Failing to react quickly enough to emerging trends can escalate a downfall. All the more so when multiple trends collide and going digital changes habits
Harvard Business Review (HBR) has an article exploring the rise and fall of the UK’s largest supermarket chain, Tesco. The retailer has been hit by various problems over the past 12 months, not least a recent allegation of cooking the books instead of their produce to make profits look more attractive.
The article explores how food buying habits have changed. Instead of a regular weekly routine shop at the nearest largest supermarket, people are now using a mix of tactics. Sourcing staples from the cheapest possible supplier in the larger quantities (monthly or more) and buying short shelf-life produce from various local stores. As with so many purchasing decisions, people are gravitating to the extremes – cheap/low quality or expensive/high quality with weak demand for anything in the middle.
Tesco traditionally covered the cheap side of that equation. In the same way Microsoft covered the cheap-end of the market for computers, able to ignore Apple targeting the other side. But in both cases, even cheaper alternatives have appeared and dramatically eaten into their dominant market share.
HBR included the following image to demonstrate just how much the more aggressive supermarket discounters are challenging Tesco and the traditional supermarkets:
Source: HBR.ORG
UK readers may well notice one anomaly in the above image. One of the brands that has increased market share is not known for being a hard discounter – Waitrose, part of the John Lewis group and considered to be at the expensive end of supermarket shopping.
I suspect the chart demonstrates the other trend disrupting purchasing habits. Online food shopping with home delivery, including frozen and chilled foods. Waitrose was one of the first to target the market, investing 40% in the start-up Ocado back in 2001. Refrigerated food delivery vans with Ocado, Tesco and other branding are now familiar on the roads. But Ocado was the early leader and Waitrose had an exclusive deal with them until 2013.
This week, Gartner is hosting its annual US CIO Symposium in Florida, Orlando. A regular feature of the conference is the ’10 Predictions’ session. This year, digital marketing and selling is taking centre stage, including the following:
- By 2016, $2.5 billion in online shopping will be performed exclusively by mobile digital assistants
- By 2016, 70% of successful digital business models will rely on deliberately unstable processes designed to shift as customer needs shift
- By 2017, US customers’ mobile engagement behaviour will drive US mobile commerce revenue to 50% of US digital commerce revenue
- By 2017, nearly 20% of durable goods e-tailers will utilise 3D printing to create personalised product offerings
- By 2017, more than half of consumer product and service R&D investments will be redirected to customer experience innovations
- By 2018, retail businesses that utilise targeted messaging and internal positioning will see a 20% increase in customer visits
- By 2018, the total cost of ownership for business operations will be reduced by 30% due to widespread adoption of smart machines and industrialised services
There are no real shocks in that list. But the emphasis demonstrates a familiar pattern. Business processes that have been successful in the past are not always well suited to the future. The predictions suggest further moves to the extremes. Efficiency gains from cloud computing and Internet-connected devices further lowering costs. Personalisation and mobility leading to higher quality / customer satisfaction (and expectation). For those who dare to move away from their stable of generic design, production and marketing.
References
- Why Tesco’s strengths are no longer good enough – HBR.org, Oct 2014
- Ocado signs £170m deal with Morrisons – Channel4.com, May 2013
- Gartner reveals top predictions for 2015 and beyond, Oct 2014
Featured image: ‘Slowly soaking to death‘ kindly shared on Flickr by Leon Rice-Whetton
Joining Dots 