Everything about retail has changed over the past two decades: Consumers have morphed into shoppers that lead busier lives. They keep a tighter hand on their wallets, thanks to lingering economic uncertainty. They demand more from retailers and brands, and at the same time have a reduced attention span — thanks to a sped-up digital and mobile world.
Technology, of course, has also transformed the landscape of retail. E-commerce growth has actually outpaced that of brick-and-mortar retail, while social media is both driving sales and empowering consumers. And, with the rise of smartphones and tablets, mobile devices have powered widespread retail trends including showrooming, in-store targeted offers, and location-based marketing.
At the same time, the entire retail landscape has shape-shifted into an integrated, ever-connected universe in order to provide a seamless customer experience. In this brave new world, margins are slimmer, competition is fiercer, and retailers must dig deep to become leaner and more efficient.
The store itself is different, too: More than just a browse-able brick-and-mortar location, it has become a fulfillment center, where people may buy online and pick up in the store, or research online and then browse in person. That means retailers have to step up every area of operations from supply chain management and marketing to human resources and service delivery.
Five trends, in particular, are helping to change the face of retail operations.
1. The omni-channel customer is the new reality.
Omni-channel shoppers, with their smartphones at the ready and apps in their pocket, are the new retail operations reality. Today’s retail success is all about connecting with your customer and giving them the seamless path-to-purchase they expect. There are no silos in a customer’s world — they don’t separate shopping into buckets like mobile, desktop and in-store. To them, it’s just shopping.
However, according to a Google study, two in three consumers are not finding the information they need in-store and 43% leave frustrated. It’s clear that consumers want more information and customized experiences during their shopping journey.
The most sophisticated retailers are revamping their marketing and supply chain operations to ensure they can enable customers to convert easily on any channel. These retailers realize that a shopper who buys from them in-store and online is their most valuable kind of customer.
2. Technology outsourcing is booming to increase efficiency.
According to PWC’s Retailing 2015 New Frontiers report, retailers must be more flexible than ever, in order to adapt and compete in the changing retail environment. As a result, outsourcing is growing in areas that are not necessarily core competencies, such as new product development, software development, business process outsourcing and talent sourcing across national boundaries. According to the report, this is not only because of cost efficiencies — it also allows retail leaders to focus on key business issues, lessen time-to-market, form new alliances and better understand emerging markets.
In a recent article in Chain Store Age, Jeff Seabloom, managing director at Dallas-based global advisory firm Alsbridge Inc, said trends in technology outsourcing, in particular, are having a major impact on retail — the strategic hosting and management of technology solutions and services by a third-party is a popular way for retailers to boost their tech capabilities and lower their IT-related capital expenditure. “By combining automation and big data/analytics, retailers can understand buying patterns and trends, and be more consumer-centric through more effective loyalty programs, direct marketing campaigns, savings and coupon campaigns and merchandising campaigns,” Seabloom said.
3. Cloud technology is creating more flexibility.
As the retail revolution has continued unabated over the past decade, IT executives in the industry have been caught between the need to rapidly innovate but also rein in costs. According to an Accenture report, they have to both help retailers provide the targeted, seamless experience customers expect — through advanced analytics and connecting consumer profiles in multiple channel sources — as well as become leaner, more agile and more efficient in order to compete with online-only retailers. Cloud technology has enabled both of those elements to happen.
Retailers will continue to quickly build momentum toward a hybrid cloud model, according to the Accenture report, in which applications are distributed across the local data center, a cloud provider, and the data centers and cloud providers of a retailer’s trading partners. They estimated an over $15 billion retail cloud technology industry today — driven by a “pay-as-you-go offering that can help retailers improve business agility and customer-engagement levels.”
4. Supply chains are being revamped.
With the significant shifts in consumer shopping behavior and pressure on margins, revamping the supply chain is a key effort to reduce costs and boost speed. A report from McKinsey & Company found that “meeting the multichannel consumer’s increasing expectations for speed and convenience is forcing many retailers recamp obsolete supply chains designed for a single-channel world.”
For example, the Wall Street Journal recently reported that Wal-Mart is holding goods longer at distribution center in order to increase flexibility as well as meet e-commerce competition and the changing consumer expectations. At the same time, Target has reportedly been revamping its grocery business and seriously considering outside partnerships to help solve supply chain issues.
“There is an opportunity to use some partners who may be able to do things a little bit better,” said John Mulligan, Target’s COO, in a recent Reuters interview, explaining that the retail leader’s supply chain evolved over time as it expanded its offerings, including more fresh food, leading to a patchwork system: “I said to my team this looks like Frankenstein. We have made this thing out of a bunch of parts.”
5. Retailers are embracing an on-demand workforce.
According to an Ernst & Young report, “Six Success Factors for a Tough Market,” store labor is the “largest category of controllable non-product cost for retailers.” To succeed in today’s competitive retail environment, where seasonality supply/demand are sometimes unpredictable, retailers need labor flexibility and a way to scale up and down when needed. They also need to be able to recruit employees with the right mix of skills, such as holiday workers who are experienced in mobile applications and cybersecurity. According to Workforce 2020, a study done by Oxford Economics and SAP, 82% of retailers are increasingly tapping into an on-demand workforce of independent, temporary, freelance or contingent workers.
Luckily, today’s technology now enables organizations to scale the on-demand workforce up or down to match business ebbs and flows. Just as software-as-a-service (SaaS) allowed organizations to scale their technology requirements as needed, new “workforce-as-a-service” platforms can help retailers quickly overcome the challenges inherent in a hyper-responsive service world.
The right on-demand “workforce-as-a-service” platform provides retailers, finally, with a better way to match supply and demand, resulting in improved flexibility, lower cost per employee and streamlined administrative efforts. In addition, a properly managed on-demand workforce can help retailers prepare for spikes in demand, respond instantly to in-store malfunction and handle product roll-outs on the fly. They can slash operating costs, accelerate the time-to-market for new products and improve customer responsiveness.
The Restructuring of Retail
According to Aberdeen research, the top omni-channel pressure is the fact that customers expect a personalized and seamless experience across channels — today’s shopper is comfortable across a variety of channels and they expect retailers to be responsive to them all at all times. As a result, everything about retail operations has had to change in order to reflect and support that goal in a fast-changing retail world.
Experts emphasize that the enterprise retailers that thrive in 2016 and beyond will succeed with lean operating models — that is, variable cost models, adopting newer and better supply chain processes, boosting innovation and efficiency, and taking advantage of a flexible workforce that can scale alongside the ebbs and flows of your business. All this while improving profitability and customer satisfaction.
Today’s retailer may look very different today than it did two decades ago — as does its customers. But the ones who make it in a new economy where online retailers like Amazon have changed the game forever will do so by taking advantage of the tools, technology, and talent that enable them to meet the needs of shoppers in today’s customer-centric, technology-driven world.
To learn more about retail in the gig economy, or to get started with your retail workforce transformation, download this free guide: The Retail Model is Designed to Fail.
