Traditional added value in retail implies two things: only retail can truly close the gap between Manufacturer and Consumer – for example by providing advise on a wide and/or deep product range – and during a purchase, product, information and transaction (largely) coincide.
E-commerce on the other hand is essentially based on digital added value and implies, the distance and time are irrelevant for the information and transaction. Instead of having inventory, service or personnel, outstanding processes need to be developed and monitored – but not necessarily "possessed" or provided by the actual company.
If these two commercial forms are so different, are all multi-, cross- and omnichannel fantasies unfounded? Is traditional retail in fact unknowingly dead and beyond remedy?
"Local proximity doesn’t justify price mark-ups"
Proximity is very relevant in process thinking of digital intermediaries
Not if it reverses the starting point: when looking at e-commerce not before the trade level and old value added, but when interpreting its local, stationary and outdated position between manufacturer and consumer before e-commerce. If it becomes an intermediary.
Local proximity is no longer enough as a value to justify product limits and mark-ups at any time. But "proximity" continues to be very relevant in process thinking of digital intermediaries. This applies to optimising search engine performance, and shows in cooperative delivery structures, where stationary retailers accept and "process" orders from e-commerce – as part of the above integrated commercial processes. It’s less about intralogistics (inventory management) than retail distribution.
In this sense it’s a common misconception that an e-commerce company which opens a shop becomes a multichannel provider, thus part of the retail value-added model. It may be true that the actual retail store partly falls under a traditional model, but the overall structure is fully included in leading digital e-commerce processes. The retail store allows additional connections but nowadays is no longer considered an actual value.
Stores become showrooms
The store is further not important for the business model, which is aligned with direct supply (for example by picking from a main warehouse, transaction before product transfer, etc.). In any case, the store can offer a better digital process. After all, the product is on site, the customer has an urgent need, the credit rating or the customer status require prepayment or cash on delivery. This allows the store to stage their products better, thus allowing additional and greater information value added. But then it’s rather a showroom than a retail store. This is now fact.
Vice versa, a multichannel retailer can develop its own digital added value in form of backward integration in e-commerce models. Let’s use "fashion" as an example. A local retailer could thwart debasement of the local presence with a strong digital offering: Instead of selecting the house tailor, tailoring jobs are placed online, to different contracted tailor’s shop connected via IT platform so the item can be sewn the same day.
The value-creation functions have a data foundation. They move within an IT-based infrastructure "end-to-end" (E2) between manufacturing and consumer, with a flexible process design and on the customer end controlled from the endpoint.
To develop digital added value models for "new retail", you first need to dismiss the traditional added value model, retail. E-commerce is not part of a traditional trade level.