Alibaba was just two years old when SARS hit China in 2002. With hundreds of thousands of people opting to stay at home, the company spotted an opportunity.
Up to that point, Alibaba had been primarily a B2B service. Holed up in an apartment, a team of employees came up with the idea for Taobao, a direct-to-consumer e-commerce platform akin to Amazon. Taobao lasted a lot longer than the epidemic. Chinese consumers loved the convenience it offered and it’s now the biggest e-commerce site in the world.
The great thing about crises, from a business perspective, is that they drive fundamental changes in how consumers think and act. Companies know this. A recent survey by McKinsey found that 90% of executives across 200 organisations believe the current pandemic (and the recession that’s following) will have lasting impact on customers’ needs and behaviours.
Now is not the time for companies to play safe. Innovation is essential. The real question is: can you innovate quickly and accurately enough to capitalise on change and unlock growth?
Look at Tata’s Good Earth, a herbal tea and kombucha brand. Created in 1972, it was set for UK launch earlier this year. When COVID struck, Tata was forced to rip up its plans. The obvious solution was to delay introduction. But Global Head of Innovation, Liliana Caimacan, saw an opportunity to lean into the brand’s positioning around exploration and experimentation. Striking an innovative partnership with Sainsbury’s, the brand pivoted to social commerce and digital experiences. Its hand may have been forced; but by reinventing the rules of a very mainstream category, the brand has had great success in engaging consumers.
Where should retailers focus their innovation resources? I think there are three main areas:
This year has seen practically every business worldwide adjust its go-to-market strategy. An overwhelming majority are prioritising digital engagement across multiple forms.
The smartest are adapting their value propositions to deliver increased utility and gather fully opted-in first party data. As the cookie crumbles into extinction, they understand the value of having direct knowledge of and access to customers.
Take adidas. In 2017, it expanded its digital presence with an experience-led app tailored to individuals’ preferences and behaviours. A year later it launched ‘Creators Club’ – a membership programme which offered exclusive access to products, services and content in exchange for people’s time and advocacy. Its reward? Sales via the app have grown four-fold in 2020, whilst 60% of total online sales now come via Creators Club.
The same logic will see an acceleration in retailers digitising their physical stores. Walmart’s new store layouts are explicitly inspired by the desire to create a mobile-first environment. And Burberry’s new shop in Shenzhen has 5,800 square-foot split into 10 rooms, each encouraging customer interactions in person or via social media. A dedicated WeChat mini programme, created with Tencent, earns shoppers social currency which they can use to access exclusive content and personalised experiences. Each customer is given a digital animal character that evolves as they engage with in-store experiences. It’s retail, Jim, but not as we used to know it.
A growing percentage of consumers want to modify their shopping behaviour… but need help and guidance. Companies who can meet this demand will unlock significant commercial opportunities.
COVID has forced many companies to re-think their supply chains. The most forward looking will seize this moment to reset and bake environmental responsibility into the process. This is one area in which Artificial Intelligence has a huge role to play.
Re-packaging, upcycling and renting are also set to grow. Aldi has pledged to reduce the volume of plastic packaging it uses by 50% by 2025, equating to 74,000 tonnes. Selfridges has been exploring new circular business models of rent, repair and recycle since 2011 and is accelerating efforts with the recent launch of Resellfridges – part of Selfridges’ Project Earth initiative. “In a way we never could have predicted, the cycle of consumption has been broken by the pandemic. This marks a moment of change in our customers to a more considered mindset and lets us set new expectations for retail,” Selfridges’ global managing director Anne Pitcher has said.
Overcoming a crisis often demands levels of co-operation that would be unthinkable in more normal times.
COVID has seen an upsurge in donation and reward-based crowdfunding campaigns to provide additional support to healthcare professionals and vulnerable populations, as well as funding for small businesses and individuals in financial distress. Likewise, we are seeing pharmaceutical companies sharing proprietary compounds and data, speeding up the process of getting to a vaccine.
Collaboration is one way in which brands can meet the challenges of diversifying into new channels and markets. It’s interesting how L’Oréal has begun to allow third-party platforms like Facebook, Instagram, WeChat and Tmall to use its Modiface technology, not only to promote its own products but those of rivals. This isn’t about altruism. As the company says: “We have 1.3 billion visitors to our website – but the more scale ModiFace achieves, the better the technology will become. It’s a win-win for us and consumers.”
For retailers with excess floor space, collaborating with like-minded brands may be the difference between survival and extinction. It certainly creates opportunities to re-invigorate the shopping experience, giving consumers more reasons to visit.
How to win: six success factors for innovation
1. Foresight. Search out uncommon insights into emerging consumer needs and /or ways in which your company can address those needs better than the competition.
2. Agility. You need the ability to jump on opportunities quickly and measure impact in near to real-time.
3. Alignment. This has always been important, but now it’s imperative. You need to minimise the number of silos and maximise organisational coherence.
4. Culture. Are you eager to experiment in pursuit of greatness, and willing to tolerate ‘productive failures’?
5. Strong relationships. You need partners with the right skills and appetite to accompany you on the journey.
6. Stamina. Even the most relevant innovations take time to gain traction. You’ll need patience to stay the course, and relentlessness to keep tweaking the model.
I’ll leave the final words to Liliana Caimacan from Tata: “A crisis forces behaviour changes and new needs. Innovation is about turning them to your advantage. It’s necessary for growth, necessary for purpose and necessary for organisations to move forward and take responsibility for the world and the enrichment of people’s lives.” That sums it up beautifully.
- Michelle Whelan is CEO at Geometry UK