Technology has reshaped the retail industry – changing where and how retailers sell product, services and experiences to customers.
The current reality is that the retail sector is facing a long-term, continuing slowdown.
Consumers are being hit by declining real wages, record levels of consumer debt and the prospect of higher borrowing costs. But whilst these trends are concerning, the wider problem facing the retail sector is the manner consumers are now choosing to spend their money.
The continuous spate of changing consumer habits, innovative solutions, omnichannel processes and tech enabled disruption are all posing some of the biggest challenges the industry has faced. Additionally, retailers are also facing into the traditional operational inconsistencies across their store portfolio – ranging from a lack of optimum inventory through to pricing, promotions and merchandise campaign execution.
This volatile environment is boosting the sales of the likes of Amazon, ASOS and Boohoo, but many are falling behind. Whilst every retailer wants innovative and cost-effective retail strategies for long term business and customer relationship success, consistent performance is proving difficult.
A lack of data and software capabilities, integrated channels and consistent operational execution rank as the toughest challenge preventing effective and efficient end-to-end omnichannel retailing. The pressure to deliver is further compounded by the fact that other channels – specifically Mobile and online – are delivering consistently great operational and customer facing results from product, search, order fulfilment to post-sales support.
Whilst online and mobile are increasing their influence on in-store sales, retailers must close the gaps by combining the best customer experience via deeper insight, integrated digital processes and greater store intelligence across both operations and customer engagement.
To remain truly relevant and competitive, retailers need to view tech and change as co-creators and co-enablers of retail value.
THE DEATH OF OMNICHANNEL
In retail, omnichannel has been a buzzword for years now. The shift from a multichannel strategy – being active across multiple channels such as stores, mobile and catalogues – to omnichannel has suggested some form of profound and lasting change across the industry.
This most definitely has not been the case. Half a decade into the journey and the omnichannel investment is yet to truly bear fruit. Many initial evangelists of omnichannel – think Macy’s and Burberry – have delivered minimal return on investment and have recently been posting disappointing quarterly results. This obsession with all things omni, and a lemming like tendency to follow what is new and shiny, means something needs to change to deliver lasting customer and shareholder value.
The biggest issue is that retailers have been pursuing universal and mass market appeal, rather than delivering relevance and differentiation. In attempting to be everywhere, many brands have gone nowhere. Poor product and customer offerings and an often-underwhelming service have not helped to extend their reach and have resulted in them moving away from their core retail competence.
This lack of consistent performance is a direct impact of investing heavily in ecommerce and digital marketing with insufficient internal capabilities, focus and prioritisation. The majority of retail purchases start online, and despite (the often misinformed) conventional wisdom, store sales are and will continue to be bigger than online sales. Many retailers have invested in ecommerce to the detriment of their store portfolio and seemingly forgotten the revenue engine room that is bricks and mortar.
Digital as a strategy is fine, but only when it is complementary rather than competitive. Retailers need to have a robust and pragmatic view of which digital, marketing and channel integration initiatives they wish to progress, with these being rooted in a deep understanding of customer behaviour and market analysis.
The favoured shotgun and/or magpie approach needs to change to drive improved results.
AND THE RISE OF UNIFIED COMMERCE
Ultimately, the biggest problem retailers need to face into is that customers simply don’t care about channels. The care about services, products and experiences, and about being able to shop with ease and simplicity. Essentially, they want unified commerce – which is a much more descriptive view of what needs to happen than omnichannel. ‘All channel’s’ never has suggested meaningful customer benefit.
And it never will.
TECH AND CHANGE AS CO-CREATORS AND CO-ENABLERS OF RETAIL VALUE
Technology has reshaped the retail industry – changing where and how retailers sell product, services and experiences to customers. Online retailing has created a whole new class of competitors across all industry segments, forced bricks and mortar retailers into digital channels and is now the fastest growing channel globally.
The rapid rise of connected, personal devices has also placed unprecedented levels of price and product information at the customers fingertips. In addition, the industry is being transformed by mass production, global supply chains and mass-market retailers that now offer products previously confined to mid and upper tier brands.
This is causing retailers to focus on the short term, rather than mid to long term.
There is also the impact of demographics to consider. With the ageing of baby boomers comes an increased demand for services. As Gen Y is entering it primary household purchasing and employment years, retailers must now adapt to meet the needs of a culturally diverse and technology dependent market. The impact of these major transitions is being felt by retailers in the form of new, and rising, shopper behaviours and expectations for a single, integrated and seamless experience.
To position for growth, and to truly differentiate in a hugely competitive environment, retailers should focus on the services and experience they can offer, rather than the products they sell.
Given that omnichannel is only going to become more pervasive, retail executives should ask themselves three questions with regards to improving both their operations and consumer engagement:
- What is the vision for their offline and online operations?
- Which processes deliver value to consumers and, ultimately, shareholders?
- Which new capabilities do they need to develop?
To help address these questions, we’ve developed a framework which includes five critical operational areas which ought to be assessed, and if required, addressed. To achieve the best results, we recommend an objective, third party assessment which can then help to prioritise the future roadmap and the advance the retailer in the areas they wish to develop a competitive advantage.