The great misunderstanding which is delaying Italian retail innovation.

Fausto Caprini
05 Oct 2017

There is never enough good news, and I have gladly accepted the (moderate) optimistic convergence of various analysts on future predictions for Italian retail. The ‘Osservatorio Confirmprese’, proposed at the ‘Retail Summit’ in Stresa between the 21st and 22nd of September, presents a growing sector with new settlements, for a business growth of 3.2%.

However, I believe that in this moment for every type of news, good or bad, a finality cannot be given to them. In my view, these are simple indicators of a complex transition and pain for the companies in our field towards or post canality, as others have themed it, unified commerce. This is a global phenomenon, with significant impact in the United States, it does not leave any doubt towards: successes (few thus far) and mishaps (unfortunately many). These are indicators that innovation in distribution is increasing in importance, especially regarding competition and survival factors. Some are rewarded if they have obtained, or are obtaining, a single offer and a single purchasing experience where digital processes play a significant role, especially in services, as a revenue accelerator due to its engagement capabilities.

Italian retailers which invest on the ‘online’ struggle to generate revenues. As much that 8 out of 10 find themselves in the condition to recognise the strategical importance but remain sceptical about potential economic returns. The channel presents costs double to standard offline ones, and it strongly counters the resumable temptation of Hooper’s famous words: “the most dangerous phrase is: We have always done it this way”. Perfectly explaining the so-called Retail Apocalypse.

We cannot exempt ourselves from online channels since they are a powerful extension of showcases. This is the fundamental which is justified by the fact that the majority of purchases are done in traditional stores; however, decisions are still made online where 60% of consumers say to check or decide on a product before seeking it in store (83% in the USA and 90% in the UK). In Italy, shopping in store marks a 4.7% decline, with lows of 6.2% in malls. Digital channels, in the future, should transform digital views into physical store visits.

On Retex’s website we are regularly publishing news and insights on “delivery wars” which, with billions of dollars invested, is aiming towards the integration of digital experiences in the traditional buying process. It is a highly expensive process whose importance for the consumer is not yet clear.

“Innovation” is a term globally perceived as positive. Jospeh Schumpeter, however, spoke about it as the “creator of destruction” as it can so drastically impact certain sectors to force a company to evolve, failure to do resulting in shut down. “Innovation” is a global term which is only perceived as being positive; yet it indicates resistance, pain, renunciation, misunderstanding, vision, improvement and affirmation, or even just survival. I remember the mediocre reactions of some Italian retailers when, in the early 90s, the phenomenon of discounting was growing, “a business model which will never work in Italy”. We then saw how it ended.

Italian retail needs to free itself from a great misunderstanding: that offline and online channels are alternatives and opposites. They are instead two parallel sources, different but contingent, of revenues for the same profit. Innovation will have to drive this forward, especially the digital channel, obtaining the definitive meaning of the word itself for the retail market. From ‘opportunity’, if not ‘risk’, to ‘necessity’.