It’s hardly breaking news that large traditional retailers are struggling to keep up with growing transnational corporations. And we all know that relying on their own R&D is no longer enough. The future of high street brands we know and love has never been more uncertain.
It has never been more important for traditional retailers to look outside their organisations and engage with startups. In 2018, 47% of US CEOs are planning on entering into partnerships. And with benefits including product enhancement, operational efficiency, channel growth, not to mention new business models, talent and capability, and medium/long-term relationship development, it’s easy to see why. Finally, a solution to help traditional retailers buck up their game, right?
On the basic level, yes. It appears that these partnerships are the future. We’re already seeing successes in the market – Sephora’s partnership with Silicon Valley’s Modiface, who have developed a programme that uses AR and AI to allow customers to ‘try before they buy’, has resulted in a 6% increase in profit between 2016 and 2017.
And it’s not just in retail where large companies are outsourcing areas of their business to startups. Take Airbnb. They have partnered with AirSorted, a company that helps hosts manage their bookings, and also work with Booking.com and Expedia. Such partnerships alleviate pressure on traditional companies, as well as ensuring that they keep up with constant technological changes.
However, as with anything new, there are a few creases that need ironing out. In our experience the success rate for strategic partnerships is about 50/50. The secret of the successes? Mutual trust, clarity, understanding and preparation. Partnerships are going to define the future, so why not be good at them?
Introducing new ways of working to your team, promoting entrepreneurial mindsets and fostering a culture of innovation means that when a startup comes on board, their innovative and agile ways of working won’t feel quite so foreign.
Start with culture fit. For partners to work effectively together, there must be a mutual understanding of one another’s culture. Don’t dismiss the dynamic nature of startups – the first hurdle which many large companies fall at when sourcing for startups is how to effectively engage and do business with the startup community.
Make sure there’s clarity and alignment of what is trying to be achieved between all involved. Awareness of all aspects of the partnership, including payments, goals and expectations, allows both partners to be clear on what they are trying to achieve. And ensures that the right enablers and resources are available and accessible. Why wouldn’t you help someone else to help you?
Strategic partnerships allow traditional retailers to expand and grow into the ever-changing world. It is the responsibility of both sides to ensure the partnership is prosperous. It makes sense that relationships with partners are conducive to success, rather than failure. Doesn’t it?
This article was originally published in Retail Week.