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Vish Ganapathy Urges C-Stores to Avoid Being in the Middle

During his keynote Technology Edge address, Ganapathy advised retailers to compete on innovation.
October 24, 2016

​ATLANTA – Vish Ganapathy, vice president and CTO of IBM Global Consumer Industry, led the Technology Edge keynote address at the NACS Show, sharing how retailers can shift their mindset to the consumer experience to remain competitive among a sea of marketplace disruptors.

Ganapathy is no stranger to the convenience retail industry; he spoke in 2014 at the Conexxus Annual Conference on the future of retail technology, and how the convergence of online and physical retail exerts greater influence over consumers.

But to see what’s coming down the pike, the need for data science is essential. “Humans are terrible predictors of the future because we’re tarnished by what we see today,” Ganapathy said.

At the consumer level, their expectations have always centered on quality goods and services at affordable prices, and fundamentally not much has changed in the market for retailers such as department stores. And herein lies the problem, because if a retailer such as a department store has a long legacy, change is hard. But for consumers, change is always out there.

The biggest threat to retailers are the new competitors “that aren't classified as competitors," he said, citing three megatrends:

  1. Widespread, competitive disruption. “Disruption is going to happen, and we are barely scratching the surface,” Ganapathy said, noting that smartphones today will look like toys in the future.
  2. An explosion of devices will totally change how we shop.
  3. Data science to determine how we’ll make better decisions.

Established markets will continue to grow, Ganapathy said, but a larger share is going to come from emerging markets to create a retail climate where consumer expectations continue to change, where digital and physical retail interact, and where you either disrupt or become disrupted. To survive and thrive, data and ensuring security “are mission critical.”

Ganapathy pointed out that the mindset at retail will shift from merchandise centric to customer centric, meaning retailers must know who is shopping their stores and why, which requires deeper analytics to go beyond offering a coupon just to sell something, and instead offering a coupon on something that the consumer frequently buys. And if a customer stands in front of an endcap for more than 17 seconds, the assumption is that he saw the product. But did he buy it?

He also cautioned that being “in the middle” can eventually be dangerous to a convenience retailer’s health, noting that there is a gap between the innovators and the people who primarily focus on cost. “You can compete on innovation or price, but you can’t be stuck in the middle,” Ganapathy said.

In terms of what’s keeping folks up at night, Ganapathy suggested that technology is “eating” retailing, with 54% of retail executives saying that in five years they expect competition from outside the industry to be more significant and impactful than competition from within the industry, such as trading platforms from Uber, Google, Amazon and Netflix.

“Things” are disrupting e-commerce sites as well, said Ganapathy, noting that disruptions happen even in the digital world. Amazon recently suggested it would create small format “convenience stores.” While large retailers going from big formats to smaller footprints is nothing new in retail, what Amazon could end up doing is disrupting technologies. “Things like POS will be heavily disrupted because Amazon doesn’t have that legacy system already in place,” he said.

In closing, Ganapathy suggested that a new way of thinking is required: “The customer is the only channel,” he said, adding that there is no such thing as omnichannel.

“The concept of ‘channels’ is a byproduct of silos in people, process and technology ... We cannot foresee how many ways our customers will choose to engage with us, so we need to design solutions that can be leveraged way beyond the original context in which it was imagined for.”

So what’s a retailer to do? Ganapathy offered a handful of ideas:

  • Forget about channels: Invest time in making sure store associates can service customers well.
  • Develop a new strategy regarding the role of the store.
  • Elevate your store associates to concierge status.
  • Incorporate data science into your merchandising.
  • Invest in innovation.
  • Turn your supply chain into a competitive advantage.

And if you could only do one thing to take on marketplace disruption, focus on injecting data science and analytics-driven insights, including: optimization in the merchandise mix, machine learning systems that assist associates and customers, and relevance in customer interactions based on insights, infused with personalization and context.