As I was beginning to write this article about the retail industry and the challenges it’s facing, I wondered if it made sense in that it will be published in a newsletter that mainly focuses on retail loss prevention. I came to the conclusion that it does make sense and here’s why: in order to be successful in any profession, it pays to know as much as you can about the overall business you are in and how the big picture relates to the future and direction of that business, your specific company and maybe even your own career. So, here goes.
Many brick-and-mortar retailers saw drops in sales in the first quarter of 2016. Some were significant. Macy’s, JCPenney and Kohl’s stock continue to take hits based on weak performance results. Nordstrom and Gap stock fell as much as 15 percent after posting similar weak quarterly results. It is speculated that decreased mall traffic is negatively affecting some of the big retailers and smaller ones, too.
E-commerce retailing is faring much better, however, with April numbers up more than 10 percent versus 2015. For all of 2015, e-commerce sales were up 15 percent compared to just 3 percent for brick-and-mortar stores.
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Because technology is driving the strong e-commerce growth, traditional retail industry brick-and-mortar brands are finding themselves having to quickly adjust their programs and strategies to keep pace. Millennials, whose retail spending power is projected to reach $1.4 billion by 2020, have fundamentally disrupted the shopping process by using mobile technology to compare prices and products on the spot. And older generations are following suit. Because of the “showrooming” phenomenon (comparing price and product in-store, then ordering online), retailers are faced with numerous challenges such as:
• How to obtain an accurate understanding of the customer across numerous retail channels
• How to engage various customer segments given the enormous amount of competition vying for attention
• How to shift legacy business operations and strategies to compete with newer, more fluid business models
It sounds ominous. However, the view from the top is more optimistic than one might think. New research published by the Economist Intelligence Unit showed that when 300 retail industry executives were surveyed, 79 percent described themselves and their companies as “very or extremely prepared” to compete in terms of offering perceived value for money paid. And 76 percent of the respondents reported the same level of confidence in their readiness to compete in product excellence, seamless service and the ability to operate efficiently. However, only 42 percent responded that they were confident in the ability to attract technologically savvy talent in order to compete in today’s retail industry marketplace.
Two themes were common: offering seamless service and providing product excellence that is personalized to the customer where possible. Regarding seamless service, it’s about proactively engaging the customer though intelligent and rewarding experiences. When the research compared high-performing retail industry companies to lower-performing companies, it showed common retail industry trends among the high performers:
• An increasing investment in technology at a rate 2 to 3 times higher than lower performers
• A focus on globalization and moving into international markets
• Forming strategic partnerships to develop stores within stores, leveraging technology and other outside-the-box relationships
• New store formats that integrate digital media into the in-store shopping environment
In the end, it appears that future success in the retail industry is similar to the success in the past. The tools, processes and integrations have just become more complicated and faster-moving. Today and going forward, it’s all about creating a unique customer experience, offering great product at a fair price and make it easier and easier to shop. And, doing it better and faster than the competition.