Next

generation
retail:
The rise of the
omni-platform.
 Talk to
2
Boxwood.
Next generation retail: The rise of the omni-platform.
Overview
Amazon, Facebook, Alibaba
and other platform business
models have turned the world
of retailing upside down.
Retailers need to transform
their customer offer and
organisational models to Next generation retail is arriving fast, and the rise
survive, and thrive, in this of platforms has changed the way consumers
interact with brands, and each other, forever. It’s no
brave new world. It’s time for
longer good enough to be ‘omni-channel’, we now
a proactive approach. live in an ‘omni-platform’ world and retailers must
adapt how they do business if they wish to remain
relevant and profitable.
The bad news is, most retailers have yet to
“Amazon’s goal master multi-channel strategies, let alone omni-
is to make it channel ones. Proactive strategies that leverage
the full potential of the various types of platform
‘irresponsible’ businesses are few and far between. And of course,
to not be a Prime the pace of change is getting faster. Platforms have
member.” taken the bull by the horns and their radical and
relentless focus on innovation through technology
Jeff Bezos
Chief Executive Officer, Amazon is changing the way consumers shop, and
manufacturers sell, at a frightening pace.
So what does this mean for your business? Well,
in short, if you want to survive, and thrive, it’s time
to act. In this paper we provide a pragmatic view of
what type platforms are available, what benefits &
threats they can bring to your business, and how
best to build a plan to counter (or be part of) these.

Next generation retail: The rise of the omni-platform. 3

 Introduction
Platform business models have been around a long time, albeit in different shapes and sizes. In
1886 the first representative of the California Perfume Company (Avon) started selling beauty
products to women in her social network and local community. No one called this emerging
business model a ‘platform’, but the peer-to-peer approach to attracting consumers was there.

Since 1945, retail has undergone a larger transformation The latest development has been the rapid entry, and
than many other industries. Where once consumers domination, of commerce platforms that create overarching
shopped at their local corner store, they now access customer-focussed ecosystems. This stage of the evolution
retailers from the convenience of their own home. requires a completely different view on value proposition,
geographic coverage, customer and channel. Platforms
Many define chain stores as the first evolution of organised
incorporate social channels alongside product offerings and
retail. Moving on from this model to multiple store concepts
ancillary service propositions, such as payment mechanisms,
meant a shift in mindset for retailers, who were now
logistics solutions, content production and delivery services,
required to operate new formats, such as out-of-town
to deliver the ultimate in convenience for customers.
destination and urban convenience stores. The proliferation
of new formats was further amplified by the emergence of This kind of all-encompassing approach is designed to keep
the internet, which introduced an entirely new channel. This the consumer within the ecosystem and target them with
resulted in multi-format retailers moving towards multi and multiple propositions, and maximise customer lifetime value.
omni-channel business models, as well as the emergence As well as providing retailers with access to new markets
of new businesses operating solely online. Today, the line and customers, product marketplaces are increasingly
is increasingly blurred as retailers mix and match their building a silent competitive advantage within their core
channels to meet their customer needs. operations through their access to vast amounts of data.

Store concept
The chain shop

Sources: https://www.ft.com/content/79661ccc-ada0-11e7-aab9-abaa44b1e130?mhq5j=e6
http://fortune.com/2017/10/10/ikea-third-party-websites-selling/
http://www.cnbc.com/2017/06/16/after-its-stock-pop-amazon-will-get-whole-foods-essentially-for-free.html

4 Next generation retail: The rise of the omni-platform.

While consumers continue to shop across all evolutionary While some may believe that selling through a platform is
stages of retail, it’s easy to imagine the platform business not for them, the recent announcement by Inter IKEA, they
model taking an increasingly dominant position. As platform are looking to sell products through Amazon and Alibaba,
retail evolves, it’s likely that an increased number of provides food for thought.
products and services (such as banking and utility services,
As all this comes hot on the heels of IKEA Group’s* acquisition
travel and educational offerings) will be bundled together.
of TaskRabbit, we can assume that IKEA is no longer content to
In this way, customers will receive the ultimate combination
simply work with a platform business – it’s set to become one.
of experience, value and convenience. Both traditional and
start-up retailers will need to give serious consideration And who can blame them? The recent example of Amazon’s
to the platform business model and what role it could play acquisition of Whole Foods demonstrates that the economic
within their businesses or, more seriously, how to protect model can make great sense to investors. Amazon is paying
themselves from becoming irrelevant. $13.7 billion in cash for Whole Foods. Amazon’s stock was up
over $32 by mid-morning following the announcement,
Indeed, new ‘direct to consumer’ platforms are emerging
so Amazon’s market cap appreciated by about $15.6 billion.
which cut out retailers altogether. For example, the
So are they are getting Whole Foods for free and pocketing
INS ecosystem, due to be piloted in the UK in 2018, is a
$1.9 billion as well?
blockchain-based platform that enables manufacturers
to sell products direct to consumers. Both manufacturers
and consumers win – consumers get cheaper prices and
manufacturers can achieve higher selling prices. FMCG
giants including Unilever and Mars are signed up to the pilot
which has the potential to revolutionise how consumers
shop for brands.

Commerce platform

Omni – channel

“Platforms represents the biggest

development in how consumers meet
IKEA since the concept was founded.”
Torbjörn Lööf
Chief Executive, Inter IKEA

*: IKEA Group (Ingka Holding B.V. and its controlled entities), the world’s largest home furnishing retailer

Next generation retail: The rise of the omni-platform. 5

 The race to $1 trillion – platform businesses
now dominate the league table of the most
valuable companies in the world
Rank Company value Rank
2009 $0bn $100bn $200bn $300bn $400bn $500bn $600bn $700bn $800bn 2017

Apple 33 1 Apple
Alphabet 22 2 Alphabet
Microsoft 6 3 Microsoft
Amazon – 4 Amazon
Facebook – 5 Facebook
Berkshire Hathaway 12 6 Berkshire Hathaway
Exxon Mobil 1 7 Exxon Mobil
Johnson & Johnson 8 8 Johnson & Johnson
JP Morgan & Chase 28 9 JP Morgan & Chase
Wells Fargo 55 10 Wells Fargo
Tencent Holdings – 11 Tencent Holdings
Alibaba – 12 Alibaba
General Electric 24 13 General Electric
Samsung 53 14 Samsung
AT&T 7 15 AT&T
Industrial & Commercial Industrial & Commercial
Bank of China 4 16 Bank of China
Nestle 15 17 Nestle
P&G 10 19 P&G
China Mobile 5 20 China Mobile
Royal Dutch Shell 9 23 Royal Dutch Shell
Wal-Mart 3 24 Wal-Mart
Chevron 11 27 Chevron
China Construction Bank 13 28 China Construction Bank
Petrochina 2 29 Petrochina
IBM 14 43 IBM

Value of company in 2009

Value of company in 2017

Source: Bloomberg

6 Next generation retail: The rise of the omni-platform.

Case study: Airbnb
Operating in the hotel business without owning any of
the assets
Airbnb is the star student of the sharing economy, connecting people to travel experiences, at any price point, in
more than 34,000 cities and 190 countries.
Whilst Airbnb is not a retailer, the disruption it has caused in the hotel industry, and its use of peer networks, is
instructive for consumer-facing businesses the world over.
And the disruption isn’t restricted to the hotel industry. Just as Amazon quickly branched out from selling books
online into adjacent product categories, Airbnb has developed its offering to include experiences and restaurant
reservations.

Customer-centric approach
From day one the company has put a focus on getting to
know its customers and what they want. Co-founder Brian
Chesky looks beyond the traditional measure of customer
“I think about the
service to ’6, 7, 8, 9 and even 10-star experiences’. Early 10 star experience.”
on Brian and his team discovered that photos of rental
Brian Chesky, Co-founder of Airbnb
properties and the renter, plus public reviews were the
essential elements that built trust.

Leading innovation
Leveraging the community – both the landlords and the renters – has been at the heart of the business since
the beginning. Through getting to know both sides of the transaction, Airbnb has been able to build a functional,
trustworthy and user-friendly platform that resonates with travellers. To keep learning, Airbnb hosts bi-annual
gatherings with the renters, after which they select insights to be included in their strategic roadmap.
But it doesn’t stop there. Understanding what is at the core of travelling (to experience the world and learn from
our surroundings), Airbnb has recently introduced Airbnb Experiences. This gives travellers the opportunity to book
everything from cooking lessons to knitting groups in the destination of their choice.

Disrupting the status quo

Airbnb has successfully created its own ecosystem where peer-to-peer commerce comes together to provide a new
type of experience. To date it has disrupted the hotel industry with over 8.5 million stays and 1.5 million listings, of
which it owns none.

AirBnb recipe for success:

• Make the platform as frictionless as possible to attract users
• Create a great level of trust and transparency to encourage participation
• Build and nurture a community of like-minded renters that share best practice and support
each other
• Create proactive and reactive mechanisms for addressing issues as soon as they arise
Many of these platform features are entirely applicable to many retail settings. There is much to be learnt and
emulated from Airbnb.

Next generation retail: The rise of the omni-platform. 7

 The ABC of platforms
The past few years have seen the emergence of a multitude of different platforms, each seeking to
create value by allowing networks of suppliers and consumers (individuals and businesses) to firstly
interact and then potentially transact.
While the platforms are increasingly aiming to ‘eat each other’s lunches’ and converging, we see at least
four distinct platform types in play today.

1. 2.
Product marketplace Social networking and
platforms communication platforms

Alibaba Tesco Facebook Snapchat

Group Direct

Amazon Walmart Instagram Twitter

• Provide retailers with access to a vast pool

of potential customers. WeChat
• Great for customer: ability to shop multiple
brands on one site and enjoy a consistent
experience while the retailer can rely on • A vehicle to connect with various networks:
third party digital capabilities. family, friends and likeminded communities.

• Can be challenging to build brand • Effective at engaging vast consumer

awareness and ‘stand out’ from all the audiences through different add-ons (e.g.
traffic. Customers might not know (or even buy buttons). Relationships can be more
care) who they are buying from, making it personal in nature.
difficult to establish a relationship. • More for building brand awareness. Getting
conversion can be difficult as users don’t
necessarily have a shopping mission whilst
on the network.

8 Next generation retail: The rise of the omni-platform.

 3. 4.
Service marketplace Payment
platforms platforms

airbnb Google Apple

Wallet Pay

Trusted Amazon
Expedia Traders Payments PayPal

• Trusted brand names making and receiving

secure payments for goods. New providers
Just Eat Uber emerging all the time.
• Innovative players are offering features such
• Leverage peer-to-peer relationships at the as instant withdrawals and deposits, low
heart of the business model and provide an transaction fees, exclusive offers, the ability
efficient user interface. to accept more currencies, etc.

• Facilitates the building of trustworthy • Customers may also prefer different

relationships that can be long-lasting. Only pay payment platforms, making it costly to
commission when transaction takes place. provide all options.

• Platform provider controls all data. If

regulatory or legal changes occur, service
provider is forced to adapt at pace.

Next generation retail: The rise of the omni-platform. 9

 Case study:
Alibaba “make it easy
to do business
Out Amazoning Amazon anywhere.”

Up until its record-breaking $25 billion IPO in 2014, Alibaba was a relatively unknown entity outside of China.
However, this has changed over recent years as Alibaba continues to grow. Although still largely focussed on the
Chinese domestic market where it holds a market share of 56.6% in online retail, the company is increasingly
looking at overseas markets, and its acquisition of the likes of Singapore’s Lazada may be a sign of more to come.

p
system articipants
Eco
Weibo
Professional
Social Media AutoNavi
Service Providers
Location-based
Marketing ketplaces
Affiliates M ar
Mobile Browser
Taobao.com AliExpress.com
Financing YouKu.com
TMALL.com Alibaba.com Digital
Aliplay.com Entertainment
Payment juhuasuan.com Sellers Buyers 1688.com
Solutions $ Logistics

Online and mobile commerce platform

TECHNOLOGY DATA TEAM

CLOUD OPERATING
COMPUTING SYSTEM

Sources: https://retail.emarketer.com/article/alibabas-tmall-maintains-reign-over-chinas-retail-ecommerce/58ada2369c13e50c186f6f32
http://www.investopedia.com/articles/investing/061215/difference-between-amazon-and-alibabas-business-models.asp
http://ec.tynt.com/b/rf?id=arwjQmCEqr4l6Cadbi-bnq&u=Investopedia

10 Next generation retail: The rise of the omni-platform.

Creating an e-commerce ecosystem
Alibaba has successfully integrated a range of platform offerings. The resultant
business model is taking on, and beating, the likes of Amazon, eBay and Google
in its domestic market, and now has its eyes firmly fixed on the global stage.
Whether it’s providing individuals and smaller retailers with fee-free access to
Chinese consumers on Taobao, or enabling larger retailers and global brands to
enter the Chinese market via its Tmall platform, Alibaba acts as a middleman
in the B2C space. But unlike other platform companies, Alibaba also operates
B2B wholesale platforms like Alibaba.com, as well as providing the means for
manufacturers in China to directly access consumers around the globe through
AliExpress.
Pursuing Jack Ma’s mission statement to “make it easy to do business anywhere”, Alibaba has also added to its capability
with platform offerings around group buying, online marketing, online payments, financial services, logistics information,
cloud computing and data management – rapidly turning itself into a one-stop-shop.
The aim is to provide an end-to-end ecosystem in which the customer can operate across the entire customer journey,
integrating social, logistics, payment, B2C and B2B marketplaces, as well as events such as Singles’ Day (now the largest
e-commerce event in the world) and physical stores, such as the Hema supermarket stores in China through which it aims
to integrate online and offline shopping.

Platform wars
Alibaba has had success when it comes to defending its home turf from Western platforms. This, in no small part, is due to
it having a deeper understanding of Chinese consumers and small business owner behaviours, and more customer-centric
approach better suited to the higher proliferation of mobile phone users in the country. From what was initially a defensive
business model, Taobao has emerged victorious. For the Western platforms that have failed to crack the Chinese market
failing to recognise that the Chinese market and business environment is very different from a Western business was the
first mistake.  Not quickly adapting to these differences was the second.

Amazon has refocused on a niche business importing Western brands to China.

With two thirds of the Chinese domestic online retail market in the hands of Alibaba (47%) and JD.com (20%), a mobile app
that’s failing to excite the Chinese consumer and a Prime offering which is not the differentiator it is in the West, Amazon’s
market share was 1.3% in 2016 with a focus restricted to selling goods from abroad.
Alibaba’s continued focus on the end-to-end customer experience in the domestic market, along with its well-established
supply chain and logistics infrastructure, will present international competitors with almost impenetrable barriers to entry.
And it’s these barriers, together with the local regulatory environment, that are helping Alibaba to position itself as the way
for Western brands to succeed in China.
So while platforms may be viewed as a source of continuous innovation, they aren’t infallible and can make mistakes. With
Alibaba now pursuing a strategy of international expansion in Australia, New Zealand, India and (through its investment in
Singapore’s Lazada) markets including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, Jack Ma’s
experience of seeing off eBay in China may now provide the solid foundation for success in both developed, and developing,
markets. Add into the mix Alibaba’s recent investment in bricks-and-mortar retailing in China, and it’s clear that the
company will continue to be a force to be reckoned with.
Alibaba has a short-term target of $1 trillion in gross merchandise value by 2020 and a longer-term aspiration to serve two
billion customers by 2036. This would make Alibaba the world’s fifth largest economy, with sales surpassing the GDP of all
economies except the U.S., China, Japan and the EU.

Next generation retail: The rise of the omni-platform. 11

 Tapping into the
platform opportunity
To harness the power of
platforms effectively, it’s
important to understand the
specific needs of your business 1. 2.
and choose your platform
partners accordingly. Outlined Engaging Endless
below are some advantages
that platforms can provide to
communities innovation
your business.

From Business to Fashion, WeChat Amazon’s strong focus on convenience

is China’s latest craze, with over and innovation has helped it to
800 million monthly users on the spread quickly across the globe. Its
‘app for anything’. It allows users latest move to acquire Wholefoods
to keep in touch with people and represents a direct challenge to the
brands and is now being used established supermarket retailers
increasingly for commerce as and gives Amazon Prime outlet
consumers embrace the idea of locations near its wealthy customers
using social media to order items. in all major US city centres.
The growth in transaction volumes
In India, Amazon has adapted its
via WeChat is astounding with total
model to utilise ‘mom-and-pop’ stores
payments up from $11.6 billion in
in rural communities. These operate
2012, to $1.2 trillion in 2016. At the
as both partners in the delivery
heart of WeChat’s success lies the
process but also as locations where
seamless customer experience it
the 60% plus of the population that
provides. The App’s functionality
don’t have access to the internet (and
allows brands to mix with a
can only pay in cash) can order and
consumer’s personal contacts
pay for items on Amazon.
to create communities of like-
minded people and organisations. It’s Amazon’s ability to constantly
By seamlessly mixing social and innovate that has put it in front.
commerce functionality within a Whilst its Prime Membership locks
single ecosystem, users don’t need customers into the eco-system,
to switch between apps. it continues to harness the latest
technology, such as Amazon Echo’s
Alexa. It’s this ceaseless invention and
re-invention which means Amazon is
leading the charge when it comes to
the evolution of platforms.
And it is this innovation that both
Sources: https://www.wired.com/insights/2013/05/sunnier-days-ahead-for-retailers-that-use-cloud-computing/
attracts new customers and
http://www.information-age.com/how-businesses-across-different-industries-are-using-cloud-123459022/
makes relationships with existing
https://uk.reuters.com/article/us-aldi-grocery/aldi-enters-grocery-delivery-in-partnership-with-instacart
-idUKKCN1AU0ES
customers long lasting.

12 Next generation retail: The rise of the omni-platform.

 3. 4. 5.
Accessing Faster Lower
credibility execution costs

Trusted payment platforms like Using platforms to accelerate Platforms have helped retailers
PayPal exist, so why not use them? things makes sense in many reduce the need to invest significant
By offering payment options that situations. A platform can be used financial resources. Whether it’s
include the choice to use a platform either as a short-term option to a large retailer automatically
like PayPal, retailers can access the allow a business to ‘dip its toe’, expanding capacity on Black Friday
trust that platform has built up over or as a longer-term solution. by running its IT infrastructure
many years. And if a social media Building the capabilities and the in the cloud, retailers of all sizes
service can help to build better and infrastructure required to expand with e-commerce shop fronts on
more sustainable communities a business into new customer Amazon or customer communities
than a business could achieve using segments or overseas markets springing up on social media
their own tools, then surely utilising takes money and time. And surely services, it’s the platform providers
Pinterest, Instagram or Facebook is that’s time that could be better that make the investment and take
worthy of consideration. spent generating revenue from the risk, not the retailers.
those new customers or markets.

For example, as Aldi continues to

focus on building market share in the
US grocery industry, it isn’t ignoring
the small, but growing a section of
US consumers that buy groceries
online. Aldi has recently announced
“Grocery it will team up with same-day
shopping online grocery delivery service, Instacart,
to run a pilot across three US cities.
is a relatively The aim is that Aldi customers will
small part of the be able to have groceries delivered
to them within an hour. However,
business but it this won’t be offered through Aldi’s
is continuing to own website, but via Instacart. If it’s
successful, the pilot will be rolled out
grow” quickly across other US cities where
Instacart has operations.
Scott Patton, Aldi Vice President of
Corporate Buying

Next generation retail: The rise of the omni-platform. 13

 Case study:
Ocado
In business for over 16 years, Ocado is the world’s largest dedicated online
grocery retailer with nearly 600,000 active customers. The know-how it has
developed along the way, both proprietary technology and IP, is now provided
to commercial partners as an end-to-end platform offering.

Leveraging IP and ‘platform thinking’ to develop new business models

By investing in the technologies and physical infrastructure needed to innovate core value chain elements and
drive growth in its own retail operations, Ocado has built a set of capabilities it can now offer to other parties.
The Ocado Smart Platform is an end-to-end software and technology system with a physical fulfilment asset
solution, which is combined with a partner’s knowledge of the local retail market in which they operate to support
a scalable, online grocery business.
Ocado believe that their partners will benefit from
a “faster, flexible, more cost-efficient and lower-
risk way of launching or improving online grocery “Our future platform
businesses, with limited capital investment.”
customers will benefit
Technologies like the picking solution now in place
at their Andover CFC are being perfected and
from years of learning
will form the basis of increasingly efficient and and development in a
effective operations to underpin more broader
commercialistion in the future.
live retail environment
Whilst building a platform does not guarantee
to enable a sustainable
that partners will flock to it, this kind of platform launch or improvement to
thinking is likely to become more prevalent
as companies seek to maximise returns from
their online operations.”
significant investments in core capabilities.

14 Next generation retail: The rise of the omni-platform.

Case study:
Farfetch
Why shop at one luxury retailer or even one shopping destination when you
can shop at hundreds all at the same time? By connecting boutiques with a
global customer base, Farfetch has disrupted the luxury end of the market
with a breadth of offer that traditional luxury retailers are struggling to match.

From small acorns…

Put simply, Farfetch is an online platform for fashion. Since setting up in 2008 Farfetch has created a global
marketplace that provides fashion conscious consumers with access to world-famous boutiques and brands, as
well as established and emerging designers. Its reach is impressive, with offices in 11 cities and products being
express shipped from partners to over 190 countries worldwide.
The shopping experience is designed to be as easy as possible and provides editorial on the latest tips and trends,
an app for instant access, a bespoke service for private clients – across nine languages and a number of local
currencies.
The boutiques that have partnered with Farfetch (now upwards of 520) decide on their range and set their own
prices. The consumer transacts with the boutique via the platform and the boutique arranges delivery. And a fee-
free, courier-based or in-store returns policy provides consumers with service they can trust. Unlike Amazon on
its Marketplace, Farfetch does not sell products in its own right.
Far Fetch’s position has been further strengthened by its recent partnership with Condé Nast, bringing together
premium editorial content with the Farfetch e-commerce platform. This convergence enhances Farfetch’s ability
to inspire customers and attract new boutique partners.

Next generation retail: The rise of the omni-platform. 15

 …but Profit
watch Playing by
different rules

out for
It’s hard to compete when you’re
not on a level playing field.
Investors appear to tolerate
extended periods of loss making
when a platform is involved, believing that future

these
returns delivered through market dominance will be
worth the wait. While platforms may not be judged by
the normal rules most established retailers are, and
profits need to be made.
However, this is easy to say, hard to do. Savvy
Despite the obvious benefits, choosing to use consumers with easy access to price information will
a platform somewhere within your operating force you to price competitively or be absolutely clear
model isn’t without risks. Some of the main what additional value you add that justifies a differential.
‘watch-outs’ include: Once you have answered the pricing conundrum, don’t
forget that the platform will take a slice of the action
from sales you make through their eco-system, further
squeezing your margin. It’s not just the retailer that’s
effected either. The upstream impact on authors and
musical artists, where commissions are being squeezed,
may provide a salutary lesson when it comes to what
producers experience in other product categories.
Platforms continue to drive down prices in retail and
other sectors, and lower prices will mean lower profits
unless you can access more consumers and drive down
your own costs.

16 Next generation retail: The rise of the omni-platform.

Customer Data
Loyalty The data question
In the past, customers bought Future power in the retail eco-
via bricks and mortar outlets system will be seized by those with
or direct from a website. Loyal the greatest insight. Platforms
customers would return because of have access not only to the data
trust generated over a period of time. generated from your transactions
But now customers have more choice on the platform, but also the data
than ever. With just a few clicks they can task a search from every other company on the platform.
engine to find alternative sellers, or open their Amazon
The ability to aggregate data and generate valuable
app to search there.
insights about what customers are buying or saying
When operating via a platform retailers lose their provides platforms with an opportunity to sell that
autonomy. They are no longer in charge of the customer insight back to you, and to your competitors. It also
experience and therefore lose many of the levers that allows mixed model companies like Amazon to curate
drive loyalty. Many customers may not even be aware its own range.
of the specific retailer they have chosen within the
The question businesses need to ask is what will the
Amazon Marketplace, and so the loyalty that customers
impact of this data shift be? The attitude towards data
used to feel for a particular company, they now feel
collection, as well as the rules governing it, are shifting
for their Amazon Prime membership. While this new
and retailers will have to stay vigilant to ensure they
type of loyalty scheme is one that consumers pay for,
don’t lose out.
the extra value they can access through their Prime
Membership means that Jeff Bezos is well on his way to Of course, regulators are beginning to take an increasing
convincing the world that it’s “irresponsible to not be a interest in how companies collect and use personal
Prime member”. In the US 80 million Prime customers data. For example, the EU’s General Data Protection
would appear to agree, now outnumbering non-Prime Regulation (GDPR) which aims primarily to give control
customers and spending over 85% more each year. back to individuals over their personal data is due
to become enforceable in May 2018 and may act to
Retailers must understand the impact of platforms on
constrain, but not stop the creation of insights.
customer loyalty and find other ways to generate trust
and engage communities. A simple example in Amazon With the threat of huge fines for those who fall foul of
Marketplace is the option to email a purchasing customer the new regulations, the implications for platforms are
to say thank you. At a more sophisticated level, using still being determined and this may impact on the value
social platforms to enable communities of fans to create they can provide to your business.
a buzz around your brand is even more powerful.

Next generation retail: The rise of the omni-platform. 17

 To survive and
thrive in the future
a platform strategy
is an imperative
Many established retailers have already adopted So what’s the strategy? We have approached this exam
platforms within their businesses, however, few question by creating a sequence of considerations that
will help you establish, with absolute clarity, the role
have done so strategically. As we have seen of platforms in delivering various parts of your value
throughout this paper, platforms will continue to proposition. This process will help retailers to proactively
become increasingly relevant and powerful in the take a stance on platforms and to understand how
future. We therefore recommend that retailers they can add value. It will also help to create a more
solid foundation for the future by ensuring the retailer
take a more strategic approach to incorporating is well informed about how best to tap into partnering
platforms into their existing business and opportunities when they arise. Finally, it’s important to
operating model. note that as a result of this process, the retailer will form
an understanding of what not to do, what to guard against
and how to protect margin and customer relevance.
Ignoring platforms is simply not an option. Even if you
don’t partner with any, they will still impact your business.
And while there may not be a first mover advantage
associated with partnering with a platform, waiting too
long to decide why, what and how, may mean all the best
opportunities have passed you by.
Below we’ve highlighted some key considerations for
every retailer.

18 Next generation retail: The rise of the omni-platform. * Reference: Boxwood Insights - The 4 As series 2014
A three-phased approach
1
Why:
• Gain clarity on Vision,
Strategy and core
Business Model
• Define role of platforms
and platform thinking in
achieving strategic aims
and meeting changing customer needs
• Establish guiding principles for platform selection;
go/no-go criteria
Consumer behaviour changes on a weekly basis.
Traditional loyalty models are being challenged, and the
competitive environment continues to hot up as retailers
seek out greater market share ahead of the further
rounds of industry consolidation to come. Being very
clear about what you’re good at and why is the key to
understanding how platforms can support your strategy.
The first step is about understanding the role of
platforms play in delivering your strategy. Establishing
clarity on vision, strategy and required core components
of the business model, a retailer can understand the
characteristics of the changes required in the business.
For example, a retailer might want to seek international
expansion into a new market(s), or they might want
to address a completely new customer segment. By
mapping these into a framework of where to ‘win/match/
follow’ vs the market, an understanding of exactly where
you need to be in order to succeed can be established.
This stage will also help to form your go/no-go criteria
– things that are business-critical and need to be
protected, cannot be left for a partner to deliver.

Next generation retail: The rise of the omni-platform. 19

 2 3
What: How:
• Identify and prioritise what to • Platform partner analysis
change to capture the opportunity
• Shortlist and establish
presented by platforms
preferred relationships
• Assess how to protect the
• Governance established,
downside risks and determine
including stakeholder
the critical success factors
relationships
• Evaluate changes required in the operating model
Most businesses aren’t great when it comes to
Platforms like Alibaba might appear to be winning collaborating, particularly when the partner in question may
everywhere as they build out their ecosystems, but be a competitor. Success depends on clarity of objectives,
traditional retailers cannot hope to win in all parts of the understanding cultural alignment and developing the
customer journey. However, knowing what to focus on required execution capability.
delivering in-house versus what you will be comfortable
The third and last step establishes the right relationships
to collaborate on, will be a key part of formulating your
and governance processes to deliver the new capability.
platform strategy.
We often see the options as ‘buy, build or collaborate’ and a
The second step determines what operating model retailer must evaluate these options across the customer
changes are required to deliver the future business model. journey in light of all constraints, e.g. financial, capability,
This is also closely linked to customer journeys as it is time etc.
critical to preserve the most important touch points with
It is advisable to keep a short list of partners, as more
the customer.
detailed stress-testing and commercial negotiations can
For example, a capability change required might be change a previously suitable candidate into a non-suitable
detailed knowledge over China as a result of a strategic one. The delicate act of business development will be time-
decision to enter that market. This requirement would consuming and will test the robustness of the previously
then need to be evaluated in the light of ‘can we do this created go/no-go criteria, as it can be overwhelming to
ourselves or is there a partner who has a significantly conduct these processes. Considerations such as regulatory
stronger capability to deliver this’? In this stage, clarity requirements and who owns the data will muddy the
on some of the previously discussed watch-outs is vital, waters and will require you to think differently.
e.g. what are you going to do with customer experience
This final stage is a less linear process and will require
and data and how comfortable are you with your partner
a measured and structured approach. As the platforms
owning and delivering some of this?
become more professional in their own business
This stage will also help you understand how, as an development, retailers need to ensure the appropriate
organisation, you need to change in order to successfully controls are in place in order for partnering to be a success.
work side by side with a partner.

20 Next generation retail: The rise of the omni-platform.

Case study:
Amazon “Your margin is my
Amazon Marketplace is an evolution of Amazon’s early
opportunity”
successes in selling products online in its own right. The
Jeff Bezos,
capabilities that were developed, and the investment that was
Chief Executive Officer of Amazon
required, is now being leveraged across millions of retailers
globally. So what will Amazon decide to disrupt next?

Online bookseller to global powerhouse with a three (or is that four) pillar strategy
Amazon didn’t start life as a platform Business Model, but as an online bookstore that later diversified into other
products. The e-commerce and fulfilment capability that was developed was then made available to third-party
vendors as a service platform offering – the Amazon Marketplace. The Amazon Marketplace had a record year
in 2016 and surpassed 40% of all sales made on Amazon.com with more than 80% of all items listed on Amazon
being from third-party sellers.
The growing success of Amazon Prime, and it’s ability to increase the stickiness of the relationship consumers
have with Amazon, is clearly a significant factor with customers in the US, with Prime members now exceeding
non-members.
Amazon Marketplace and Amazon Prime are two of the three pillars that have driven growth for the company.
The third pillar, Amazon Web Services (AWS), was a natural progression given the scale of the investment in IT
infrastructure that Amazon was making. AWS is now the world’s largest provider of cloud infrastructure services.
There has been much speculation about likely source of continued growth for Amazon beyond Marketplace, Prime
and AWS. Analysts have suggested a range of potential options, such as grocery, logistics, fashion and Alexa/
artificial intelligence.
Amazon have their fingers in a lot of pies. Two of their most recent, and most visible, innovations are the recent
foray into bricks-and-mortar retailing through their Amazon Go concept store in Seattle, where new customer
experience technologies are being trialled, and their high-profile acquisition of Whole Foods in June 2017.
But it is perhaps AI where the biggest bet will be laid. Just as Prime became a key enabler of Marketplace growth,
Bezos believes that AI is the “enabling layer” that will “improve every business”.
With Amazon, Alphabet and Facebook all investing heavily in machine learning, machine vision and natural
language processing, the race is on to bring these technologies into the mainstream. And once the technologies
become mainstream, how long before they are available through a platform offering?
Maybe this is why retailers with scale and brand recognition such as IKEA are now considering the possibilities of
partnering with Amazon. The current question may be “Is anyone too big to be an Amazon customer?”.

Next generation retail: The rise of the omni-platform. 21

 Conclusion
Platforms are here to stay and they will continue to increase their power
and influence in the retailing eco-system. As they provide the consumer
with ultimate convenience, retailers and brands must take a proactive and
structured approach to determine what role platforms will play in their
business. Businesses that fail to undertake this process may lose out.
1. Platforms are becoming more and more powerful and important to consumers and
brands. To survive and thrive, retailers need a proactive strategy to work out how to
work with them, to either use them to fuel growth or protect the downside
2. There are many types of platform, all are innovating at pace and racing/ converging
around a broad eco-system that provides ultimate convenience for consumers and
extracts the maximum value from the transactions. You need to understand the rapidly
shifting market to have a chance of leveraging it
3. There are many benefits available in terms of engaging customers and communities,
leveraging innovation, accessing trust and credibility, faster execution and lower costs
4. There are also many dangers to guard against – margin compression, customer
relevance and data being of greatest concern
5. A structured approach to creating a platform strategy is a must-have. Otherwise your
lunch will be eaten before you realise it. Workout the Why, What & How of dealing
with platforms and get organised about how you buy/ build/ collaborate to access the
capabilities required to successfully deliver your value proposition

Talk to Boxwood.

22 Next generation retail: The rise of the omni-platform.

Next generation retail: The rise of the omni-platform. 23
We are working with many leading Retail and Consumer organisations
across the globe to help them make the difficult choices that need to be
made. If you need help navigating your way through the challenges:
Talk to Boxwood.

Contact for more information:

Matt Clark | Head of Consumer, Partner, KPMG Boxwood

T +44 20 7311 8149
E matt.clark@kpmgboxwood.co.uk

15 Canada Square

Talk to
London
E14 5GL
United Kingdom

Boxwood.
Tel +44 20 7964 1700
Email info@kpmgboxwood.co.uk
www.kpmgboxwood.co.uk

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