The future of retail
Six steps to success for tomorrow’s retail leaders
“The future is the shape of things to come.”
– H.G. Wells
Imagine, if you will, a world in which consumers shop from home using a webcam to simulate an in-store shopping experience. A world where retailers target offers to specific customer needs, which can be instantly redeemed from a smart phone, over the Web or at a store.
Think ahead to a time when consumers will be designing the products or clothing that retailers stock and display. And envision, if you can, a future in which retailers get inside the heads of their customers to predict which items will be popular in the coming season, what collections customers will like and how much of what inventory to buy to optimize a store’s assortment.
With rapid advancements in technology and predictive analytics software – not to mention more sophisticated use of the Web, social media and mobile devices by consumers – that world is not as far away as you might think.
The retail industry is clearly at a pivotal juncture. In recent economic times, consumers have become more discerning and value-conscious, which is unlikely to change anytime soon – if at all. If that isn’t enough, technology, such as social media, mobile devices and the pervasiveness of the Internet, continues to effect change in the everyday lives of consumers. Consumers today are more technologically savvy than any generation before them. They can blog about products and customer service; instantly do comparison price checks on their mobile phones from a store aisle; friend a brand on Facebook; and review their purchases on YouTube and Twitter.
The game has dramatically changed. Coming out of the recession, it’s the fittest that will survive. Those retailers that were best prepared – had strong brands, seasoned management teams, and had invested in new customer engagement technology and merchandising analytics before the downturn – will be the new leaders that emerge.
Those new leaders must craft an innovative strategy that provides value to the customer and drives customer loyalty; increases sales, margins and inventory turns; and improves cash and working capital. With those ends in mind, here are six critical success factors that retail leaders must focus on to survive in this brave new world:
Recalibrate growth strategies
With new store growth dramatically slowing in the retail sector, e-commerce has become the emerging salvation, providing a platform to expand – not only locally, but globally. In fact, e-commerce transactions are growing by 20-50 percent or more, year over year. With same-store sales eroding in recent years, retailers must begin to focus on “same-shopper sales” and reach cross-channel consumers on personal terms, as well as tailor assortments, pricing and promotions at a local market level.
Keep a laser focus on the customer
Not only are customers always right, they are in charge. Retailers of tomorrow must engage today’s savvy and discerning consumers on their own terms. This means listening to them, improving service, focusing on the customer experience by engaging them where they spend their time, and providing value-oriented assortments that reflect their preferences and needs.
Accelerate brand strategy
A retailer’s brand is who it is. The growing trend in private-label, private-brand and brand-exclusive products gives retailers more control over their brands and helps differentiate them from their competition, while providing higher margins. Financial success for retailers will ultimately depend on increasing shopper frequency, offering a well-stocked assortment of value-oriented products through the right channel, at the right time.
Reflect value through assortments
Retailers who clearly demonstrate value, exhibit style and offer the current fashions, while focusing on the freshness and quality of an optimized assortment of products – reflecting local market demographics and preferences – will win the hearts and minds of consumers.
Enable the omni-channel consumer
With a cohesive strategy for social media and mobile devices, retailers can use these channels to build brand loyalty and encourage cross-channel shopping and long-term customer satisfaction. Omni-channel consumers, as an evolution of multichannel customers, inform their decisions and shop in-store and from other channels – simultaneously.
For example, a shopper with an iPhone can snap a picture of a product’s bar code and immediately do price comparisons, check ratings and reviews from other consumers, and connect to a social network for opinions from friends. And omni-channel consumers are the ones you want to reach because they spend 15-30 percent more than consumers using a single channel.*
Implement customer, merchandise and operational analytics
The amount of data, both within the enterprise and across various external channels, is growing exponentially. Today, people share more data about their preferences, opinions, demographics, tastes and current location than ever before. Customer, merchandise and operational analytics provide an enterprise foundation for timely, relevant and useful decision making across all customer channels. Retailers with the best strategy for analyzing this data to better understand, engage and react to their customers’ needs are the retailers that are going to win in the marketplace of the future.
Where to go from here
These six success factors must be aligned with the company’s strategic goals. They are not relevant unless they are focused on improving customer loyalty and sales, increasing profit margins and inventory turnover, and improving cash and working capital. Customer analytics, tied across all channels, including social media and mobile, will be critical in the brave new world of retail tomorrow.
*Progressive Grocer, IDC Retail Insights.
Lori Schafer is the Executive Advisor for SAS’ Global Retail Division. Schafer also serves on the board of directors of the National Retail Federation (NRF), as well as several public and private retailers and technology companies, including AC Moore Arts & Crafts (NASDAQ: ACMR) and Tradestone Software.