Digitalization, the growing use of digital technologies in the ways businesses interact with each other and with their customers and suppliers, has radically changed the rules of the market game in almost every industry.
So has globalization, the integration of domestic and overseas markets.
In some industries, digitalization and globalization have created a winner-take-all game in which the company that wins the game accrues almost all the pay-off.
How? By attaining either a scale or a network advantage.
A scale advantage is the cost gains associated with large production size. A network advantage is the revenue gains associated with a large distribution network.
A good example is the e-commerce industry, where Amazon has achieved the size to be the winner-take-all. Then there’s the search engine industry, where Google is the winner-take-all player. And the social media industry, where Facebook is the winner-take all.
How can a newcomer compete in a winner-take-all game? What does it take?
“The single most important rule in competing in the digital economy is offering relevant customer experiences, and developing an online and in-store strategy that meets customers’ unique needs at every moment,” says Dan Neiweem, Co-founder and principal of Avionos. “The digital economy is a trillion dollar sector, crowded by tons of players all vying for consumers’ attention.”
How can they get it? They must provide the right customer experience, according to Neiweem.
“In order to stand out, brands and retailers must provide an experience that’s based directly on customer feedback and user data, and checks all of the boxes that are required for positive interactions today - omnichannel touchpoints, robust, accurate content, optimized digital shopping carts and personalized offerings,” says Neiweem.
That’s what Walmart did in its bet to compete head-to-head against Amazon, according to Neiweem. “Walmart has completely evolved its traditional brick-and-mortar customer strategy to directly meet the needs of its shoppers across multiple channels, he adds.
That wasn’t easy. It took a great deal of resources to recruit and retain software development talent and acquire competing on line retailers. Like Jet.com and ModCloth and Bonobos.
“Walmart understands that no digital strategy is static,” says Neiweem. “As it seeks to compete with other marketplaces like Amazon, Walmart has completely revamped its website and eCommerce offerings, investing in cloud tech to ensure that each experience is modern and can be evolved quickly to meet ever-changing customer demands.”
While a head to head strategy may work for large well-established corporations with deep pockets like Walmart, it doesn’t work for smaller start-up ventures. They lack the resources to compete with the dominant player, and therefore have one choice left: join the dominant player.
That’s what thousands of “third party” suppliers have done by listing their products on Amazon site.
They’d rather partner with, than compete against, Amazon.
