The Impact of Digital Technologies on Innovations in ...

1 Author: David Prepletan The Impact of Digital Technologies on Innovations in Retail Business Models The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 1 of 130 AALBORG university International Marketing The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan June, 2013 The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 2 of 130 ACKNOWLEDGEMENTS I would like to express my sincere and genuine gratitude to my advisor Reimer Ivang, Associate Professor of the department of Business and Management at Aalborg university , for his persistent guidance and timely feedback through the course of developing this study.

2 My appreciation also goes to Birgitte Krogner, Senior Secretary of the department of Business and Management at Aalborg university , for her administrative support. Finally, I would like to express my heartfelt thankfulness to my family and friends for their encouragement and assistance during this last semester of my studies at Aalborg university . The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 3 of 130 EXECUTIVE SUMMARY The journey to business success in the retail industry is neither straightforward nor even. It is a journey fraught with difficulties, obstacles and obstructions that arise from the interplay of several factors and elements that, taken together, render the selection of the correct course intricate and arduous.

3 Not all retailers can stay the correct course in the face of external forces and heightening competitive pressures. However, there are those retailers who have successfully taken advantage of the changes happening in the customers shopping behavior and in the retail industry as a whole. Innovation in technology, both inside the retail stores and in the hands of customers, is one of those external forces that Impact the retail industry and is also the primary focus of this study. This study lists examples of retailers and of recent developments in marketing and technology in retailing that transform the way retail business has been done.

4 Through this study, the reader, potentially retail store or retail chain manager, will explore the topic of retail business model innovation evidenced by cases of retail companies, such as Walmart, Tesco, Safeway, Target, Burberry and other. The role of technology is discussed in these cases and also separately with an outlook to those future Technologies that are poised to grab the attention of retailers. Examples of those Technologies include, but are not limited to, location-based applications, targeted and customized mobile promotions, mobile point-of-sale, personal shopping assistants and radio frequency identification technology.

5 The study describes how these Technologies might affect customer behavior and change the role performed by the store personnel. The combination of these examples sets the stage for a look into the near future of retailing. Moreover, these examples convey an interesting insight into current and future technology trends. Future trends that are going to be characterized by technology creating stronger connections between customers and retailers. Connections that will increasingly be made across several channels and mediums that customers feel comfortable with and that retailers can utilize to increase both their profitability and competitiveness.

6 The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 4 of 130 CONTENTS ACKNOWLEDGEMENTS .. 2 EXECUTIVE SUMMARY .. 3 CHAPTER 1 - INTRODUCTION .. 9 Background of the Study .. 9 Technology Connects Retailers to Customers .. 10 Technology Opens up New Data Sources .. 11 Multi-Channel Approach Evolves into Omni-Channel .. 13 Research Problem 15 Contributions of the Study .. 17 Objectives of the Study .. 18 Definition of Terms .. 18 CHAPTER 2 - METHODOLOGY .. 22 The Influence of Rapid Technology Innovation on the Chosen Research Method and Literature Sources Used.

7 22 Case Study as a Research Method .. 25 The Question of Reliability of On-Line Sources of Information .. 26 Limitations and Further Research .. 27 CHAPTER 3 LITERATURE REVIEW .. 30 Business Model .. 30 Competing through Business Model 36 CHAPTER 4 SELECTED CASES .. 52 Leveraging Customer Loyalty Data Case of Tesco and Safeway .. 52 Customers as Co-creators of Value Cases of Mix My Granola, chocri and My M&Ms .. 55 The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 5 of 130 Big-format Retailers Innovate In-store Fashion Lines Case of Target .. 57 Luxury Fashion Retailers Enhance the Store Experience by Introducing Technology inside the Stores Case of 59 Extending Sales of Luxury Fashion to the On-line Channel Case of Gilt Groupe.

8 62 Adopting Alternative Retail Formats to Strike a Difference Case of 65 CHAPTER 5 - APPLICATION OF TECHNOLOGY Innovations IN THE RETAIL INDUSTRY .. 68 Digital Promotions .. 68 Location-based Applications and Mobile Promotions .. 72 Mobile Point of Sale .. 75 Mobile Payments and Digital Wallets .. 78 Personal Shopping Assistants .. 87 Electronic Price Tags .. 89 Radio Frequency Identification (RFID) Technology .. 90 CHAPTER 6 CONCLUSION AND A LOOK AHEAD .. 94 Can Innovations in retail business model lead to a sustained competitive advantage? .. 94 Do new Technologies have the potential to influence the introduction of completely new retail formats?

9 95 What are some of the key Technologies and trends that have the potential to change the way we shop in retail stores in the future? .. 96 REFERENCES .. 101 APPENDIX .. 123 Cover Letter (Grocery Shopping Example) .. 123 Self-Completion 124 The Impact of Digital Technologies on Innovations in Retail Business Models by David Prepletan Page 6 of 130 Topics to be discussed with and questions to be asked of the grocery retail store s managers during face-to-face interviews .. 130 FIGURES Figure 1: Interrelationship among Technology, Customers and Retailers .. 10 Figure 2: Data & Information Sources Used in this Study.

10 23 Figure 3: Emergent, Inductive Approach in This Study .. 25 Figure 4: Future Research Outline .. 28 Figure 5: Business Model Elements .. 34 Figure 6: When to take on business model innovation? Source: Adapted from Johnson et al. (2008) .. 36 Figure 7: Traditional Business Model - Low Costs Bricks-and-Mortar.. 41 Figure 8: Traditional Business Model - Premium Bricks-and-Mortar.. 42 Figure 9: Impact of the Internet and Mobile Digital Technologies on Retail Shopping.. 43 Figure 10: Changed Business Model Multi-Channel 44 Figure 11: Multi-channel Shopping Experience for Customers and Business Opportunity for Retailers.. 50 Figure 12: Digital Wallet s Retail Applications.