The dangers of digital shift...

The prospect of Jeff Bezos becoming a trillionaire is pretty mind-boggling at a human level. However, it also speaks to the dominance of Amazon and likely acceleration of that dominance as a result of the Covid-19 crisis.

All retailers are currently experiencing a huge digital shift in their channel mix right now. Once customers experience shopping online in a particular category, many of them are likely to stay there even when the shops open. Trouble is, most traditional retailers do not differentiate themselves online anywhere near as well as they can instore and customer promiscuity will quickly increase, especially if the same or similar products are offered on a platform like Amazon at better prices with a superior delivery / returns promise.

The other issue is that digital channels are often less profitable than stores, especially when returns are factored in. Channel profitability has shifted and the growth in digital has accelerated 3-5 years in as many months, without the associated productivity improvements you would normally see as a channel matures.

These issues have caused many retailers to step back and take a hard look at the fundamentals - why they exist, what is their relevance in the 'new normal' market place and how do they genuinely deliver that point of difference online without destroying the profitability of the business. Significant proposition changes, cost reduction and capability shifts are required to respond. It is time to accelerate transformation.