Generation Four
In 2019, the fourth generation of retail had begun to take share from and re-shape the generations that came before it. Generation four of retailing, also known as the next wave, is characterized by the integration of emerging technologies such as artificial intelligence, virtual reality, and the internet of things. This generation of retailing is expected to bring new levels of personalization, convenience, and automation to the shopping experience.
We could create value in new ways using G4 platforms.
Multi-marketplace and multiple customer Touchpoints – Retail platforms aggregated different marketplaces, entertainment, payment, and other capabilities with unified corporate ownership, governance, and data.
Super Apps – While all G4 platforms developed multiple touchpoints with customers, the most expansive platforms developed full “super apps”. Super apps combined a large array of services into one. For example, the Alibaba Taobao app combined social features with entertainment shopping, travel, reservations, and payments. Super apps reduced or eliminated the need for consumers to open or flip between different apps.
End-to-end Integrated Supply Chain – Retail platforms were architected as end-to-end integrated value and supply chains, meaning that the same data, analytics, views, and communication tools could be shared at each step of the value chain. Different steps in the value chain could often see data changes at other steps.
By comparison, supply chains for earlier-generation retailers required high levels of human involvement. For example, retailers often created sales forecasts with suppliers who in turn did the same with their suppliers and so on. These were not unified processes. They were error-prone, created misunderstandings, and slowed commerce.
Leadership Challenges in Entering Generation Four
Investing in technology: Retail leaders must be able to identify and invest in the technologies that will be most impactful for their business, and then integrate them into their operations. This can be a significant financial and organizational undertaking, requiring careful planning and execution.
Managing data and analytics: Retail leaders must be able to effectively manage and analyze the large amounts of data that will be generated by these new technologies. This will require a deep understanding of data management and analytics, as well as the ability to use this data to make informed business decisions.
Managing customer expectations: Retail leaders must be able to manage customer expectations in terms of the new technology-enabled shopping experience. This will require a deep understanding of customer needs and preferences, as well as the ability to communicate the benefits of new technologies in a way that resonates with customers.
Managing supply chain: Generation four retailers must manage a complex and dynamic supply chain, which may include multiple suppliers, logistics providers, and other partners. Retail leaders must be able to coordinate and optimize these relationships to ensure the timely delivery of goods and cost-effective operations.
Managing and developing talent: Generation four retailers must be able to attract, retain and develop talented professionals who are skilled in areas such as data analytics, digital marketing, and technology. Retail leaders must be able to create a culture that fosters innovation and creativity.
Cooperation vs Competition: As G4 platforms began to re-sell their infrastructure, other retailers had to choose to what extent they would compete with growing G4 platforms and to what extent they would cooperate by licensing the platform infrastructure. To reach certain consumer markets, many major retailers and brands decided to use G4 platforms for payments, delivery services, and access to their marketplace. By 2019, a few major retailers licensed G4 platforms capabilities even further. For example, Office Depot and El Corte Inglés agreed to engage with Alibaba on cross-border product sales, data sharing, and analytics, and, eventually, on to its enterprise system software capabilities.
Implementing sustainable and ethical practices: Retail leaders must be able to implement sustainable and ethical practices throughout the organization, from sourcing to distribution, and communicate these efforts effectively to customers.
Maintaining security and privacy: G4 retailers will be collecting and handling large amounts of sensitive customer data, retail leaders must be able to ensure the security and privacy of this data and comply with regulations.
Conclusions
As the consumer industry shifted in 2019, the profund distinctions between these intergenerational retail models amplified. Retailers, brands, and distributors were not in charge. The consumers and platforms were in control. The leadership challenge of the day involved knowing how each party would create and capture value in the constantly transforming value chain. Advisors argued that executives had to reskill themselves to avoid being left behind and to successfully transform their business models, economic structures, capital allocation, and human resources.
In setting workforce strategy, leaders faced even more questions. Wich new roles should they attempt to hire? How could they attract, train, and retain the talent? As they invested capital in new technology, what activities should they seek to automate and augment? How would they organize and incentivize data teams to take advantage of the increasingly valuable data?