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The Disruption Of Retail By SAA

I had the privilege of spending time with my old (young l) friend, David Berman – who is USA’s guru on retail and has a retail fund called Durban Capital. 
He had been saying for years how retail is being disrupted by SAA.
Samsung, Amazon and Apple 
Bob Pritchard writes about the Legacy Manufacturers dilemma….
 Over the past few years we’ve seen an explosion of companies that sell and ship their products directly to your door. (B2C) But, this is not due to digital advertising and millennial style branding, it represents a huge shift in the way we buy products, and the big consumer packaged goods companies are in trouble.
 
The middleman to save costs and the internet has made it easier for companies to go directly to the consumer. 

Most of us now have a connected computer in our pocket and can demand goods and services instantly – that can be delivered to us “on demand”
 
If an industry exists, chances are its being “disrupted” 

Gillette’s share of the US men’s razor business fell from 70% in 2010 to just 54% in 2016, thanks to competitors like Dollar Shave Club. 

 Mattress companies like Casper have doubled their market share in the past year, and meal kits are projected to grow ten fold.

I was speaking to someone at Nestle the other day, and they were questioning the value of spending money building an end user customer list and communicating directly to them – or continuing to invest in their distribution to retailers. 
Will they be disrupted by
“The Dollar Coffee Club”
Or
“The Dollar Chocolate Club”

 
 
In the traditional model, brands design, produce, and market their products,  rely on wholesalers and stores like Walmart, Best Buy, Target or Amazon, to reach the end consumer.

That means they not only own all the revenue from the products they sell, they own the customer –  they own the whole customer experience – end to end! Effectively the advertising medium becomes the distribution and delivery channel.
 
 Once a consumer has downloaded the brand’s  app or logged into its website, the entire digital experience can be highly personalized, with the brand gaining more data and learning to serve the consumer better, creating a virtuous circle, making  it harder for a competitor to challenge the role of the incumbent brand.

With the rise of highly targeted advertising via social media, small companies can now easily compete with the behemoths and reach their perfect customer from using demographic data along with location information and interests. 
 
Consumer packaged goods companies such as  Procter & Gamble, Nestle and Unilever, are among those facing the biggest challenge. They have not had a direct relationship with the customer and have relied on 3rd party retailers and distributors for sales (hugely successfully might I add) .

 Not only do they have to build D2C relationships virtually from scratch, but also they have to restructure their legacy operations in an environment where shareholders demand rapid results.
 
 The smartphone has changed behavior with people using them for communication, information, entertainment and transactions, with manufacturers struggling to find its place in an app-led world.
Design and user experience, building awareness through advertising, driving a purchase and, finally, distribution of the product through to payment – triggered by a tap of a button!!! 
 
In the age of D2C, brands need to make the customer experience as seamless as possible because consumers are in charge and, if they encounter friction, they will shop elsewhere.

In my view it is clear….. the winners are those with the relationship to the Customer! 
Posted on March 7, 2018

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