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Reinventing Retail

 
The forces of globalization, the Internet, social media and emerging sourcing models have drastically and permanently changed the retail dynamic — giving customers new choices for where to shop, what to buy and how to buy it. Under this change, retailers have access to new information that allows them to truly understand their customer and their shopping preferences.  Winning retailers are capitalizing on this digital shift to reshape their strategies, processes, organizations, and technology infrastructure to stay ahead of customer demands and keep competitors on their toes.

This two-part series will address the top four myths related to how retailers are moving beyond the traditional model and reinventing  the ways the support new business realities.

Myth #1: “Large retailers compete against other big stores.”
The old retail model segmented stores by size and geography, and defined ‘competitors’ as other brick-and-mortar stores that were of a similar look and feel;  however, our new reality understands that today’s marketplace as a global one. Retailers not only compete against other stores in their categories, but  competition expands to “mom and pop” shops, online retailers that can be located anywhere in the world and even individuals that sell on platforms like Etsy and Craigslist.

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Buying through non-institutional sources were historically limited by payment mechanisms, but today many options exist in both third-party payment mechanisms and rating sites that connect consumers to other consumers.   Online shoppers have gained valid options for payments and small online marketplaces have opened up as alternative venues for individual craft makers.

As a result, retailers are forced to define their competition more broadly and look to new strategies for sourcing, supply chain and merchandising to accommodate these dynamic business demands. Retailers that will thrive in this new retail economy will need to reinvent their traditional views of competition and competitive intelligence.

{loadposition MWIAA} Stores aren’t going away; they still provide high levels of value for most consumers. Private label and exclusive brands that give shoppers something they can’t get anywhere else are a critical technique being employed by top retailers to increase in-store sales. Target is a successful example of this strategy, as we’ve seen them drive increased traffic and sales from customers that crave exclusivity. Retailers like JCrew are extending their brands to some exclusive partnerships, and also extending their brands beyond traditional good/better/best boundaries. 

Localization is also becoming increasingly important. But while historical definition defined localization by store location, retailers should now localize by customer grouping.  Increased data on consumers – their buying preferences, demographics and psychographics — enable localization at a location level.  

According to Cognizant’s 2012 Annual Shopper study, shoppers are demanding clear and consistent cross-channel experiences.  Nowadays, consumers have unprecedented amounts of information available at their fingertips, and more shoppers do more significant research before ever leaving their homes.  If your products, prices, and policies on your web site don’t match what’s on your store shelves, you’ll hear about it in a request for a parity and price match. Shoppers are beefing up their expectations — and creating a challenge for retailers to stay ahead of the curve.

Retailers with an online presence should look to their e-Commerce sales to drive their brick and mortar strategy. The intelligence gained through e-Commerce is an untapped source of value that can give insight into what the concrete store assortment should sell. Retailers can also gain intelligence on the price point customers at a particular location are willing to spend on certain products. In a “good-better-best” product pricing system, retailers might find that price points are higher in a particular location for certain products allowing them to offer the better and best options to drive more profit.

Traditional market research remains important, but competitive intelligence also means observing trends to understand what shoppers are buying and what they are talking about in social media circles. Big box retailers can take a cue from individual sellers by incorporating products sold successfully through online market places into their traditional assortments to bring a fresh perspective to merchandising. This allows stores to build sales and increase customer loyalty amongst shoppers who don’t have access to alternative outlets.

Myth #2: “Product design and development is best left to professionals.”
In recent years, a new trend has emerged with retailers moving away from dictating the designs and brands found in stores and giving customers more personalization options. Individual style is the new trend, as consumers of all ages want to demonstrate their own unique tastes.

Through social media, retailers are beginning to realize that personalization is critical. In fact, Cognizant’s shopper study found that above all, customers want more personalized in-store experiences and they are generally willing to provide more information to get it.

What customer’s friends think is more important than the most current runway styles. Traditional stores can drive sales by reshaping the supply chain to offer true customization. Brands such as Nike and Fashion Playte are doing well in this area, allowing individual design by shoppers at mid-market pricing.

Most retailers already have the building blocks in place to capitalize on a personalized design model. They have access to steady streams of customers.  The aforementioned study found that four out of five purchases are still transacted in brick-and-mortar stores. As retailers have mastered e-Commerce, digital tools have been put in place to outfit stores with personalized design capabilities. With the lines between online and offline blurring, customer co-creation is here, giving customers new ways to trumpet not only their designs but also their satisfaction.

Retailer’s first actions should be exploring new Merchandising and Sourcing models to allow customers to personalize their products. The bottom line is not nearly as expensive as you think. Store associates also play a huge role. By employing a guided selling rather than a self-serve model for associates, retailers can hire and train associates that bring personalization to life for customers.


Colleen Coleman is an Associate Vice President of Merchandising within Cognizant Business Consulting’s Retail Practice. She has 25 years of experience in retail information technology and a bachelor’s of science in industrial engineering from Iowa State University. Colleen can be reached at Colleen.Coleman@cognizant.com.

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