Strengthening the retail ecosystem with new types of data-driven services
Fredrik Hammargården, Co-founder & Head of Commercialization at Indivd
Physical stores are facing a fateful choice. To survive in competition with e-commerce, physical stores must become more data-driven. Retailers need to have more resources in R&D and cutting-edge expertise in data analysis. That is why we are now supplementing our offer with completely new types of services that will provide increased opportunities to use data-driven resources in their operations, says Fredrik Hammargården, Head of commercialization at Indivd.
E-commerce has now reached a level in Sweden, where it is the largest growth engine for retail as a whole. A recent report, provided by the organization Svensk Handel, states that physical retail is now on the verge of having major profitability problems due to the competition with e-commerce.
This directly affects the retail companies’ operating margins when they are forced to compete against huge global companies which have advantages such as economies of scale and power over price.
– It will therefore be necessary for retailers to act proactively towards a more digital business model, says Fredrik Hammargården, commercial manager at Indivd.
11,000 retail stores are at the risk of being closed down
Digitalization is hitting the retail stores the hardest, every tenth store having been forced to close during the last six years. This corresponds to a total of 5,000 stores, ie every tenth store in Sweden. The number of grocery stores has also decreased.
At the same time, during the same period, the number of e-commerce companies increased by 5,000, which corresponds to almost a doubling.
In the same report, Svensk Handel fears that by the year 2025, another 11,000 retail stores are at the risk of being closed down and with them, 41,000 employees will be terminated.
Retail must become increasingly data-driven
Digitalization affects all parts of the value chain. In order to compete, retail must become more data-driven and digitally mature. The problem is that physical retailer is ill-prepared for this digital transition.
According to Svensk Handel, 75% of the industry still has a long way to go on their digitalization journeys. As a whole, retail is far behind many other sectors, especially in comparison with the markets for games, travel, film, and music.
Particularly vulnerable are older companies, which are often more invested in traditional retail and poorly adapted to modern retailing. And once they invest, the investments are strategically misdirected and poorly thought out.
According to Svensk Handel, traditional retailers who are under the pressure of ending up in self-oriented behavior where they implement technical solutions as a jack to lift their existing business and save their current store structures rather than delivering services that customers demand.
Improving the ecosystem with new types of data-driven services
The physical stores must become more data-driven if they are to survive the competition. Svensk Handel, therefore, wants to see increased investments in digital cutting-edge expertise. The proportion of highly educated people is significantly lower in physical retail compared with e-commerce. This means that the growth of e-commerce requires other types of skills among staff.
– As retail becomes more digitalized, there will be a need for increased cutting-edge expertise in, above all, data management and data analysis, says Fredrik Hammargården.
More research and development will also be needed. Last year, Amazon alone spent just over $ 16 billion on R&D.
– Therefore, Indivd now complementing its offer of anonymized insights to retail companies with a series of new types of data-driven services to strengthen the ecosystem surrounding physical retail. This will provide increased opportunities to use data-driven resources in their operations, concludes Fredrik Hammargården.