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Which retail business models will be trending in 2019?

By Maria Morais

As we are fast approaching the end of the year, with Black Friday gearing up for a month-wide breadth of discounting, the topic of business transformation returns as a focus of highest priority for many UK retailers.

This is the time of the year to align budgets and think strategically in order to be prepared for the next 12-month cycle. It can also be seen as an opportunity to change outdated traditions and define a new vision for the future.

With that in mind, here are some of the trends behind new retail business models that can make the difference in 2019.

1. Customer-centric retail in Business-to-Home (B2H)

Going direct-to-customer (B2C) or business-to-business (B2B) are well known business models, but a new trend is slowly emerging in the retail market: business-to-home.

One such concept which has been featured in the media recently is the intelligent fridge, which allows customers to replenish their monthly or weekly groceries. While this is one of the use cases we have identified as having a potential increase in attention in 2019, B2H isn’t exclusive to kitchen appliances alone.

Another use case for the business-to-home model is the magic mirror, connecting to fashion catalogues, beauty and jewellery products, with the opportunity for the customer to select and filter by favourite brands, price points, etc.

The best way to define a B2H business model is this: the piece of furniture exposing the product catalogue (i.e. fridge, mirror) is a rental service, which the customer can decide to opt out of at any time.

Inside of home

2. The omnichannel movement

Another business model that can gain traction in 2019 is digital centralisation.

The customer being at the centre of all touchpoints is the standard, but once retailers achieve customer centricity, another challenge around centralisation will arise.

Typically, it starts with merging store operations with ecommerce operations and the wholesale business (B2B) with the direct-to-customer business. It’s the emergence of the omnichannel platform.

A centralised business model for retail involves investment in digital transformation for new end-to-end processes such as:

  • Deliver to delight – Developing services to better serve the customers
  • Order to delivery – Making goods available as close as possible to the customer
  • Route to market – Transforming sales and marketing omnichannel operations (in-store and online)
  • Market to order – Driving conversion with expertise, intelligence and trust between customers and sales agents

The demand is there and the technology can deliver on the promise, the only question is: is your business ready?

Connection

3. Unique Innovation Proposition (UIP)

A unique selling proposition (USP) is not enough anymore to create differentiation. Retailers must strive to design a unique innovation proposition (UIP) and make deeper connections in context, focussing on the experiences and feelings that products can evoke.

Customers are multidimensional, and companies resisting the wave of change will find themselves on the edge of extinction, despite their confidence that current brand loyalty will keep them afloat.

Innovative companies are making shifts towards cloud data, connecting commerce, marketing, sales and service capabilities into one single data base. These are some of the most critical technical core attributes that can enable retail innovation:

  • Consistent look and feel of the UX in all the business processes so that users can easily create great customer journeys
  • End-to-end processes (from supply chain to front office and from front office to supply chain) to build connected journeys rather than fragmented touch points
  • Common set of master data services to enable one source of truth for all customer data across the various departments (i.e. stores, marketing, commerce, warehouse, contact center, etc.)
  • APPIs based on an open ecosystem, exposing all services to the public cloud

Sliced lemons

4. Sharing is caring

The sharing economy is increasing in traction in the retail space, with economic, peer-to-peer (P2P) models for access to goods and services through online platforms.

For traditional retailers this model is highly disruptive, but there is a reason why this should be a priority for investment – millennials are not aiming to own material goods as the previous generations were; they simply want access to products and services when they need, and move on to the next thing the minute after.  

Good examples of this business model are coming from everywhere

(i.e. MYRECYCLE allows customers to swap rather than buy, and I LOKYOU gives customers the option of renting or borrowing everything you need: tools, cars, services, etc), but we should expect to see more ideas developing in 2019.

Cup with two straws

5. Cross-Industry Collaboration

Blockchain technology's utilisation is becoming widespread in an economy that is aiming to bring more and more transparency to the supply chain. Anti-counterfeiting and authenticity-ensuring benefits in the fashion industry are one of the many examples where collaboration is at the centre of everything.

But whilst many companies are discussing advantages of collaborating with other businesses across the supply chain, a certain secrecy around the way things have always been done is in many cases stopping innovation from happening at a fast-paced rhythm.

Perhaps 2019 is the year where we will see old paradigms being disrupted by retailers looking to create purpose-driven business cases that can be tied up to profit.

Perhaps 2019 is the year that retailers will want their customers to know where every single product came from, how it was assembled, the shipping route, and, ultimately, the social and environmental costs associated with it. In practical terms this would mean information during checkout, with customers being able to receive intelligent recommendations on how to reduce plastic consumption and atmospheric carbon impact.

Can a redefinition of rules of engagement between suppliers and buyers be the starting point for this transformation? Are customers really interested in this ‘ultra transparent’ supply chain?  If so, what does this mean to traditional retail?

Together, software and business can create a more sustainable world, but strong leadership is needed in order to bring new business models to live. Who do you think will be the winners in 2019?

Maria Morais, CX Industry Principal, Consumer Industries, SAP

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