Every day there is a new article about how customers are embracing all-channel retailing, and how those changes will cause disruption in the retail market. The next five years will cause more real, tangible change than that in the last fifty. Retailers that aren’t ready to embrace true business transformation will find themselves behind — possible with no ability to catch up.
If you think about the last 50 years, the technology was all in the hands of the retailer. We had the advanced inventory management, real-time POS, sophisticated planning and ranging tools, and more. The balance of power has now shifted — consumers are armed with technology — and retailers are scrambling to adjust.
However, retailers can’t just “fight technology with technology.” The all-channel reality of today must be met with real business transformation, affecting people, business processes, and technology. Retailers need to understand that this disruption is real — it’s now, and it’s not going away.
Here are 10 of the challenges that are affecting everything the retailer does:
1. The simple fact of the matter is that EVERY employee of a retailer must start thinking like an all-channel retailer. The salesperson in the store needs to include cross-channel selling into their repertoire. We are still seeing too many instances of store employees saying “I don’t get commission if a customer buys something from a kiosk.” It’s time to develop a comprehensive approach to all-channel selling.
2. Too many retailers still use a siloed approach to merchandising channels. While many retailers started their “e-commerce” business as an off-shoot of their marketing departments, many have ended up buying, ranging and fulfilling product out of that department. That practice creates confusion and differentiation in the eyes of the customer. E-commerce needs to become “commerce,” encompassing all the ways that the retailer interacts with the customer. And that “e-Comm” department? They should be working on inventing and enabling the new channels of selling!
3. You already know that change is hard. Driving true business transformation affects almost every person in your organization? That’s massive! If you aren’t thinking about a change management strategy now, you should be. Look for change leadership experts to help you design, coordinate and effect change.
4. It was easy answering the question “who are you?” ten years ago. You are what consumers saw when they walked in your front door. You owned them. You don’t own any customer any more. You “share” them with every other retailer in the world. You’ve probably read more discussions about building and protecting your brand in the last year than you have ever read. Here’s a hint: find a 16- to 22-year-old female and describe your brand to them. If you can’t do it in 25 words or less, you have a problem. They may not like your brand, but you need to make sure they (and everyone else) understand it. Bottom line: brand is the new loyalty, and you need to work to build it and protect it!
5. How do you measure success? The traditional way was by your “year over year store growth,” right? How relevant is that in an era of re-envisioning of the role of the store, and your consumers coming from anywhere? More important, in this new era, what is the most important thing to measure? There is a sea-change shift from store measurement to customer-retention measurement. You should be thinking of business processes that capture, retain, measure, reward and protect those most loyal of customers. And remember, they aren’t loyal to YOU, they are loyal to your brand!
6. One area where we are seeing lots of small but significant changes is in the way that retailers manage their supply chain. This needs to be tied into your brand (hint: everything is tied to your brand!) What is your fulfillment strategy to support your brand? How do you hold stock in central, regional and local warehouses to speed fulfillment? How do you hold stock in your distribution centers in pre-packs and fulfill to direct-channel customers in eaches? Retailers need to re-think the way that they envision their supply chain, with the simple realization that the end of the supply chain isn’t the store shelf — it’s in the consumer’s hands!
7. If you look at those retailers that are considered on the “leading edge” of fast fashion, they share one thing in common — a relentless management of the lifecycle of their products. They come in, sell, are marked down, and are cleared along a very tight schedule. This adherence to a planned lifecycle is part of their brand scheme, and it should be a part of yours. Your lifecycle should be yours — not someone else’s. But you need to have one, for every product and collection.
Technology And Tools
8. Apparel retailers are famous for keeping lots of information about products, locations and time — they can tell you what store sold what SKU on what day. But introduce the customer into the equation, and the picture muddies. Asking the retailer to link a store sale to a mobile phone purchase to an Instagram post? That’s the kind of stuff that keeps CIOs up at night. One of the largest changes in technology in the near future will be integrating all your customer interactions. It’s more than “big data” — it’s understanding how and why consumers use the channels they do, and when — and then tying that all together into a seamless experience.
9. Look at a typical planning organization, and it’s arranged around products or locations. It’s normally NOT arranged around brands or customers! Here’s an example: you probably know fairly well what sales are occurring in your stores. However, do you know what inventory is being consumed by direct-channel customers within walking distance of those stores? If you institute “store pick-up”, you will need to plan for inventory that is not bought in the store, but is collected in that store… how will you plan for that? Planning itself is changing, and the tried and true “Product/Location/Time” hierarchy is changing also. Planning is now about collections, brands, preferences and integrated touch-points with the customer — are you ready for that?
10. The challenge above calls for a new way to look at merchandise. Product attributes have been around for a while now — leading retailers use them for merchandise and assortment planning, allocation, replenishment and more. We believe this will continue, and expand — attributes will be at the core of everything. Additionally, retailers will start to track customer attributes also. We are seeing this trend in boutique stores, but it will be a part of the new world. How will you protect your brand if you don’t know your customer’s preferences?
How many of these 10 challenges are you addressing today? More importantly, are you addressing them one at a time, or in an organized, cohesive manner? Each of the above challenges affects the others, and you need to think about this as true business transformation, not just “moving to multi-channel.”
Steve Davis is a Vice President, Retail Consulting Partner with the JDA Services group at JDA Software. He is responsible for bringing business transformation and leading practices to the company’s worldwide customers. With more than 30 years of experience in the retail and supply chain industries, Davis has held management positions at tier-one retailers across the U.S. He has direct experience in merchandising, retail IT, consulting, and software sales and implementation.