Platform businesses – the likes of YouTube or Airbnb – facilitate the flow of value in a multitude of directions. This is in sharp contrast to the typical retail model: a linear, one-dimensional flow of value from the manufacturer, to the wholesaler, distributor and retailer, and finally to consumer.
With platform thinking, this linear model is replaced by a three-dimensional approach to the ecosystem – where the retailer considers how it can harness the power of digital technologies to give customers, suppliers, partners and others the right tools to engage and exchange value.
In practice, what does this really mean?
Let’s look at a classic example of school wear, stationery and textbooks. For most parents, the beginning of the year is a mad scramble to assemble all the requirements that the schools ask of their learners.
With so many of these items ‘standardised’ for everyone, what’s stopping retailers from partnering with the major schools in the area, and preparing pre-bundled offerings that encompass everything the parent needs? This entire ‘basket’ could be queued up, paid for at the touch of a smartphone app, and readied for in-store delivery at the customer’s convenience.
Platform thinking asks what are the new stakeholders and role-players that can be ‘plugged into’ the retailers’ platform – such as a network of schools in this particular case.
For this new approach to gain traction, a retailer may well need to start integrating what has traditionally been a fractured landscape of disparate systems: the likes of transactional engines, loyalty programmes, store credit systems, debtor management, stock management, customer relationship management (CRM) and marketing tools.
By adopting a new breed of loose, decoupled middleware applications and micro-services, retailers can ‘glue together’ these systems to start exposing services to external third-parties in the ecosystem.
This also helps to build richer customer profiles, as the very heart of any good platform strategy must be the focus on getting to know customers better. To this end, new beacon technologies, facial recognition, geolocation and other technologies can help to better identify and understand customers.
In fact, by better understanding shopping habits retailers experience an important value-flow back from the customer. They know what they need to change (such as new items to stock) and position themselves to provide hyper-personalised services to customers.
In South Africa, ‘bricks-and-mortar’ retailers are still very much the predominant force in the market. While many local retailers have made concerted e-commerce efforts to serve customers online, there hasn’t generally been great orchestration between their physical and digital presences.
Platform business thinking represents a deepening of this digital journey – where it isn’t simply about taking the old linear model of retailing and ‘porting’ it into a digital space. Instead, retailers need to think differently about how they interact with their ecosystem.
From a technology vantage point, this requires that they ultimately move away from the traditional approach of building high-cost monolithic systems, in favour of more flexible architectures and interfaces that can adapt to ever-changing business and customer needs.
In our example, this means that schools have an easy way of on-boarding themselves with the retailer and creating their line-up of required clothes, stationery and books. This would trigger automatic engagements between the retailer and the relevant wholesalers, to ensure that the necessary stock is ordered.
With this in place, the retailer can automatically provide such a ‘pre-packaged’ offering to parents – saving them hours of hassles and gaining a key advantage over competitors that don’t have such advanced integrations into the (circular) value chain.
