I believe there are four key areas business people need to harness in order to grow in our newly digitally disrupted business environment. Not just to survive, but to be successful enough to grow sales, and meet a growing payroll and roster of trade and non-trade supplier stakeholders (landlords, utilities, banks, state and federal tax bodies). And perhaps have something left over to reinvest in innovation projects, shoppers, staff, and the business’ infrastructure.
The four areas are: Technology in everything you do; millennials (shoppers and team members); innovation and re-invention in what we do and how we do it; and finally, partnering. Partnering is mercurial magic that has delivered us Google, Uber, Airbnb, Apple, Amazon, Lazada, Alibaba … please stop me when the point has been made.
Most new retail companies start with a core idea, focus on delivering it to shoppers and need to partner very early on. They have to. They can’t afford their own HR team, in-house legal counsel or marketing team. They partner with accounting, legal and marketing companies that provide these services as their own core offering; they’re experts in these services. If a company is selling physical products, they usually partner with physical distribution and warehousing companies — third party logistics (3PL) companies.
But what happens when a company fails to build a partnership in a key area of their offering?
Recently, I came across a new online retailer that apparently struggled to partner with their 3PL partner. I don’t know why, but I do know that partnering with 3PL is core to the success of the likes of Alibaba, Lazada, Apple and Amazon, so it’s important to any online retailer’s success.
In fact, the struggle for this retailer became so pronounced that it was necessary for shareholders to fund new warehousing space with the associated “start-up” issues we all face when we choose to go in-house with our logistics function. Those big “sheds” come with a mountain of orange and blue Dexion racking, a warehousing ERP system, forklifts, warehouse staff, packaging materials, Chep pallets and a logistics director, plus suppliers for all those things. Once we have all the “stuff” in-house, we need to spend five years developing a competency within logistics. Understanding local and international sea and land freight rates, Certificate of Residency to manage GST/VAT issues, case sizes and bug spraying, to name a few of the issues.
This company’s core online offering to shoppers is great; I shop with them online. They’re bold, challenging and an innovative leading light in their industry. Their shopper communication is very engaging. But somewhere along the way they managed to master only three of the four key areas to grow — technology, millennials, innovation/re-invention — but couldn’t find a way to build a partnership with their logistics supplier. To solve that issue they’ve had to invest significant capital to build fixed costs into the business, capital that could’ve been spent on building offerings for their digital shopper base.
There was another option: build a new partnership with another 3Pl supplier.
Why does it matter? Because in the new disrupted, sharing economy we have to partner. It’s not an option, it’s a core part of the success mix. As new disrupters, we simply do not have the capital on our balance sheets to fund doing “stuff” that’s not core to our own business, while at the same time funding the things that make us new and attractive to shoppers. We need to build those soft partnering competencies in order to stop us taking focus and capital away from the things that help us grow: the shoppers that give us money.
I believe that many online startups have the innate millennial ability to shape entertaining and compelling offers to online shoppers in Australia, and into Asia. However, I believe they also need to hire experienced individuals with partnering competencies to harness all the non-core elements within their business mix. Otherwise they’ll run out of growth capital and go under.
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Kevin Moore is a retail expert and the chairman of Crossmark Asia Pacific Holdings and Now Comms Group. He is also an independent director of Australian fintech company InvestSMART.
