Is A 'Digital Department Store' Really The Only Future For Retail?

There is no way we can talk about the world without mentioning the impact the global pandemic has had on customers’ spending habits.

Many high street retailers have closed some of their brick-and-mortar stores, while others have even disappeared completely from shopping centres, instead reinventing themselves as online-only and changing what they have on sale to entice buyers to continue spending with them.?

"Transformational Change is Driven by a Bold and Visionary Leadership Mindset".?

Recent history has proven that clinging to a legacy thinking mindset 'we can't change because of' type of excuses, or 'do as I say, not as I?do' creates casualties not transformation.

I get lots of feedback from retail employees (every level) saying 'our leaders don't do what they ask us to do' as such these are the most common 'blockers' of any change.

I have been reading an ongoing article from 'Drapers' where they have interviewed several of the UK's brightest and best retail?CEO's about their predictions and business strategies for 2022.

I found it an interesting read along with providing some insights into the retail leadership mindsets that are not only dealing with the same plate spinning Covid conundrum as the rest of the world but also how they view the retail outlook for the coming year, and for some their vision for 'transformation'.

To be honest I found nothing earth shattering other than the worrying trend for many who are still intent on building out their core business with 'partner' brands - so is the 'digital department store' really the only future and salvation of retail for many?.

Have they really looked at the critical changes needed for this operating model to get going and become sustainable?

Feels a bit like "let's do what we used to do because we know that" to me.

Websites are a thing of the past, yes still important but nowhere near the first port of destination for consumers.?

Those 'partner brands' you think will lure them into your funnel are today easily accessible via all manner of social platforms where the consumer doesn't even have to figure out how your 'funnel' works - even if you offer BNPL!!

BNPL started gaining popularity due to a multitude of factors.

Consumers can buy several items (sometimes the same item in different sizes), before deciding which to keep and which to return, without paying for all in advance.

The simple concept of “see and try, and only then buy” has driven the transformation of consumer bedrooms into changing rooms, with this paradigm shift having revolutionised (especially fast fashion) sales, particularly as they come with easy returns via prepaid bags.

Customers love BNPL, because the concept of splitting a large payment into smaller, more manageable chunks without the excessive fees that come with traditional credit lines, is straightforward and therefore appealing.

For many decades the big players in what was known as (pre-internet) the 'Home Shopping' sector (NBrown, SDG, Freemans and others) elected to provide a relatively small up front credit facility to all new customers to entice them to spend now and continue to shop with them in favour of a competitor - NBrown in particular knew how to how to factor in those high return rates but also found them extremely painful.

This model allowed these companies the ability to lock in a consumer to continue to spend with them, along with managing the risk associated with the customers spending and payment habits.

As a result of this operating model over time companies like 'NBrown plc' made more profit from the revolving interest applied to these accounts than they did from product margins which in turn created a 'transactionally biased' non sustainable relationship with the end ageing consumer particularly as the competitive landscape started to open up.

This operating model was forced to change over the last decade as tighter financial regulations kicked in combined with competition from emerging agile online consumer focused players, this eroded the competitive advantage around decades old mail order laggards that could and should have been the clear UK leaders in the eCommerce direct home shopping sector - for some of these laggards it's still a key component within the operating model of today.

Today consumers have access to many forms of credit facilities from a whole range of providers and although a small percentage of the online credit market, the buy now, pay later (BNPL) sector has been booming, and it seems others now want a slice of it.

So, my big question here is; if your big bold and ambitious transformation plan is to build out a 'digital department' store offering credit terms across all partner brands are they (partner brands) supporting the principles around BNPL and associated stock holding required for manage all those returns?