Innovation in retail is at an all-time high, as witnessed by over $17 B spent in ecommerce M&A over the past 12 months. Retail industry has transitioned to a phase that can be defined as the retail singularity, in which retailers are facing completely new market dynamics, constantly rising consumer expectations and disruptive competition. Just think about the opportunities that IoT commerce will bring to the market, threatening, at the same time, traditional direct revenue streams.
Or think to when consumption will fundamentally change from ownership to use and service, with the setup of new cross-brand offering ecosystems and totally new KPIs to consider. And think about pure online players acquiring brick and mortar retailers, counting on advanced AI solutions for customer experience personalization and leveraging a highly capillary distribution network.
To thrive in the singularity context, retailers should leverage innovation opportunities geared around three main attributes:
- Insights: into customers and products, to understand the context across complex and dynamic customer journeys and product lifecycles.
- The speed of change: in other words, the pace of implementing innovation at scale, is the second key strategy.
- And lastly agility: which means the ability to be flexible and efficient when responding to changing business requirements, customers’ expectations and competitive dynamics.
To plan and execute innovation on the base of these three attributes, retailers need to adopt a structured process: starting from defining what is the strategic mission for innovation, identifying the programs that will deliver the mission, and then the use cases that will enable the program’s objectives.
According to IDC Retail Insights’ recent “Innovation in Retail Survey, 2017”, only 7% of retailers have an innovation strategy in place. At the same time, 39% of retailers find a challenge in both identifying the right innovation model to leverage and building a retail omni-channel commerce platform.
IDC has developed a Retail Innovation framework that provides a guide to the planning of innovation programs based on three target innovation missions:
- Contextual innovation: aimed at driving incremental business benefits and contextual to the current business model of a retailer.
- Disruptive innovation: aimed at driving transformational opportunities and new business models.
- Ecosystem innovation: retail innovation in extended value chains means participating in new business ecosystems or creating new ones, leveraging industry collaborative clouds.
Once the innovation mission has been defined, the framework guides retailers through the path for discovering the available innovation sources, selecting the adequate innovations on which focusing the efforts, and then piloting, implementing and scaling successful innovations.
The pilot, implement and scale phases are fundamentally enabled by the retail omni-channel commerce platform, critical asset to grow omni-channel profitability in the short-term and achieve innovation missions in the long-term (IDC MarketScape: Worldwide Retail Omni-Channel Commerce Platform 2017 Vendor Assessment). The platform relies on four channel-agnostic core capabilities: customer experience, single commerce engine, order fulfilment, and content optimization. All of these elements result in connecting data, applications and external services through an open API layer.
We need to always consider that innovation is first a cultural fact. Innovation strategy must be shared across all the levels of the organization, interiorized and executed by every single person among operations, management and executives. If this is missing and the company only relies on technology, then it will be more complex than expected to drive a successful innovation process.
Given this scenario, IDC Retail Insights has decided to join numerous international retail executives in attending Shoptalk Europe 2017, to be held in Copenhagen from 9th to 11th October. In the last year, we have seen an interesting development on how Shoptalk Europe has built a European community centered on innovation in retail and ecommerce. We think that events like this favor constructive and inspiring conversations among retailers, brands, IT vendors, investors, media and industry analysts. The innovation theme is at the center of retailers’ agendas and, as a matter of fact, Shoptalk Europe is gathering a growing number of attendees – as is also happening for Shoptalk U.S. – interested in learning from and collaborating with the broader retail ecosystem.
IDC Retail Insights’ analyst Giulio Raffaele (Senior Research Analyst) will be glad to meet you in Copenhagen, to exchange experiences and visions about innovation in retail.