Reimagining Retail-as-a-Service in the Digital Economy 

Brand authenticity and reputation are more critical than ever in today’s digital economy. While customer experience has always been a factor in the retail equation, the shift to consumer-centric planning has transformed retail’s business model and separated the successful retailers from the rest of the pack.

Capitalizing on customer preferences and enhancing shopping experiences are vital for continued operational success, and the most successful customer experience-centered business models prioritize simplicity and effectiveness. In fact, a Global Brand Simplicity Index study found that 70 percent of consumers are more likely to recommend a particular brand due to simple experiences and unified communications across all channels.

As digital communities of potential customers continue to connect on social media and mobile platforms, the rise of the subscription-based retail model poses a significant obstacle for traditional retailers. For continued success in consumer engagement, retailers need to reimagine their business models by shifting their focus from products to outcomes.

Rise of Subscription-Based Retail
A survey by The Economist Intelligence Unit found that 81 percent of millennials use their mobile device as their main purchasing channel. The same study found that the 51 percent of consumers who do not currently use mobile devices for shopping believe they will in the future.

Businesses recognize this pattern, and subscription-based retail has emerged to target users who prefer mobile and desktop interactions over traditional brick-and-mortar visits. Companies like Trunk Club, Amazon Subscribe and Stitch Fix are identifying — with increasing accuracy — their ideal customers and how best to engage them for future purchases. These retail-on-demand models connect the right products and experiences at the right time during a shopper’s path to purchase.

The basis for these models is prioritizing relationships over transactions. With subscription-based retail, consumers identify products used regularly, and these products are then replenished automatically at the time they’re needed. This on-demand connection with consumers has disrupted the flow of both retail and consumer products.

For example, the process of shaving has been transformed by a myriad of active, subscription-based services enticing their customers through regular replenishment and online convenience. These models prioritize convenience for buying additional razor blades, forcing some traditional suppliers to take notice of this emerging, outcome-based system that replaces visits to a physical store.

By investing in consumer insights and creatively using technology, retailers can focus on identifying and delivering unique outcomes rather than specific products — enhancing the customer experience and increasing brand loyalty.

Traditional Retail in a Nontraditional Economy
The move to an outcome-based economy necessitates a transformation in retailers’ business models. Even though consumer preferences and purchasing methods have changed, some retailers have not.

How do brick-and-mortar operations compete with on-demand replenishments while maintaining their traditional customer base? A strategy that continues to tempt retailers is to lower their prices and hope that shoppers will abandon these newer models. While price is certainly a significant factor for most consumers, a 2014 Global Business Barometer Index from American Express found that 68 percent of consumers are willing to pay more for an item if they receive an improved purchasing experience.

Creating a 360-degree view of the ideal customer provides traditional retailers with shopping history and consumer preferences. By tailoring a unique, multichannel shopping experience, retailers can move beyond their brick-and-mortar operations and connect with consumers’ online digital channels. Retailers can transform traditional retail into retail-as-a-service to provide the products customers want — when and how they want them.

Achim Schneider is the global head, SAP Retail Industry Business Unit.