When digital retail giant Amazon announced its plans to open as many as 400 brick-and-mortar bookstores earlier this year, the news might have been met with some skepticism—after all, this is a company that is infamous for destroying the physical retail market for books in particular. But Amazon’s decision is an example of a company knowing how and when to revise its business model for continued success.
While digital-born companies such as Amazon may be known for disrupting various industries, traditional retailers are also taking measures to update their business models for the digital age. One example is discount retailer Target, which is “one of the most digitally sophisticated retailers in the physical retail business,” despite “many years of missing the digital opportunity,” says James McQuivey, vice president and principal analyst serving CMO professionals at Forrester. McQuivey attributes Target’s success to its Cartwheel app, which enables customers to use their smartphones to scan any item in the store and find out if there is a coupon available for that item. If there is, the customer logs that coupon in to the Cartwheel app. If there isn’t a coupon available for that specific item but a coupon for a related item from another brand is available, Cartwheel will notify the customer.
According to McQuivey, Target isn’t simply getting people in its stores and driving promotions and purchases via Cartwheel—the app also satisfies Target’s brand partners. Cartwheel provides coupons to the specific customer that a brand cares most about, at the exact moment that that customer is most able to take advantage of an available promotion: while he is in the store. “It gives their brand partners a better experience as well,” McQuivey says.
Both digital-born companies and traditional retailers are facing significant challenges today. But while the approaches they take to improve their business models may differ, their end goals are largely the same, regardless of the medium they started in.
One of the major advantages digital-born companies have when starting out is that they don’t have long-standing cultures and processes that need to be adapted for the digital age—according to McQuivey, they have “incredible agility” and can “essentially choose what their culture looks like.” But unless they carefully craft their culture, many of these companies will find that they’ve unintentionally developed one after being in business for a few years—and the culture they’ve ended up with may not be to their advantage.
“If they haven’t been deliberate about it, their culture suddenly becomes its own entity, and it backfires…I think most of them didn’t think they’d ever have to pay attention to culture: They kept saying, ‘We’re a start-up, we’re a start-up, we’re a start-up.’ And then fifteen years in, they’re not a start-up anymore, and they have not attended to the culture issues,” McQuivey says. For example, digital-born companies might find that they lack diversity in ethnicity or age, and haven’t made efforts to attract employees from various backgrounds. “That culture issue has caught up with a lot of these companies, which is interesting because even though they already have a very strong bias towards action and disruption, they’ve so far been very good at disrupting other people, and haven’t paid as much attention to what it takes to change or disrupt themselves,” McQuivey adds. He cites Sheryl Sandberg, chief operating officer at Facebook, as an example of an executive who is working on changing the culture of her company and making it operationally sound, not just inspirational—an essential measure that he says many digital-born companies never take.
In addition, digital-born companies—particularly those in the retail space—may find themselves having to confront the fact that customers use multiple touch points. “One of the challenges [digital-born retailers] are finding is while e-commerce continues to explode at double-digit rates, the customer journey—even for the Millennials—is still going through multiple touch points,” says Michael Klein, director of industry strategy for retail, travel, and hospitality at Adobe. “The consumer wants to be not only online, but also wants to be in the physical space—maybe not as much as they used to, but they’re still utilizing brick-and-mortar [stores],” he says. To deliver the experience the customer expects, Klein says, companies need to integrate all customer touch points by incorporating policies such as “buy online, return in store” and enabling customers to utilize their devices in-store to find out additional product information.