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Virtual Grocery And Toy Stores On The Rise

This article was first published on 9 February 2013.

This article provides a nice overview of virtual stores and their potential impact on both traditional bricks and mortar and “traditional” online stores.  Three interesting points from the story:

  1. The first point revolves around the impact of smartphones. Elements of the virtual store model are actually quite similar to the more conventional mail order and catalogue business models. The big difference though is the emergence of the smartphone which the author argues is the key enabler for this business model. The combination of mobility, computing power, connectivity etc. enables the value chain to be reconfigured in ways not possible without smartphones. This is an important point in the context of predictions of continued exponential growth in the computing power of smartphones over the next five to ten years. Just as developments over the past five years have opened up new possibilities and new business models, it’s highly likely that we’ll see the ground continue to shift rapidly over the next five to ten years as well, making a large number of things that seem impossible today very possible in the not-too-distant future
  2. The second point from the story relates to the way in which the virtual store model uses advanced technology to create key elements of the traditional store experience specifically to overcome the some of the challenges created for online shoppers by that very same technology when applied in a traditional website context (e.g. the difficulty of “browsing” through multiple products etc.)
  3. The third, and in my view, most interesting point relates purely to strategy and centers on the strategic power of asking the right question. The article includes two short videos (both of which I would recommend), one of which is a short case study on Tesco’s experience with a virtual store in South Korea (the Tesco video is embedded at the bottom of this post to make it easier for you to get to). After a number of years in South Korea Tesco occupied the number two position in the grocery business in South Korea. Just as Honda’s founder is reputed to have transformed Honda by asking his team “How could we put six Honda’s in every garage?”, Tesco’s leadership asked “Could we become number one without increasing the number of stores?”. Asking the right question is, in my view, much more art than science, but if you get it right it can profoundly change the way you think about a problem, free you from the constraints of industry orthodoxies and dogmas and be a catalyst for breakthrough innovation. Tesco’s question directly challenged the assumption that the only two forms of retail presence you could have were either a physical store or an online store and resulted in creation of a hybrid that provides the best of both worlds for both Tesco’s customers and Tesco itself.  The key is to ask a question with a constraint that, on the face of it, can’t be met.  Asking the right question is a craft to be practised but can be one of the most high yielding activities a CEO or strategist can engage in.

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