How far will we take the platform economy?
Platforms are becoming increasingly used for everything, including communication, shopping, and work. Especially because of the pandemic, much of people’s shopping habits have moved online. So, are we leaving behind shopping in person and moving fully onto platforms?
Seems like utilizing these online platforms for shopping has positive effects for both the consumer and the producer. By being online, the supplier is able to take advantage of the long tail and offer a large selection. This also decreases the cost of stocking, as there will be no need to keep lots of stock in multiple retail locations, rather just a few centralized warehouses used for distribution. Even if there were multiple distribution locations, these would still be less costly than retail stores, which need to be in optimal locations, and have lots of excess space for the shopping experience.
The customers will also be able to have access to more products online, and more sizes. Moving to platforms would also decrease the personnel cost needed to run in person stores. Warehouses can be more easily automated, and there is no need to have employees dedicated to customer service in warehouses like is needed in in person retail stores.
In addition, the shopping experience has the chance to become more personal. The online platform gives the opportunity for personalized recommendations. Especially if all shopping is done online, the websites can be completely tailored to individual consumers, in the same way social media pages are.
But will online platforms be the death of retail? In person retail probably won’t die but we might just see a huge transformation.
A possible evolution of the retail store is to become a showroom. The stores will carry a piece of each item in each size, but these cannot be purchased from the store, they will merely be a showroom. If you want to make a purchase, you can then move onto the online platform. A little bit like an IKEA, but without the warehouse in the end.
The retail experience will be less about shopping immediately, and more about service and exploring. The online environment is the perfect place for low-cost, long tail strategies that are not replicable in store. The retail environment therefore will become hybridized between online and offline.
Hi Jutta,
Thanks for you blog contribution.
I share your opinion that E-commerce is going to change a lot in the retail sector. I think COVID-19 was a big catalyst to enhance this proces. In my opinion, the digitalisation of retailing is starving out city centers, which is a pitty. Therefore, I hope like you said about Ikea that instead physical shops will reinnovate and still be there. As a result, the city centers will still be alive in the coming ten years. However, I also agree that online shopping has a lot of benefits of which I am also a fan. Thanks again for your blog.
Kind regards,
Paulo Bos
Nice post Jutta! I completely agree that an online platform strategy offers various advantages for customers as well as retailers. I would like to add an – in my opinion – very important benefit of this strategy for retailers. Following a platform strategy allows companies like Zalando not only to reduce cost but also to gather strategic insights regarding their assortments. As they have access to all the data of third-party sales on their platform they can use this information to strategically optimize their assortment. It is a great way to spot trends early on and identify new brands that they otherwise might have rejected a direct partnership with. By taking the third-party bestseller brands and items into their wholesale assortment they can widen their assortment without taking big risks. So the benefit of additional sales data and strategic assortment steering could be another driver for retailers to follow an online platform strategy compared to a brick-and-mortar or simple online distribution.
Fairly agree to the article. In my opinion the traditional “brick and mortar” popularity has exponentially declined in terms of profitability and perspective since the beginning of the 21st century. The growth in E-commerce, including the creation of oligopolistic markets, i.a. Amazon, Shopify, Alibaba), has benefited from the democratization of online trade, as well as the digitalization within several supply chains of all kinds of sectors. Among others, the main drivers are 1. The ease of access to new markets, 2. reduced overhead costs, 3. the benefit of customer intelligence including new sources of information and revenues, and finally 4. the ability to flexibly adapt to new environmental and economic shifts. The last point could e.g. refer to the latest COVID-19 crisis. The new definition of socialising and working has given online-retailers opportunities. Work-from-home will define the future for many companies worldwide. Further, there is a massive shift from urban to rural living, regarding the residential pricing. Such key facts create a high demand in online retailing and the way commerce will move on. Hence, a hybrid retail environment will persist, yet the offline component will decrease to a certain point.