The problem with retail disruption

In a nutshell, it’s really hard. Responding to disruption can make life challenging and uncomfortable for retailers. 

I’ve worked with several grocery retailers on this issue over the last 12 months. Coming from different markets, the sources of disruption have varied, but underpinned by new technologies. These have reduced barriers to entry, influenced changes in shoppers and led to new strategic initiatives from competitors. 

Companies are often blasted for their slow pace of response or failure to grasp the scale and pace of change in grocery retailing. However, for large businesses, there is much on the line. Here’s what I’ve seen as the four major challenges for retailers during my discussions.

1. Balancing long and short term business needs

For many companies to compete more effectively, there is a need to invest in technology. This can be a multi-year undertaking, requiring significant focus. However, retailers need to continue delivering growth in the short term, to fund the ongoing investments and provide confidence they’re heading in the right direction. Conflicts often arise while simultaneously operating a legacy business and transitioning to a new business model, especially when the latter is less profitable.

2. Prioritising investment activities 

Retailers are faced with multiple, and often, competing priorities. Investing in ecommerce, creating experiential stores, infusing business processes with artificial intelligence, the list is endless. While the largest retailers can tackle these at once, this is not the case for many mid-sized retailers. The sequencing of activities is not a straightforward exercise given the investment requirements, internal capabilities and market dynamics associated with the types of disruption we are seeing. 

3. Getting organisational buy-in

Even when a new strategy is set and led from the top, it can be challenging to get the entire organisation aligned behind it. This is true when the disruption impacts processes deeply such as how products are bought, priced, sold and delivered to the end consumer. Many new technologies are not just adjusting or improving how things get done, but changing them fundamentally. 

4. Dealing with curveballs  

While all major projects have built-in contingency plans, the scope of changes in the external environment often call for a reassessment. The types of deals being made, and retail partnerships being formed, are often beyond why may have been expected to happen. Existing plans have to be re-evaluated or accelerated, impacting investment requirements and planning horizons. It is more important than ever to consider how radically the trading environment and competitor set could change. 

What are your experiences with retail disruption? What do you see as some of the key challenges? I’d really like to hear your perspectives and to connect with you on this key topic.