Like many industries, retail faces tremendous competitive pressure from new entrants whose rapid success derives from technological developments that change end-user expectations and behaviour. Innovative companies can thrive under this pressure by viewing competition from technology less as an obstacle, and more as an opportunity.
While there’s no doubt that the rise of online commerce has made it harder for traditional retailers to attract customers into stores, it’s also clear that in-store shopping is far from dead. There are certain qualities inherent to the in-store shopping experience that consumers don’t want to completely abandon as they remain loyal to the concepts of convenience and personalisation. This has caused innovative retailers to turn to disruptive technologies to keep customers happy and to ensure that brick and mortar shopping is at the forefront of the new consumer experience.
Innovate, adapt — or face obsolescence
Retail leaders understand that the key to future success is in merging digital innovations with the traditional shopping experience. Consumers continue to be drawn to innovative digital shopping experiences, yet still crave the convenience and personalisation inherent in the physical shopping experience. For those retailers who can keep up, the coming years promise more customers and higher sales than ever. The challenge is clear: the game is no longer the same and winning requires retailers to develop a different set of strengths to survive and thrive in the years ahead.
Smaller is better: experimenting with smaller-format stores
While online shopping accounts for an increasing portion of total sales, some retail segments are seeing a gradual resurgence of in-store visits. Many of the most successful businesses—from big-box brands to niche stores—are experimenting with smaller physical stores. We believe that this trend will only accelerate in the coming years, as more retailers see the potential benefits of the smaller-is-better approach.
Competition for the last mile: racing toward same-day delivery
As big brands evaluate ecommerce threats, they’re focusing on one of their biggest assets: proximity. Physical stores bring them closer to customers than online-only players, allowing them to compete and win where online-only retailers still struggle - at the last mile. Retailers are focusing on a shorter delivery times, with many offering same-day delivery and some even promising deliver within two hours. While over half of First Datas major retail customers now enable same-day delivery, we see the ‘last mile’ as a next major battleground and expect to see more innovative experimentation, partnerships and acquisitions.
Rise of rental: the rebirth of subscription services
Interestingly, some of the most talked about trends are, in fact, not new. That’s certainly accurate in the case of subscription services. Subscription startups are rapidly moving from ‘new kid on the block’ to become significant players. Some traditional retailers have picked up on the trend and are rolling out their own subscription services for make-up, children’s clothing, and athletic apparel, hoping to create their own box model to attract shoppers. While still in the early stages, we anticipate significant growth in this trend over the next five years.
M&A SHORTCUTS: acquiring digital startups to catch up
As M&A activity remains at post-recession highs, we’re seeing more of a new kind of deal across every industry - merging traditional business models with digital technologies. Clearly, tomorrow’s winning retailers will ultimately be those with the best software and digital technology. Many retailers see that the smartest path to ‘catching up’ or ‘getting ahead’ is to acquire and integrate promising new technology. We are already seeing several major deals impacting the industry and we expect to see increases in industry convergence in the year ahead.
Source: https://www.accenture.com/us-en/insight-tech-led-mergers-acquisitions
Separating reality from hype: understanding where to invest
As new technologies continue to emerge, companies cannot afford to waste time or money ‘chasing golden apples’. In this ever-evolving landscape, one of the biggest challenges companies grapple with is how to separate reality from all the hype. We are helping our customers to understand which emerging trends and technologies are likely to gain widespread implementation to become the new standards - and which will potentially be abandoned on the long path to mainstream adoption.
To find out more about how First Data can help accelerate your business growth, contact our team today at talkpayments@firstdata.com. Download our industry insights here.
About Peter OHalloran
Peter OHalloran joined First Data in 2013 and is Vice President and General Manager, eCommerce, EMEA and Non-Executive Director of First Data Polska S.A. (Poland). Peter is also the Founder and Managing Director of Gestion Consultancy and a Collaborator with Fintech Ireland.
About First Data
First Data (NYSE: FDC) is a global leader in commerce-enabling technology, serving approximately six million business locations and 4,000 financial institutions in more than 100 countries around the world. We are dedicated to helping companies, from start-ups to the world’s largest corporations, conduct commerce every day, by securing and processing more than 3,000 transactions per second and $2.4 trillion per year.
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