services to online customers. Last year, Yoox Net-a-Porter introduced “You Try, We Wait”: a same-day premium delivery service with at-home shopping consultations that allow you to get some items delivered by a « personal » shopper, so that you can try them without dealing with repacking and sending back what you don’t want.
Nordstrom has launched in Los Angeles Nordstrom Local, where the brand offers no goods. Just stylists, tailors, manicures, a juice bar, and a drop point for online purchases and returns. This is a clear echo to Angela AHRENDTS repositioning Apple stores as « town squares » saying that « We don’t call them stores anymore. »
By opposition, Nike who is launching another digital concept store this time in SoHo, New York, is just missing out on the high-value strategy I describe. Minding the fact that they have a powerful data-driven operation and an exemplary solid O2O strategy, they actually don’t go the extra mile and don’t offer real high-value services.
This is making the case on how even being a leader in digital, branding and retail, with fantastic flagship stores on par with Apple ones, doesn’t cut it anymore. For the customers, this is just more of the same thing. An acute version of the innovator’s dilemma? Probably so.
I talked in another article on how Starbucks Reserve was also reinventing the flagship store with a lot of care and value offers for the customers, while also blending in young, modern local designer brands. This creates both a sense of high-end service and trendiness that you wouldn’t expect from an industrial coffee and pastry maker.
A few months later it was announced that Nestlé signed a $7.15 billion deal to get the right to distribute the Starbucks brand, even in its Nespresso stores. Which is in my book an abdication of the inventors of coffee as a luxury ‘what else?’ experience, to the US giant.
Why is it important to understand this trend now?
Because the answer to how to save retail from digital is not in-store VR headsets or blockchain.
It’s not either about saving retail from digital. Digital is now as pervasive as electricity. Just start to think past it even if your CRM is dated, your inventory systems not connected together, and that your sales team think that just showing up to open the store in the morning and being polite to customers is enough.
This is my case of jump-frogging digital and immediately pushing to the step where you actually might have a chance to beat Amazon and the cohorts of other e-retailers.
What to look for in the next few months?
What I labeled the Chic and Mortar trend might well start to propagate into banks, insurance, car dealerships, and other typical B2C operations. I’d be curious too to see what differences we are going to witness between the US, Europe and China. How different cultures are going to embrace different aspects of the high-value service spectrum.
The fourth part of my innovation radar will be on the current dynamic where we have companies like Douyin, Fortnite, or Kylie Cosmetics that are appearing out of seemingly nowhere to dethrone prominent leaders out of their position. In a market where we thought that the GAFA and BATX were above everyone else and entrenched behind deep competitive moats, we might start to realize that the disrupters are still quite disruptable. I call this other trend the Outsiders Outbreak…
Lee VINSEL is an associate professor at Virgina Tech. He gently explains that innovation is like oxycontin in the academic field. And that when he’s pitching innovation to university administrators he does what consultants do when they try to part a customer from its money:
Terrifying them is even more important, though. When I am pitching administrators, I show them threatening charts of how fast cell phones diffused around the planet, which really has nothing to do with anything, and LOADS of curves representing exponential change — like Wayne and Garth from Wayne’s World, schwing! — and then I start throwing in phrases like “digital transformation” and “the permanent disruption of college education,” (…)
His view on innovation programs and five-steps methodologies are quite articulate too:
you can pay Stanford $15,000 for a four-day Design Thinking bootcamp. Design Thinkers have never demonstrated persuasively that their quasi-mystical process leads to any especially significant outcomes, and many professional designers will tell you privately that they believe Design Thinking is a scam verging on fraud. After your Stanford bootcamp, you will leave the Bay Area half-a-new-car poorer, but — quite sadly, tragically even — you will still be you.
He’s also tweeting at @sts_news maybe you should also follow him. I know I am.
He’s my new hero.
I’m often surprised to see leading companies with solid innovation programs, missing obvious market turnarounds. They record the same weak signals and trends that I do, they understand them as well or better than me, but they fail to properly act on them. In my experience, the key reason they fail and miss every new market wave is because they don’t adjust to the right perception distortion.
Most innovation programs work on the first order of consequences.
If you’re an insurance company and see your customers relying more and more on digital tools and social web, well, there is a point in time when you decide to get there too. And you feel that you innovate because you transfer your customer journey progressively from a physical brick and mortar, and phone operation, to a digital one. You actually don’t innovate. You’re just adjusting to what the market is progressively telling you to do. You’re not even customer-driven for what it’s worth, you’re getting on par more or less rapidly depending on your internal agility. Which very often is why you feel you innovate. Because it’s painful for your team and involves a huge cultural shift.
But the market doesn’t care.
Natasha JEN formulates a very calm and articulate deconstruction of the designthinking craze.
Just like open innovation, lean methodologies, effectuation, or intrapreneurship… design thinking is a methodology that is better at selling the idea that there is a one-size-fits-all solution to every corporate strategic hurdles, than actually delivering anything real.
Continue reading The design thinking craze
Worldline has been one of the key customers I’ve been implementing a company-wide strategic mentoring program (you will spot me here and there presenting, gesticulating and laughing in the short video). During the last four years, I’ve been starting up, designing, implementing, training, tweaking, measuring and evolving their mentoring programme to attain specific strategic goals (that I won’t disclose obviously, but you can Google what they’ve been up to since 2014 and have some idea).
As consultants working on the strategic side of things (culture is about strategy) we can’t share much of what we are doing internally. That’s probably the only frustrating part of our job really. If Worldline chose not to communicate that much on this program up to until now, it’s evidently because it was not just a PR « feel-good » operation. That being said, now that the program is really mature and has delivered enough Worldline decided to share a few things about it.
As such, I can also open up a bit on what the key to their success at making mentoring a strategic tool, not just a feel-good operation:
We discussed on the previous article the idea of the weak singularity, where all connected devices tend to be harvested by a few massive platforms, as a global sensor network targeting us for ads (or broader influence strategies).
The follow up of this trend is what we call Platforms’ Dark Patterns, which refer to how the GAFA / BATX are evolving to deal with growing concerns about privacy, while still sustaining their constant push for pervasiveness in our daily lives.
Continue reading My Innovation radar 2018 — Part 2, Platforms’ Dark Patterns
As I did mid-year 2017, I will start today a discussion on what I have on my innovation radar. This is what I believe will shape both B2B and B2C markets for the next two to three years. Unlike last year, I will split it up in six parts to avoid getting in another mega-article! But very much just like last year, I won’t go for the easy answers and discuss artificial intelligence, virtual reality or self-driving cars. So that may be a good reason to read on. : )
Continue reading My Innovation Radar for 2018 — Part 1, The Weak Singularity
Philippe had been hinting at one of the combined tools we’d like to share: the culture and business frameworks. The culture framework that we’ve been using for years informally when helping organisations in their strategic transformations is the “other side” of the business framework Philippe has been sharing for a while now. We redesigned it recently and tested it extensively with our more recent customers to ensure that it’s practical and actionable for anyone not in the consulting business : )
You will see how it regroups and connects concepts I’ve been sharing in previous articles such as values, vision and behaviours, and key elements I’ve been hinting to when talking about complexity intelligence: purposeful drive, strategic empathy and reconfigurable mindset.
This concepts are usually fuzzy and it’s difficult to see why they would matter on any Monday morning at the office. It shouldn’t be that way.
Among other things, China innovation now leads the on-demand mobility revolution with more and more electric vehicles and… bikes.
While I was already forewarning my customers in luxury, automotive, energy and retail for years, this is now hopefully obvious for everyone.
The country size, the problems it faces with pollution and demography, the rapid growth of its economy, have all shaped it to be the most transformative force on the planet. Industries and startups that are still dreaming of California as THE innovation template are still looking in the rear mirror. 20 of the biggest internet companies by market capitalization are now in China, whilst only 11 are in the US (five years ago it was 2 versus 9).
These next years will be both thrilling and quite challenging for westerners innovators.
I won’t develop fully the tools and how to use them in this article. It’s all about giving a first tour of the concepts and how simple they are.
The first illustration is how powerful CUSTOMER-driven companies (Amazon) connect their culture, leading with strategic empathy to identify emerging problems to invest in, and finally select differentiated products.