6 reasons retailers shouldn’t own tech companies
Normally, as a good ex journalist, I try to put both sides of the argument; on the one hand, on the other etc., but in this instance, I have to come off the fence and say that I do not agree with retailers buying tech companies.
Retailers have over-invested their time, not to say money, in tech over the years, and made plenty of mistakes, some of their own making, but naturally the tech industry has to take some of the blame. For instance, there is no reason why retailers shouldn’t outsource, but this only made sense when tech meant little more than data processing. Now that retail is tech – ecommerce, social media, digital marketing, data analytics – it’s easy to see why they want to own and run so much of it.
But this should not go as far as owning the companies that make the tech. Here are my 6 reasons:
You want your tech suppliers to innovate so they need to be exposed to the rigours of the open market to stay competitive and drive them to constantly upgrade. Living in house kills that stone dead.
You want them to get as much experience as possible of working with other retailers so they can base their solutions on a range of real life scenarios, developing best practice for the wider industry. In house, they are cut off from the rest of the industry.
What if a better solution comes along on the open market but the retailer can’t take advantage of it because they have spent so much money buying the tech company?
Or they stop investing in the tech they bought so people are going to be out of a job, and there is going to be a barrage of negative feedback from shareholders who legitimately ask: what business is the retailer in today?
Buying tech companies is not retail. It sounds clever and it sounds strategic, but it isn’t.
The initial projects that go live are likely to take a long time, because there is no commercial imperative for the tech company to develop efficiently. In fact, they can probably go right off to sleep.
Of course, there is an argument on the other side of this that is existential. And it is this; what is a retailer, now that they are no longer in the business of buying and repositioning stuff? Supply has given way to demand and clearly retailers need a huge tech armoury to understand the consumer and start making smart predictive decisions.
So, I can see why Nordstrom bought BevyUp and MessageYes but I still don’t expect it to end well. The tech industry should not be biddable in this way; it needs to make its own decisions, and is already struggling under the weight of consolidation, which has led to some appalling combinations that are not good for retail and not good for tech. Let these two tech companies make their own way in an open market and prove they can add value.