Collaboration is the new competition; it was back in 2013 that Harvard Business Review used this sentence to headline an article on how to drive large-scale social change through collaboration. Almost a decade later, the term is absolutely still valid when it comes to defining the status quo in the retail industry. Collaboration, along with the blurring of traditional industry conceptual barriers, is shaping retail new models for future growth.
Retail is becoming the battleground — and collaborative space — where traditional retailers, brands expanding their DTC forces, health services providers, hospitality players or financial institutions are melting networks and combining services to capture new revenue streams, while responding to people’s desire for deeper experiences with the brands they trust.
Here are some examples covering the spectrum of diversification, from a continuist perspective to more disruptive cases:
- In July 2021, John Lewis revealed plans to become a private landlord by building 10,000 new homes over the next 10 years on land currently used as car parks and above Waitrose supermarkets across the UK. Those who rent property from Lewis will be given the option to have it furnished with company products or to do it themselves.
- Ikea is selling renewable energy to households in Sweden, aiming to build the world’s biggest renewable energy movement, making electricity from sustainable sources universally accessible and affordable.
- With the rise of mental health concerns, the Walgreens Find Care program is offering virtual therapy sessions as well as physical appointments and online mental health screenings with teletherapy companies BetterHelp and Sanvello, through their partnership with Mental Health America. Walmart, which acquired MeMD in May 2021, is offering virtual mental health care in addition to its counseling services with Walmart Health. CVS’ partnership with Microsoft focused on developing innovative solutions to help consumers improve their health, while empowering over 300,000 CVS Health employees with tools to attend more than 100 million people.
- Expanded assortments, as in the case of Nordstrom partnering with an increasing number of brands, or new “couples” such as Petco Health and Wellness and Lowe’s partnering to open in-store pet shops at 15 locations.
- Supply chains and operations are also witnessing increasing acquisition or partnering moves with third-party delivery companies to better serve consumers. Last year, Carrefour and Uber announced the launch of a new rapid grocery delivery service in Paris via Uber Eats, from nine dark stores operated by Carrefour partner Cajoo.
Alliances with “new to the retail scene” partners can bring in freshness and completely new services to customers. Health and wellness service providers or educational players, for instance, will be highly courted. In these areas, the use of immersive technologies will create an interesting set of fully virtual or mixed services. Also, new agreements with local players known for their commitment to sustainability, local biodiversity or the wellbeing of local communities will represent a way to provide new services around micro-adventures or eco-friendly local tourism.
Partnerships with successful online brands that are struggling to turn a profit with their DTC channels are another interesting alternative. Many native digital brands are realizing the need to move offline and understand the value of the stores as marketing channels, to alleviate the high advertising costs associated with acquiring customers exclusively online. These partnerships can be derived to the retailer’s third party-managed or in-house marketplaces for those retailers opting for a marketplace strategy, and can also benefit from the synergies of the retailer media business.
Expansive private label strategies are an efficient mechanism to cover non-existent categories or respond to growing growth areas such as inclusive, multifunctional and sustainable cosmetics; immunity food and drink products as continued focus on illness prevention is boosting food market (CAGR of 8.2% from 2021 to 2028); vegan products; and blue zone-specific assortments, among others.
Equally important is the use of store space to animate traffic and increase square meter return by leveraging partnerships with diverse entertainment, technological or innovation players. As a source of inspiration, here are a few diverse examples with varying technological intensity, in keeping with the old retail motto of “knowing and serving”: Bosei Space in Shanghai; the hundreds of Hema supermarkets in China; the Carulla Freshmarket supermarkets in Colombia and Uruguay; and the Ukrainian Silpo supermarket chain.
Retailers will be shifting gears, finding creative ways to diversify that go beyond the borders of their business. No matter how intensely diversification is understood and executed, they will need to rethink, readjust and develop capabilities to incorporate these new sources of revenue in a controllable and ordered way. Some examples:
- Updating and expanding core data structures to support multiple products and services categories, diverse business partners and extended supply chain networks
- Enlarging integration capabilities to sustain additional inbound and outbound processes
- Redefining merchandising and channel strategies to reflect diverse positioning
- Adapting organizational structures, combining a focus on new channels/new services/new products with the implementation of cross-department, transversal and efficient workflows
- Reviewing P/L structures to collect wider contribution and profitability concepts
- Maintaining focus on increasing the efficiency of operations across the end-to-end value chain.
As business complexity grows, so does the need for flexible arrangements, sensing and forecasting capabilities, risk management processes and dynamic decision-making schemes. We will be witnessing more and diverse collaborations, alliances and partnerships and those that understand, prepare and transform their operating model for an agile diversification onboarding model will play better in the future context.
Miriam Molino Sánchez is Head of Global Retail Practice at Stibo Systems. She brings with her deep expertise in retail, with more than 25 years in the industry as a consultant serving retail corporations in multiple strategic and operational initiatives, including working for one of the biggest retail companies in Spain as it underwent a massive digital transformation. At Stibo Systems, Molino Sánchez is reinforcing the company focus and value orientation toward retail clients.