Emiratisation.. the slogan of the future of retail

When I covered retail for the Financial Times in the early 1990s, industry bosses often recited the three secrets to their success: location, location and location. Back then, retail was very much a real estate game. Companies go to great lengths to analyze local demographics, economics and infrastructure to estimate potential upside and spend small fortunes to acquire the most promising locations. Build your shops in the right place and customers will fall into your net, just like spiders catch flies.
This retail model, which clearly favors capital-rich companies, has been ripped apart by the rise of the Internet. For most digital transactions, the location of the store has become irrelevant. With no outlet buildings at the time, Amazon delivered the goods directly to your door. The secret to retail success has been redefined as logistics, logistics and logistics.
The next development came when consumer brand companies and smaller merchants chose to bypass traditional retail outlets and e-commerce platforms and go directly to the consumers themselves. This led to the direct-to-consumer frenzy that Shopify, the Canadian innovation company, cultivated. Shopify is widely seen as the anti-Amazon, providing back-office logistics, payments and delivery infrastructure that small, independent merchants can’t afford to build themselves.
Investors poured money into direct-to-consumer companies such as Warby Parker Opticals, Pelton Sports Bikes and the clothing service Stitch Fix. The strategy was to use social media to build brand awareness, attract consumers and send directly to them. For a while, the business plan was satisfactory and many direct-to-consumer companies were floated on the stock market at great valuations. But it now appears that investors have concluded that this direct-to-consumer model is seriously compromised, if not hit hard, and has significantly devalued the sector. Shopify’s stock price has also fallen 73 percent in the past year. Last week, the company announced it would cut 10 percent of its workforce. What does time mean for retail?
Shopify CEO Toby Lutke argued that his company’s downturn was simply the result of earlier excessive expansion. The company assumed that e-commerce would jump forward five to 10 years due to the Covid pandemic and expanded very quickly in anticipation of greater demand. “It is now clear that the bet did not pay off,” Luttke wrote in a sigh note to staff.
But the company’s euphoric optimism about its long-term prospects hides some of the deeper flaws in the direct-to-consumer model. Like retailers and other consumer goods companies, direct-to-consumer companies are struggling with rising cost inflation, high interest rates and weak consumer demand. In addition, many are trying to deal with rising shipping costs, supply chain disruptions and their overdependence on an increasingly volatile Chinese manufacturing base.
But it also faces pressures of its own. The cost of customer acquisition has increased dramatically with the increase in Facebook advertising prices. Determining the target audience via social media has become more difficult after Apple’s decision to allow users to opt out of app tracking services. Furthermore, direct-to-consumer companies sometimes face stiff competition from counterfeit merchants.
Traditional retailers and consumer goods companies including Walmart, Heinz and Nike have learned the tricks of direct-to-consumer commerce and are increasingly becoming multi-channel operators as Amazon expands its network of physical stores. Although Amazon is also experiencing difficult economic conditions, it remains a dominant e-commerce operator in most of its markets. It is easier for consumers to use a frictionless platform than to deal with different websites from different brands. Without decisive regulatory intervention to separate the third-party marketplace from its own sales and delivery, it’s hard to see how competitors can capture the e-commerce giant’s throne. But in business, as in politics or sports, the rise of indomitable power is often the moment of greatest weakness. Everyone wants to remove you from the throne.
One of the experiences worth watching closely is in India, where a remarkable initiative has been launched in 100 cities to provide digital infrastructure supported by retail. The Open Network of Digital Commerce aims to create an interoperable collective network for e-commerce rather than a closed private platform, enabling millions of small merchants to connect with suppliers, customers and delivery companies. Its ambitions are to bring 30 million sellers and 300 million buyers to its network by the end of 2024. No one underestimated it, Nandan Nilekani, co-founder of IT company Infosys and architect of India’s public technology group, called it “the most exciting business”. transformation in the world”.
India has always championed public digital infrastructure. Digital identity system Aadhar is now used by 1.3 billion people, while payments interface UBI enabled 6.3 billion online transactions last month. The vision of the Open Network of Digital Commerce is to empower millions of small neighborhood merchants to take on Amazon and Walmart-owned Flipkart. If the experiment succeeds, the mantra for the next era in retail may be localization, localization and localization.

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