As digital disruption ramps up across industries, is the hype of pure play digital shopping over?
In recent months, Australians have witnessed cracks in pure play digital disruptor The Iconic’s business model. Despite revenues of $30.6 million between August 2011 and December 2012, it made a loss of over $44.7 million according to Fairfax.
Shoes of Prey has gone analogue by opening up a physical retail presence in David Jones, and digital disintermediator StyleTread has been sold by its founders to bricks-and-mortar retail behemoths the Munro family. While digital players are blamed for the poor sales of Australian retailers, and more broadly with the demise of incumbents like Kodak, Blockbusters, and Angus and Robertson, the initial hype of digital retailing may be over. It seems digital players are turning to the analogue world of physical retail to connect with customers - both locally and globally.
In China, the online retailer TaoBao has "special" TaoBao girls running physical deliveries for its digital sales, PayPal has opened up analogue window-shopping in Singapore’s subways, and eBay has launched bricks-and-mortar pop-up shops in New York City and London. It seems these pure play digital disruptors are starting to wear their digital hearts on their increasingly analogue sleeves to win the hearts and minds of tomorrow’s customers.
What does this mean for consumers in the context of digital disruption?
The essence of digital disruption is this: everything that can be digitised will be digitised. This has enormous consequences for the nature of work, productivity, and communications. The question is whether work or its output can be reduced from the physical, analogue world to a set of digital 1s and 0s.
Digital disruption has already obliterated or upended industry incumbents whose informational work and output could be shifted from the analogue world to the digital world: think music, entertainment, banking, retail and publishing. The digital world democratises and lowers barriers to entry for start-ups, yet it has also creatively destroyed old modes of operations in an exponential fashion.
Because of digitisation, we are now online, interlinked and hyperconnected 24/7. Increasingly we do our due diligence — both as consumers and professional procurers — digitally. We shop, compare prices, check reviews, and make rational choices in the digital world. For example, for many consumers, Spotify represents a rational mode of renting access to music over the more costly alternative of owning a physical delivery mode containing the same information of tunes. Our rational minds have gone digital.
But at the same time, consumers also seek analogue experiences, which is being recognised by pure play digital disruptors. It may be that the analogue, physical alarm clock is now a digital service on our smartphones, but many consumers still enjoy wearing an analogue, physical watch — largely for sentimental reasons. In a sense, we wear our analogue hearts on our physical sleeves.
While mp3 downloads or Spotify streams might be convenient, nobody really remembers their first download. Vinyl, on the other hand, is forever. This goes a long way in explaining why vinyl sales are growing at double digits both in Australia and in the US in a fast-paced world of digitisation, or why Shoes of Prey needs a physical presence in David Jones.
For businesses, this means that the way products and services are delivered needs to provide informational value to customers’ increasingly digital minds, as well as connecting experientially with their analogue hearts. Take Apple: when its digital and high-tech counterparts digitised their delivery model (think Dell’s mass customisation), Apple decided that it would digitise customer touch points (FAQs, iTunes downloads, App store, iBooks), as well as capturing the analogue hearts of their customers through concept stores, the physical Geniuses, high-touch workshops and coaching in-store.
In the rush to innovate, business leaders need to remember not to throw the analogue baby away with the digital bathwater. The digital world holds great promise, but businesses need human customers and human capital to come with them on the journey to greater effectiveness and productivity. Businesses need to create products and services that will win the digital minds and analogue hearts of tomorrow’s customers.
Anders Sorman-Nilsson is a global futurist, innovation strategist, keynote speaker at TEDx and author of new book, “Digilogue: How to Win the Digital Minds and Analogue Hearts of Tomorrow’s Customer.”