Retail is transforming, and you need to act now
Think Tank: McKinsey & Company – Report summarized by : Bummary
Data filed by US retailers in the past three years reveal a contradicting trend; on the one hand we have seen the number of store closures outpace store openings, and on the other US retail sales have recorded a 3.9 per cent increase to reach $3.53 trillion at the end of 2017.
In this Bummary, we’ll touch upon the disruption and changing trends in the retail industry and help you identify the ideas, insights and strategies to build upon these changing dynamics and fix your organization for sustainable and long term growth.
- Building Omni-channel, not to be misunderstood with multi-channel is going to be a critical barometer for success.
- Data analytics and AI will play a huge role to not only streamline front-end client interactions but also build robust backend systems driven by robotic process automation.
- Talent is going to be the key. Retailers, even big brands have to re-invent themselves to attract Gen-Z. They are up against new age tech giants and suave startups for the race to attract and acquire talent, and appealing to their sensitivities will be the key to success here.
- Retailers will also have to understand the new age dynamics of multi-industry business models. Amazon is the perfect case study to understand how an e-tailer has progressively built capabilities across businesses like web-services, on demand video and smart-home devices.
- Process automation will make current labor force redundant. CHROs and Chief People Officers in your firms have to look at this challenge today before competitors, regulators or leading societal figures pounce put you on the defensive.
Key Ideas and Insights:
Reinvent physical stores
Building an omni-channel sales strategy goes beyond having an e-commerce store or an account on Instagram or Facebook. It is all about customer experience driven by insights. The new store has to marry the digital experience with an in-store experience that is as smooth and friction less.
For instance, Nike the leading consumer sports brand allows its customers to use the Nike mobile application to reserve products in store for pickup, scan QR codes on store merchandise to identify available colors and sizes, and book consultations with experts all through the convenience of a handheld device.
Note: Today’s consumers expect services at light speed and aren’t brand conscious to make choices. For them it’s all about the zing factor and the convenience and experience of feeling special. Making consistent customer experiences across the chain can help you attract and retain customers in today’s times.
Spend on data & analytics
Most CXOs realize the power of digital but aren’t sure of the ROI on tech spends justifying the initial budget or expenses. However, digital is the key to differentiation and success in this market.
Building a tech strategy having all key stakeholders in the room is critical here. From targeting product pricing and promotions to smart category management, all of this can and should be backed by tons of data analytics providing you the visual and informational apparatus to stop second-guessing your next strategy.
Personalized marketing is a powerful way for firms to realize incremental customer value and drive sales. Companies that have toyed with the idea of using data analytics to provide consumer specific offers have seen sales rise by 10 to 30 percent, and a 5 percent improvement in customer acquisition rates.
Reading consumer signals like social media interaction, browsing data and historical purchases are a few ways to build customer specific predictions for your next marketing effort.
There’s no perfect data or system to start realizing this value. Start with what you have, and build slowly and progressively towards learning your customer’s trends and tastes. One-on-one personalization is ideal but one-to-many is still better than no personalization at all.
Retailers taking the lead to build technologies around customer experience stand to gain as much as 2 to 5 percent in EBIT returns in comparison to tech laggards.
Want to win in the long run, then learn to walk together
Technology leaders in retail like Alibaba and Amazon have taken a huge lead to learn, and then perfect technology interactions to enable client retention and value creation. For standalone companies looking to enable a digital first omni-channel experience, going through the learning curve again is a costly affair. Building relationships with other companies that have those capabilities is a smarter and faster way to add on to your arsenal.
Retailers like Kroger, Walmart, Carrefour and H&M are all leveraging tech through partnerships with firms like Google, Amazon and Alibaba.
Kroger for instance have partnered with UK based Ocado to build 20 automated warehouses in the next three years. McDonald’s have partnered with Uber Eats to streamline food delivery for thousands of McD stores around the world, and Amazon has a store front on Alibaba’s TMall.
A thorough capability analysis before any partnership is made is the key. Once a close assessment of the partner’s capability is carried out, use cases must be built to understand how those capabilities can be in cashed.
Collaboration is not just about current benefits. It can allow you to re-imagine the entire retail business model from scratch. An ecosystem might offer rentals, subscriptions, ad space, or digital goods all together thus not only providing current value but also potentially new revenue streams and ways to reach customers.
Talent is a no-brainer but how you do attract the right people?
New age talent doesn’t like structures. They crave autonomy, freedom and recognition of work. Operating with conventional matrix structures will kill your ability to get the talent your business needs to succeed.
Agile organizations are three times faster to hit the market with new offers and twice more likely to take the risks needed to transform customer experiences into omni-channel possibilities. Move away from current structures and instead move towards cross-functional teams that use ‘concept sprints’ to design, test and scale opportunities. Identify new value proposition to attract talent from the gig-economy and other non-traditional industries.
Companies like Walmart and Target use acqui-hiring i.e. buy smaller startups to integrate new talent into their companies. You should also focus on re-skilling employees to meet the challenges of the new economy. Now, with disruption and transformation at your doorstep make use of this opportunity to identify skill gaps and put your employees into skill based knowledge programs to expand their perception and capabilities.
Risk isn’t binary it’s important to take a holistic view of your risk paradigm
The looming trade war gave us a glimpse of the major financial devastation companies who’re excessively reliant on China for their goods put themselves up for. Retailers need to look at risk holistically. Today you’re exposed to multitude of risk factors like brand reputation risk, investor activism, cyberattacks, and data privacy breaches.
One way to build a robust risk management framework is to look towards the financial sector which has been constantly under regulatory pressure to build robust risk management practices. Tomorrow’s world is all about data and consumer privacy. Use this transformation as an opportunity to to build data protection and resilience systems and real time systems to track and deter attacks to your most critical digital and physical assets.
Retail industry is at a point of inflection. Historically it’s an industry which has always been at the forefront of disruption and today is no different. To survive and thrive in this transformation you have to go back to the drawing board and find fundamental ways to disrupt and de-link current processes to a more agile and rapid deployment of ideas, talent, technology and strategies.
Here are the key takeaways to initiate the transformation:
- Build new talent acquisition strategies based on new age value proposition like flexible work hours, autonomous and flat organization structures and creation of cross function small teams.
- Look for collaboration across industries based on your current and future growth maps. Carefully analyze your short comings and look for strategic points of inflection with potential partners.
- Risk needs to be holistically understood. Make a robust assessment of your current and future risk factors based on sectoral risk assessment methodologies and strategies.
- Digital is key and omni-channel is the way. Omni channel means creating consistent customer experiences for all your engagements. Go back to the drawing board to re-assess your customer touch points and figure out how a combination of technologies and design can enable your organization to help your customers feel special and engaged. New age customers are looking at experiences and aren’t obsessed with old and traditional brands. This creates a challenge for incumbents to retain consumers and generate long-term value.
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