Retail Disruption. Are Company Executives in Denial and not watching their Frontiers?

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I was at a dairy meeting this week. Senior management of companies from all over the US come together to discuss market trends, regulatory issues and food safety. Their companies make the cheese, yogurt, dairy ingredients and other dairy products that we all eat. It is a highly experienced group from small, medium and large companies.

Normally the audience is very up-to-date and not much surprises them. This time one session really opened their eyes and gasps could be heard.

The speaker was Dan O’Conner from RetailNet Group, as they put it: a leading Global Retail Intelligence Resource helping Retailers and Suppliers plan tomorrow’s strategies today. He showed digital trends and the impact on the dairy business. The audience was silent and in full attention.

Dan spoke about how apps change customer shopping and especially that they “wall off” the users and make competition much more difficult. Apps will become the new loyalty programs.

The growth of customer toolkits that allow for a much more personalized experience and easier click and buy. These toolkits include: product scanning, creation of shopping lists based on scanned products, recipes, coupons and delivery options. The delivery options are getting faster and faster with major emphasis on same day delivery. Amazon is the leader in the retail industry and is forcing the major retailers to rethink everything.

Over time total transparency will be expected by many customers. This includes ability to see ingredients, sustainability of supply, origin of sensitive ingredients, etc. All this will be available through the content of apps. The impact on sourcing of ingredients is considerable.

It is expected that over the next few years volume will shift away from stores and that about 25% of todays volume will take place without store interaction, of that15% will be pick and deliver. This highlights that companies need to provide both web and store channel options (clicks and bricks). The increased cost can be quite significant and a totally new set of employee skills is needed. On top of that, supply chains will become more complex and need to be flexible.

Finally, in all cases the increase of marketplaces changes the dynamics. They have the fastest growth and need to be considered as a source of revenue. However, profitable pricing is more difficult and requires new ways to add value.

For me the reaction of the audience showed that most companies are still in denial of the changes that are happening in their industry. They are not watching the frontiers of their business. Not a good sign. Time to wake up.

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