Friends and Crocodiles

In the BBC television drama, ‘Friends and Crocodiles’, written and directed by Stephen Poliakoff and first broadcast in 2006, Paul, the lead character by Damian Lewis, spends part of his career as a one man ‘think tank’ in a firm of venture capitalists in the 1980s.

His task was to find the next big innovation that the firm could invest in and develop. After weeks of apparent effort, the partners await the presentation of Paul’s ‘big idea’ with eager anticipation.

The concept he presented was simple enough: a bookshop where you could sit, relax in comfort with a book and have a coffee. The idea was greeted with complete incredulity and he was thrown out onto the street.

It was of course the business model adopted by book retail chains such as Borders and for a while, book buyers enjoyed the experience of browsing, relaxing and drinking coffee. Now Borders are extinct, destroyed by the rise of the internet and Amazon.

In America, online sales are now approaching $200 billion a year, 9% of all retail sales. Consumers who are in their 20s and 30s do about a quarter of their shopping on line.

So what does it all mean for the future of retailing? Pure on line businesses will continue to grow at the expense bricks and mortars only retailers and for the latter to survive, they will either need to offer a different kind of shopping experience or develop a parallel on line business.

Few traditional retailers have risen to the challenge of developing an on line business that has been integrated with their traditional operations, making only small alterations to the business model that served them well in the past or ignoring the future impact in the hope that it is just a passing phase.

It’s no good just setting up a website and hoping for the best. To be successful, the strategy and tactics have to be targeted more effectively – and most retailers have a rich vein of data about their customers which enables them to do this. Wise retailers know lots about their customers: who they are, what they buy and their sentiment – their current attitudes and future intentions.

This data can be used to segment customers into groups with similar behavioural characteristic: at a simple level, for example, those who currently or intend purchase most of the goods that you stock via the internet and those who prefer to stick with the traditional mode of shopping. Once you have got this, then this will help target the two elements of your retail business against the right groups of customers.

And then the analytics kick in – with data driven predictive analytics, you can forecast how the shape of your retail business is going to change and how you need to change with it.

Roy Amara, an American futurologist, once observed: “We tend to overestimate the effect of technology in the short run and underestimate its effect in the long run.” Overestimating its impact might have been true in the early days of internet shopping, but now the trends are well established and highly predictable using the right analytics.

And as a retailer, don’t be fooled into thinking that the products that you stock and sell will never be popular on the internet. The internet is not just for books, music and movies. The most unlikely products are enjoying net sales success. For example, Amazon is now one of the leading sellers of Pampers nappies.

Time to dust down the data and use the analytics.

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