What does Formula 1 racing have to do with retail?

by Infor Retail August 23, 2016 Digital Transformation

By Kevin Sterneckert, Infor Retail

Amazon (AMZN -1.15%) has created significant turbulence in retail over the past 10 years. Most scoffed at the business case of buying books a better way … but no one is laughing now that Amazon has created a better way to buy just about everything. How can retailers win with so much disruption and uncertainty? The answer, strangely enough, can be found in Formula 1 racing.

The Scuderia Ferrari championship racing team has amassed an impressive resume of wins across Formula 1 circuits. A key to winning is understanding the external conditions and tuning the engine and air foils to maximize performance. Drivers understand that attempting to pass another car on the straightaway is very difficult because of the extra wind resistance generated by leading cars. When a driver is able to slipstream, he or she can slingshot past competitors and take the lead. Slipstreaming reduces the air resistance and drag on the second vehicle in a tandem—so team drivers often use this technique to advance the desired leader.

So how can retailers take advantage of slipstreaming? Amazon has paved the way by proving that every category of merchandise can be sold through all channels of retail. There was a time when many thought consumers would never buy shoes online. Zappos (and now Amazon) have shown this is not true. Fashion apparel, another category many thought safe from the threats of digital commerce, is proving to be an open opportunity online. Instead of trying to pass Amazon where the turbulence and air resistance is the greatest, retailers should be considering where the air pressure is lowest.

What can retailers do that Amazon cannot or will not do? How can they cater to their customers in ways that are more relevant, more endearing and more valuable than the competition? What exclusive merchandise can they offer in the market that will draw attention to their brands and services? How can retailers encourage customers to shop their brand—even though shoppers aren’t walking past their physical stores as often and are shopping completely differently than they have in the past?

Retailers who find ways to localize merchandising decisions based on consumer demand preferences are realizing double-digit sales increases for every category deployed. Those who are pricing based on consumer demand—and not a margin expectation that is set based on history or tradition—are realizing high single-digit sales and margin increases. Retailers that are examining the attributes customers love (and the ones they don’t) are able to deliver new products to the market that are exclusives. There are many examples of retailers finding the slipstream and leaping ahead of Amazon and the rest of the pack. This can only be accomplished by looking at retail differently than your competitors do.

The data, technology, and advanced analytics with which you empower your employees matter. But if your decision makers have the same tools their competitive counterparts have, how can you expect different results?

Finding the slipstream is difficult; leveraging it is equally challenging. Going head to head with the same tools yields a nearly impossible task of moving beyond your competitors. Equip your decision makers with elegant, insightful, and intuitive technologies that identify the opportunities and recommend the best approaches to connect with your customers, and you will win the retail race. Do it consistently—you’ll change the race and take your place in the winners’ circle.

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