What we learnt at the Internet Conference 2016
The 10th annual Internet Conference (formerly PeSA and soon to be known as Retail Global) wrapped up on the Gold Coast last month. Here are the Internet Retailing team’s top takeaways from the event.
Mobile is everybody’s top priority
On the opening afternoon of the conference, Vicki Cantrell talked about the retail reality in the US, challenges US retailers are facing and what’s trending. Cantrell is the senior vice president communities and executive director, Shop.org and the National Retail Federation, the industry body and advocacy group for US retailers.
“Mobile is everyone’s top priority and mobile continues to be everyone’s top priority,” Cantrell said. Although the conversion rate on mobile is still relatively low, retailers are busy working out how they can engage shoppers on their devices. Retailers are taking a ‘small screen first’ approach to everything they do to capitalise on the number of shoppers using mobile for research or inspiration to drive them into stores, Cantrell said.
“The consumer is not doing one big dedicating shopping trip or one big dedicated shopping experience,” Cantrell said. “What shopping is now is snippets all day long. They are searching and looking for something while they are standing in line at store. There is lots of little fragmented mobile activity and you have to think about how the consumer is doing things differently. This is why retailers have to adopt a small screen first approach. Is it a great experience on the small screen?”
Amazon is prepared to disrupt itself — you should be too
It’s not a retail event until someone brings up Amazon and Cantrell reminded the audience why. Not only is it tough to keep up with in terms of fulfilment, but Amazon also makes up 60 per cent of the total online sales growth in the Unites States.
“Amazon is a huge part of everyone’s threat level. It is the number one threat to other retailers,” she said.
“They are highly profitable, even though everyone thinks they are not profitable and where they are profitable is in their third-party sellers which is not reported necessarily.”
Cantrell put this success down to Amazon’s readiness to disrupt its own business and urged other retailers to do the same.
Channel conflict between suppliers and retailers is fading
Brands, or suppliers, selling direct to customers has had a major impact on retail over the last decade.
“For a while it was all about the channel conflict — the retailers were upset if the brands started to sell their own product because they would lose market share,” Cantrell said. “It is less about that now, they seem to have resolved the fact that channel conflict is a problem because the more you sell, the better for everybody.”
Instead what brands selling direct now struggle with is operations — changing the model from delivering palettes to delivering units to end customers — and sharing information.
“Operationally, these brands don’t necessarily know how to go direct to consumer and they have to hire in the talent to be able to figure that out,” Cantrell said.
“There is a customer for Nike and that customer is across the buying chain in many different ways. How do you get a total picture of the customer?”
Finding the right talent is tough
As retailers need new skills and to break down silos, attracting the right talent and changing internal culture will be key.
“In 2020 and 2030 the retail organisation is not going to look the same,” Cantrell said. The challenge for retailers is: how do you have the organisation completely understand what ‘customer first’ means and make that transition part of the DNA of the organisation? Cantrell said, taking a broad approach to restructuring organisations, all roles belong in one of four areas: customer experience, brand, operations and administration.
Cyber security is a big problem
“Retail is a big target for hackers,” Cantrell said, highlighting a trend away from hackers targeting credit card data because it’s a “once and done thing” to going after supply chain data.
Sometimes you have to build it first
As both Booktopia and Kogan prepare to go public, founders and CEOs Tony Nash and Ruslan Kogan shared their advice for dealing with investors. Both highlighted the need to show investors what you have built beyond a good-looking website.
It was important to build a strong case to present to the investor community before embarking on the IPO process Nash said, which included strong financials and a track record of acquisitions. Nash said Booktopia could have gone to market while still operating from a 4000sqm premises in Lane Cove but chose to wait and make the move to a 10,000sqm DC.
“Sometimes when it comes to investors, if you are looking for funding, you actually need to build it first… so they get it,” Nash said.
Kogan put it a little more bluntly.
“The problem when investor markets start to look at online retail is everyone looks the same,” Kogan said. “One thing that has stayed constant for hundreds of years before e-commerce came along is: a good business is a good business and a shit business is a shit business.”
Kogan argued that the health of a bricks and mortar business can be determined by walking into a store, while what makes online retail successful happens out of sight. “In bricks and mortar you can often easily see it by walking into a store, in online retail it’s a different ball game,” he said.
“You go to an online retailer and everybody’s website looks pretty, whether you’re a good business or a bad business, making a pretty website isn’t difficult at all. Getting it to work well at the back end, that’s a different ball game.”
Merchandising automation is increasingly important
Jon Bovard, digital advisor and consultant, highlighted the importance of merchandising automation to put the right product in front of online shoppers to increase conversion.
“On any e-commerce site these days, the average punter looks at less than 1 per cent of the inventory. So they are looking at less than 1 per cent of the products and they are making a purchase decision. I think that’s quite terrifying… we better be damn sure as retailers it’s the right 1 per cent,” Bovard said.
During the conference, Ruslan Kogan also talked up his company’s investment in algorithmic predictions engines, which serve shoppers the most relevant items from its inventory, as well as automating its fulfilment processes to get items to customers more quickly.
Hard work pays off
At a gala dinner at Movie World to celebrate 10 years of The Internet Conference, industry veteran Nathan Huppatz was awarded the Retail Global Industry Excellence Award.
Let’s talk about ‘Cybrids’
Futurists and husband and wife team, Erica Orange and Jared Weiner of The Future Hunters, discussed the generation which comes after Gen Y/Millennials, dubbing them ‘Cybrids.’ Born after 1996, this cohort is now turning 20 years old and are an increasingly important demographic for retailers to understand.
“We call them cyber-hybrids because they have a fully symbiotic relationship with technology from the moment they are born,” Orange said. “Everything around them is dictated by technology. They are not just digital natives, they learn differently, work differently, shop differently and socialise differently because of technology.”
Key characteristics of Cybrids:
- They are well educated but place less value on higher education,
- They are collaborative, inclusive and entrepreneurial,
- They are financially prudent and eager to build a better planet,
- They have decreased brand loyalty and shifting purchasing habits,
- They expect brands to use sophisticated technology but they do not want to be tracked and they want to retain control over their own data.
Othersourcing will become the new outsourcing
According to Weiner and Orange the future is increasingly going to be about ‘othersourcing’ — the migration of human labour “to what we call non-carbon lifeforms” eg smart systems, algorithms and robots.
“It is going to change the whole nature of the logistics and transportation industry, but also the entire supply chain,” they said.
Purchasing decisions in the future will be dictated by non-humans, increasingly be data driven and sensor driven. Imagine a ‘smart’ refrigerator purchasing milk or a ‘smart’ wardrobe buying apparel to complete an existing outfit. ‘Smart’ being shorthand for an object connected to the internet.
“Smart systems are going to be auto-purchasing items, disintermediating humans from the equation entirely,” Weiner said. “Some people find this scary. I happen to think if done properly this could actually be very exciting.”
Design thinking will become essential to organisations
Traditionally design folks were once on periphery of an organisation, tapped for solution of creative problems that came up but not given true leadership positions. “That is going to change. Design is underpinning everything,” Weiner said.
Design is now highly valued and leveraged for marketplace differentiation, Weiner said, emphasising that design relates to the design of services and experiences, as well as the design of physical products.
“Design thinking is becoming one of the most important executive competencies of the future and we can’t highlight this enough,” Weiner said. “I would argue that in a few years time it will be just as important for an executive or CEO of a company to have a design thinking background or some sort of a design background or related-discipline as it would be for them to have their masters of business administration. If you had told people this 10 or 15 years ago they would have thought you were crazy.”
There’s a difference between innovation and imagination
The Future Hunters wrapped up their presentation with a quote attributed to Henry Ford: “If I had asked people what they wanted, they would have said faster horses.”
“Innovation is the faster horse… Innovation is often just straight-line extrapolation based on what it is that we know,” Orange said. “But true imagination is the car. That is what completely disrupts everything and that’s why we need to think in terms of imagination. Often times we just think in terms of what we know, when rather we can leapfrog so much of what we know and create an entirely different future.”
The Internet Conference will be back in 2017, rebranded as Retail Global Gold Coast.