Today’s opinion piece on the urgency of innovation in the retail space comes from Tim Evans, Digital Strategy Director of Ogilvy Group Melbourne.

Do you remember the first record you bought?

Mine was License to Ill by The Beastie Boys. The one with the cool airplane crashed on the sleeve. Yep, they were the good old days. Back when you’d make those weekend trips to the record store, flip through CDs, and try to make eye contact with that blue-haired girl. When ordering an XS Ramones tee with free shipping via the Internet sounded super sci-fi, and streaming Radiohead was something you dreamed of.

Bon Jovi remembers. Just the other day he was blaming Steve Jobs for destroying his trade. Gone are the golden days of the CD super profit. Apple killed the record-store star, he said. They’re murderers of the music business.

We’ve heard this song and dance before.

Often from those at the top of the food chain who bemoan some new techno threat. But in the wake of the Borders collapse, it’s becoming clear which companies have fought to hold their position in the retail playground, and those who have simply failed to innovate.

Recently, Forbes wrote that multichannel retailing is becoming obsolete. The title was misleading. The definition of multichannel retailing is what’s changing. Traditionally, covering all your bases consisted of a store, a site and a catalogue. Fast-forward to 2011, and you’ve got far more to think about.

From apps to social media, mobile sites to interactive marketing, consumers expect to find their favourite brands everywhere, anytime. More than that, they want to purchase there and then. But if the retail site is understocked and the app doesn’t function, there is a high risk of disenchanted consumers. And there are plenty of other players in the marketplace that’ll give them what they want.

This shift in expectation represents an important challenge for top-tier retailers. Those at the height of their game are most at risk from obsolescence. The bell curve is a dangerous beast. The challenge calls for the category leaders to recall how they got to the top in the first place – by staying competitive, nimble and ahead of the curve. R/GA calls this approach purposeful play – ‘purpose gives focus to innovation’.

Look at Best Buy in America, for example. These guys are live tweeting during the Consumer Electronics Show about products their followers might see in store. They’re featured in the Shopkick app, giving customers incentives to come in store. Not to mention the monthly eMagazine they produce, tackling a new tech topic each issue.

And who could forget Starbucks? They dedicated a microsite to customer suggestions on how to improve their brand, receiving 98,000 ideas and a whole lot of consumer brand advocacy. Howard Schultz, Founder and Chairman of Starbucks, famously used their digital channels to communicate with customers why the logos were changed. Oh, and they have an app that tracks rewards, reloads cards with money, and pays for coffee through scannable barcodes.

These are just two examples of how quality multichannel retailing can earn a brand money, press and advocacy. It’s triple the winning. But while many retailers have pledged to invest more online, innovative e-tailing is easier said than done.

My point here is urgency.

Because while industry concern is high, the stakes are higher. According to Forrester, online spending in Australia increased 12% to reach $27 billion in 2010, with 40% going to overseas competitors. However despite this opportunity, many retailers are concerned about cannibalising sales in their brick and mortar stores. This logic has always seemed odd to me. Especially in light of recent data from eMarketer. Their report explains that in 2007, for every $1 spent online, the Internet influenced $3.45 of in store purchases. In 2011 it will influence $5. This is not innovation for innovations sake – it’s quickly becoming a matter of survival.

The writing is on the wall. Big retailers must innovate. They need to swallow their fear, apprehension and pride, and take a bite out of the ecommerce apple. Cover all bases, and deliver the experiences a consumer craves.

Because if they don’t, you can bet their competitors will.

Tim Evans is the Digital Strategy Director of Ogilvy Group Melbourne. You can follow him on Twitter at @Tim__Evans.

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