THE EXPANSION of distribution channels to physically cater to shoppers in front of their homes, along with enhancing Big Data analysis to capture purchasing behaviour of individual shoppers, have recently emerged as two major new strategies by major retailers.
Controversy has followed as major retailers struggle to increase sales and market share, including by violating consumer’s lives in search of insight into their lifestyles.
Kiatanantha Lounkaew, a lecturer at the Faculty of Economics, Thammasat University, said that the 4.0 era wave is sweeping through the retail business landscape in Thailand. He pointed to two recent notable examples – Big C’s experimental mobile retail truck and the takeover of tarad.com by TCC Group, a parent company of Thai Beverage (ThaiBev) and also owner of Big C Supercenter.
“What underlies strategic moves of these two players is what I call “Walton 4.0”. While both of them seem to have different business moves, they possess the same strategic motive, which is what I call “Walton 4.0”. Sam Walton created Walmart based on three essential pillars. The first pillar is integrated logistics, which integrated small towns into one big market for Walmart. Such integration allows Walmart to enjoy greater negotiating power over product suppliers. The second pillar is store-level timely records of sales and inventory which are stored centrally. The last pillar is the use of purchase and inventory information to centrally plan its logistics routes nationwide so as to minimise cost and to maximise sales. But these were things taking place some 60 years ago.”
Kiatanantha said that what is seen today is the upgraded version of Sam’s brainchild. Big C’s retail truck benefits from the company’s formidable market power over its suppliers. Thus, products can be offered to meet local demands at a lower cost. In addition, the integrated digital back office permits the use of sales data to make predictive analysis on what kind of products should be offered at each locality. This is where “Big Data” comes in handy. With Big C megastores serving as distribution nodes, logistics costs can be minimised.
Thus, in a world where consumers increasingly do their shopping virtually, Big C’s move to this market is not only logical, it is inevitable, said Kiatanantha. Offering products door-to-door is the only way to compete with the convenience offered by online shopping. This is exactly what Sam Walton would to do to his Walmart stores if he were still the CEO.
Kiatanantha said that strategic reorientation of tarad.com is of a similar spirit. Its 6E strategy is comprised of:
lE-commerce, which encourages its customers to expand their business to other online platforms and make use of Big Data to optimise its business opportunities in a timely fashion;
lE-marketplace, which uses its website as the point of sales;
lE-marketing, which uses social media platforms;
lE-payment through its partners;
lE-Logistics and warehousing to minimise delivery time and costs; and
lE-knowledge, which serves as a virtual training house for its customers.
By and large, the 6E is another version of Walmart 4.0.
“Over the next three years, competition in retail business will intensify significantly,” predicted Kiatanantha. “Big players will utilise digital prowess to gain advantage in terms of sales customisation and cost reduction. It doesn’t mean that smaller players are facing extinction. In contrast, digital technology can equip smaller players with greater agility and such agility enables them to avoid head-on fights with big ones. Those who will be crushed are the ones who believe in doing business as usual.”
Punyapon Tepprasit, chief executive of MVP Consultant, said that 2018’s trends of retail competition feature rapid change as the digital world impacts customer behaviour. Retailers must undergo a digital transformation as soon as possible. Today’s retailers are seeking the critical tools needed to support data collection and analysis at the customer and market levels.
Punyapon said that the solution with the best fit is “video analytics”. This technology captures a customer’s individual face and tracks their behaviour – or customer journey – by sharing between an organisation’s database and an online database in search of data insight that answers the question “who is he or she?”
The result from video analytics will surface patters of customer behaviour that can be applied to strategic decision-making.
It will also categorise look-alike customers into persona groups or targets. As more retailers conduct more in-depth analysis, they will better understand the customer pain point, which will in turn enable retailers to create value offers targeting individual customers.
“In conclusion, the competitive landscape of retail businesses is focused on deepening customer insights that lead to competitive advantage,” said Punyapon. “The next step is they will invest in technology infrastructure and analytic tools for generating the data to ‘value’ information.”