When you say the word “aggregations ” to any IT’er, the concept that immediately comes to mind is a data aggregation – a place where detailed transactional data is summarized so that you don’t have to go through all of the line-item details every time you want a total. Aggregations have been really useful for business application systems, because they improve the overall performance of the most applications.

But data aggregations create limitations too. As SAP founder Hasso Plattner wrote in 2014, “The assumption that we can anticipate the right pre-aggregations for the majority of applications without creating a transactional bottleneck is completely wrong. ” Not only does the maintenance of aggregations in itself require a lot of work on the part of the application, but aggregations also assume that we have predicted all the various ways that people will want to look at and use data. That’s simply not the case. As Plattner said, “… now we have to realize that we only did transactional pre-aggregation for performance reasons. ”

But the term “aggregation ” can have other contexts. For example, when you say “aggregation ” to a demand planner, it means the first level of demand aggregation that the planner needs to forecast. For a retailer, it might mean “this many of an item for one day at one location “. For a supplier however it might mean ” this many case packs of that item for a retailer per order cycle “. Andre Martin, co-author of the 2006 book Flowcasting the Retail Supply Chain, contends that the fundamental flaw in how partners in the value delivery chain work together is that they each forecast based on different aggregations, and because of that, then end-result is too much of the wrong kind of inventory in the entire system.

Aggregations have some common characteristics:

• They feature pre-conceived organizations and access methods;
• The aggregator can do something the individual cannot, but…
• Individuals’ choices get limited, and that means that…
• The ability to innovate with the agreed-upon value being delivered is restricted; and,

• When aggregations outlive their usefulness they (eventually) get deleted.

The Store Is An ‘Aggregation’

There are all kinds of organizations that serve to aggregate either information or demand, and a lot of them are in trouble. Here are some examples: network news channels, political parties, social clubs like the Loyal Order of Moose, TV shopping channels… and stores.

But when you use the word “aggregation ” to a retail executive, as in “your stores are the first level of demand aggregation in the value chain, ” you might get some strange looks. What a geeky way to look at the business! And yet, that’s what most stores are: a physical place where aggregated demand meets up with supply. The reason that’s a problem from retailers today is that consumers don’t have go to supply to get their individual needs filled – supply will come to their doorstep. So the question becomes, what’s the point of that having that aggregation, i.e. why have stores at all?

As RSR has been pointing out for years, consumers can find what they want on the Internet, and if the digital representation of any product is “good enough ” to make a decision with, the store is increasingly irrelevant. And the point of that is that digital representations of things that used to require hands-on experience with are getting better and better, especially with the consumerization of augmented reality (AR) technologies. For example, take a look at what Sephora is doing with AR solution provider Modiface on its mobile app.

The End Of Aggregations As We Have Known Them

Old aggregations are fast outliving their usefulness, and there are several reasons why (all of which impact Retail in a big way):

• 24X7 access to the Internet, “anytime and anywhere “
• Social Networks
• Big data and Analytics
• Markets of One (extreme personalization)
• “Anything ” as a service

The question is, how can retail stores survive in the long term in such a world? That came powerfully to mind as I was reading a piece in the Sunday morning San Francisco Chronicle about Best Buy (Now comes the difficult part for Best Buy CEO, by Thomas Lee). The article points out how the CEO, Huber Joly, has stabilized the company without having to resort to store closures. But even Joly admitted that the strategy to-date had been to “pick the low-hanging fruit “, like updating its web site and unifying its channel-specific supply chains into one. The question is, now what?

According to the article: “But Best Buy needs to move beyond its suppliers. As part of his new strategy, Joly wants the company to sell advice and services directly to homes and businesses. ‘Our customer value proposition is to be the leading technology expert, who makes it easy for them to learn about and confidently enjoy the best technology,’ Joly told analysts during an earnings call this month. ‘We believe we can and should go beyond selling products to customers. We want to focus on their underlying needs, which is entertainment, communications, security, energy management, and health,’ he said, adding that it will result in a ‘stronger relationship’ with customers. “

And that’s a clue for every other retailer. To live in a world where supply can go to a single instance of to demand wherever it is, the retailer has to add something that no one else can deliver in the same way – something personal, something exceptional.