Retail going back to corner store era — with an online twist

With the smartphone becoming the integral part in daily decision making, including access to shopping, it is little surprise that there is fragmentation taking place.

This presents a Herculean challenge for retail giants, as boutique outfits proliferate to capitalise on the customised needs of the customer.

On the other hand, the boutiques themselves face constant attack from new entrants as barriers to entry become increasing lower in the digital storefront. With the availability of low-cost smartphones, and increasingly attractive data plans, these merchants have moved nimbly to engage and interact with their customer in increasingly innovative ways.

The concept of commerce using the social media tool box takes us back to the origins of retail, to an era where merchants knew their customers well, and developed an interactive personalised experience with them. Size mattered less than the overall customer experience.

And for the merchant, it was more about return on equity rather than growth.

This return to small commerce on the industry level is a return to basics, as investors start focusing on the bottomline. For the merchant, it allows for an increasingly focused relationship using data as a means of reaching the customer through increasingly personalised messages.

In Dubai, as well as in other developed markets, this is increasingly becoming the case, as merchants can now analyse what purchases are being made through which device, the frequency of purchases, time of purchase, method of payment, average ticket size, as well as the success of personalised promotion packages.

Using data to predict needs

Unsurprisingly, what we see emerging are a plethora of bespoke websites that cater not only to specialised products, but also various price points, as the market reach potential becomes increasingly customised. Not only has there been an explosion in ethnic-based websites, we have also seen the move towards product-based specialisation, including but not limited to, intimate apparel, pet grooming, specialised books, photography courses, and even sites that combine all the above in a bundle that makes the sum of the parts cheaper than buying them individually.

Increasingly, these bundles are what have defined the mid-income category consumer.

Most, if not all, of the merchants are using the data from social media platforms, as well as the data generated by users on their websites, to predict customer buying needs. This data becomes far “richer” in a social media context, where customer interaction across various demographics is used to glean customer preferences.

It is these experiments with data that yield interesting patterns of customer behaviour. For example we have seen customers in our store have a preference for ath-leisure alongside their purchases for phone covers.

These sorts of counter intuitive “combos” would never have been possible in the traditional retail model; nor is it scalable for the larger giants to pursue.

It only works with boutique outfits, and the definition of retail in the social media platform has been re-written to include exactly these sorts of preferences such that they can be monetised.

A further trend that is healthy has finally entered the ecosystem; that of retail profitability. In Dubai, we have seen a number of smaller online merchants set up … as well as shut down.

This is typical in newly developing markets. What we are also seeing is an increased focus on the bottom-line trends. This is what is causing some of the smaller players to merge and/or close down as capital becomes more expensive and return on capital becomes paramount.

Good news

This evolution is healthy; in fast changing market places, the rise of boutique outfits oftentimes spells a bubble as capital becomes readily available for experimentation and profitability concerns become compromised. Happily, this trend is now changing in Dubai.

On the one hand we await the arrival of another mega e-commerce player and on the other we see the proliferation of bespoke set-ups where consolidation and merger activity is starting to take place. In the coming year or so, there will be more of the same at an accelerated rate.

What is good news is that as far as the customer is concerned, there will be more choice at lower prices, as the retail industry continues to reinvent itself in the digital age.

The writer is head of digital operations at GCP Group.