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"What can be digitized, will be digitized"

                                         - Unknown

All of us know and realize the online retail business is growing much faster than bricks and mortar retail business. The current generation of college kids are much more comfortable buying online than in a physical store.

Now, if you look at about 5-7 years in the future, when these teenagers will start earning, can you guess where they will be spending their money?

What effect does this have on the large format retailers like Walmart or Carrefour? These retailers will find it more and more difficult to maintain their profitability and growth. The metrics they use today to define success will no longer be a window to success. They will need to re-imagine how they do business.

In  my opinion, one of the following will prove to be the business model that could work in the future:

  • Re-focus the business to become a leader in a chosen category online. This will not be easy as the very fundamentals of their business will need to be re-thought. Strengths (like supply chain efficiencies, etc) are no longer enough to differentiate themselves. The core skills needed for success in this brave new world is about technology and great customer focus. They would then be competing against the likes of and
  • Re-imagine the business model, move towards smaller formats. Provide an extremely personal customer experience and become much more niche.
  • Continue to run the business "as is" but focus on using technology (big data, analytics, predictive analytics, etc) to enable all decisions. These are the businesses, that will need to run their businesses in real-time. SAP and its array of products can help these sets of customers to become capable of running their businesses in real time.
  • Go out of business just like so many book stores have gone out of business due to the amazing success of

Out of all the above options, there is one common pattern.

The only result that a business can get by running business as usual is to go out of business. Every other option requires the retailers to re-think their business models, work out their strengths and pick their battles and fundamentally change the way they run their busineses.

The other option that I have not mentioned above is an option that requires someone to think really long term. The idea is that retailers should start promoting the concepts like the ones that Kent Larson talks about in his TEDx talk called "Designing Responsive Cities".

Such cities will enable the retailers to be close to where their customers live and can then become the places where people meet socially and connect with one another, and by-the-way shop at the stores as they are already there.

I don't expect retailers to be serious about such long term concepts and promote them. However, they should keep such ideas on their radar so that they can move fast and support such initiatives when needed.

I hope retailers have taken a long, hard look at these trends and are thinking about the future of their businesses.