Dave Nemeth
Dave Nemeth

New entrants into retail could be the disruptors

by Dave Nemeth. The big disruption in the retail space will come from new entrants.

by Dave Nemeth. The retail industry is well aware of the fact that it has to innovate, and the big chains are keeping a close eye on one another as they all try and gain valuable market share. We have in recent months seen some great improvements to the retail landscape both here in South Africa and abroad, but it is very difficult to change the direction of a large ship quickly. I believe that the big disruption in the retail space will come from new entrants. This is why I think it is completely plausible.

Lease opportunities

Many of the larger, more dominant retailers are downscaling and renegotiating rates and terms with landlords. Most shopping malls still have lots of empty space with developers fighting a hard battle to sign new leases, which could prove to be favourable for new entrants into the retail space. There are also abundant opportunities for short period leases as well as profit share models. The bottom line is that developers have to become more flexible and there has never been a better time than now to negotiate with these giants.

Global lockdowns have been the order of the day in recent months and naturally, created a massive increase in online sales. Retailers are spending millions on their online shopping portals and investing on having a great digital presence. This includes artificial intelligence integration for ensuring that they learn more about their online customers. This technology is able to push personalised offerings and communication which speaks to the specific buying habits of the individual consumer. There is still a lot of work to be done as currently there is very little differentiation between one online store and the next. This is a massive opportunity for new entrants as the barrier to entry is far easier, and generally more affordable for starting off, than by setting up a new brick and mortar store. Collaborations with suppliers and manufacturers can decrease the need for warehousing and storage, freeing up cashflow for continual digital innovation.

Digital first

A ‘digital first’ approach will allow companies to analyse their product offering, cost effectively and, more importantly, start building a following of customers. New entrants into the space, which  successfully achieve great consumer loyalty and sales, will have an easier time expanding their digital presence into brick and mortar stores, when the opportunities present themselves. Digital first, brick and mortar second, seems to be a very logical approach in these uncertain times. Shopping for goods and services online is nothing new, but the pandemic accelerated the rate at which business owners opened ecommerce shops and consumers shopped online. According to a survey conducted earlier this year by the United Nations Conference on Trade and Development (UNCTAD) and the NetComm Suisse e-Commerce Association, online sales have “increased by six to 10 percentage points across most product categories”. “The COVID-19 pandemic has accelerated the shift towards a more digital world,” said UNCTAD Secretary-General Mukhisa Kituyi. “The changes we make now will have lasting effects as the world economy begins to recover.”

Virtual showrooms

Virtual showrooms and product assortments also offer a point of differentiation for new entrants and it is the perfect medium for engaging in a fun and interactive way. 3D virtual showrooms provide the perfect bridge between physical and digital, allowing consumers to avoid the mundane shopping portals and instead escape into a world of inspiration and fantasy. Virtual retail allows for showrooms to be created that simply wouldn’t be viable with a real build, due to prohibitive physical costs. This is where brands can really explore their creativity.

Dark kitchens cook up innovation

Opportunities for new entrants into the hospitality and restaurant business also exist with the rise of dark kitchens. Restaurants in South Africa have been among the hardest hit over the past year. Regular alcohol bans, as well as having to adhere to rules for the number of patrons allowed at any one time are, sadly, causing more and more establishments to close their doors. It is uncertain just how the future will play out over the next year, but consumers are still willing to pay for good food. Dark kitchens are also known as virtual kitchens, cloud kitchens, ghost kitchens or delivery-only restaurants. While we may use different names to refer to the dark kitchen, the concept remains the same: these kitchens sell meals exclusively through delivery. Rather than cooking for eat-in diners, cloud kitchens cook purely for delivery, so the food that is produced there can only be consumed elsewhere.

Not having to provide customer seating and waiting areas significantly lowers the cost of rent and additionally, there’s no need to hire serving staff either. Ghost restaurants are therefore a great way for restaurants to reduce overheads while increasing their capacity to cater to the increased food delivery market. Another key value in the dark kitchen model is the ability to easily experiment with new brands, menus and concepts. There are no physical premises to take into account when consumer food trends change, so delivery kitchens can quickly move on to a whole different menu or concept in no time. If a brand isn’t landing, they can quite simply create a new one and try again.

This is a great opportunity for collaborations, as well as for up and coming new chefs to create a profitable business within the food industry, without having the often huge and crippling financial outlay for restaurant décor; or reliance on alcohol sales. The big players in both the retail as well as the hospitality industries have to keep their eye on their arch rivals; and also need to become extremely aware of new entrants which have the potential to pull out all the stops and steal market share one little bit at a time.

 

Image credit: Photo by Andrea Piacquadio from Pexels.

 

Retailing Africa’s retail analyst and columnist, Dave Nemeth is the founder of Trend Forward; and a design thinker, innovator, business re-designer, trend analyst, keynote speaker and writer.

 

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