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Competitive Strategy in a digital world

On behalf of : Rahul Bindlish

Multi-channel commerce is exploding and it is a no-brainer to have a digital presence and a digital strategy. Every retailer has one, or is in the process of defining one for its business. Most of them treat it as a marketing / channel strategy and it makes sense for many of them - with sales from mobile / ecommerce channel only a small % of the overall sales. For eg. the largest retailers - Walmart, Target, Kroger, Safeway, Home Depot, Lowes, etc. have only a small (low single digits) percentage of sales coming from the digital channels. However, there is a big risk with this - as retailers may not completely understand the impact of the digital strategy on their competitive positioning.

Developing the digital strategy through the lens of marketing / channel strategies alone is not sufficient. It is important for retailers to understand the trends in the industry, conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, evaluate their competitive positioning and develop a digital strategy that enhances their competitive positioning in the industry. A retailer may be a low cost / low price leader in the market, or it may be differentiating itself in the market place through its merchandize, service, etc. - its digital strategy has to enhance that positioning in the market place. Doing this will enable retailers to strengthen their business strategy and improve their sales and/or profitability compared to competition.

Amazon has changed the retail industry with its innovation in online experience for the shopper combined with a strong network of distribution centers and logistics to deliver goods as promised. Many retailers attempt to copy it. Instead they should look at doing things differently leveraging their strengths to enhance their competitive position. There are several examples of retailers doing this well. For eg. Nordstrom has extended the high level of service that it provides its customers in the store to its web by providing free shipping and free returns - always. My wife loves the ability to order a dresses that she likes on the web, and returning them to the nearest store if they are not as good as the image looks - with no questions asked. Target gives me the ability to check availability of items I am shopping online at the nearest store - giving me the convenience of getting it now rather than waiting - extending the promise of a better shopping experience.

Digital space will continue to evolve quickly, and unpredictably. It is important that retailers continue to innovate but in a manner that strengthens their competitive positioning, and brand in the market place. Those successful in doing this will be benefited by increasingly loyal customers, higher sales and greater profitability.

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