Seven Trends Impacting Brick-and-Mortar Retailers
The retail industry is in the midst of a massive transformation driven by consumers’ rapid adoption of new digital technologies. By the year 2020, the retail landscape will have fundamentally changed how every retailer will go to market. No segment of retail will be more impacted than the brick-and-mortar store.
Here are seven trends brick-and-mortar retailers should consider and what they can do to leverage their stores to become
retail winners.
1. Social networks – the wealth of information about consumer shopping behavior and preferences available in social networks is untapped gold for retailers. By leveraging the right customer analytics tools, retailers can effectively mine this data to gain insights into what consumers want to buy and channel these insights into more effective merchandising plans and promotions. Conversely, retailers
can leverage social networks to build relationships and become trusted brands to influence what and how consumers buy.
2. Showrooming – the phenomenon of shoppers coming to brick-and-mortar stores to examine merchandise they later buy online is a paradigm shift that is here to stay. Rather than trying to prevent the inevitable, brick-and-mortar retailers must embrace it as an opportunity to engage shoppers in their stores to grow revenue and loyalty both online and
in physical channels. This will require better trained and equipped store associates with clienteling and assisted- selling tools, new service-based store layouts with curated assortments, and greater store autonomy to leverage local events, negotiate prices, and cater to local demographics and shopping preferences.
3. Store-specific assortments – This is an extension of embracing “showrooming” and the local consumer. The era of “push-based” mass merchandising is a thing of the past. Retailers must cater to the local consumer, segment and curate assortments according to their preferences as
gleaned from their all-channel purchases, and create store- specific planograms that maximize shelf-level performance.
4. Store-size rationalization – With the changing role of stores from big boxes jammed full of inventory to destinations for entertainment, socializing and the
total shopping experience, retailers will quickly need to reevaluate and rationalize their entire real estate strategy. Will the traditional mall anchor stores move to smaller strip centers? Should once abandoned rural locations be reconsidered? Retailers must understand the new role of
physical channels in an all-channel commerce environment and adjust store sizes, layouts, assortments, fixture arrangement and “entertainment” factors accordingly to deliver a seamless brand experience.
5. Near-field communication – In addition to mining
social networks, retailers must begin leveraging near-field communication technologies within their stores to better understand how shoppers move through the store to online purchasing decisions, where their interests lie and to offer them contextual, real-time options through mobile apps and interactive store displays that contribute to exciting and relevant new customer shopping experiences.
6. Growth in order fulfillment from stores – one aspect of the all-channel shopping experience that is popular with consumers is the ability to order online and then pick up the merchandise from their local store. This requires traditional retailers to re-examine policies on staffing, compensation, task assignment, inventory planning and sales reporting.
Fulfilling online orders from stores raises new issues such as not cannibalizing inventory at the expense of foot traffic and how to measure and compensate store associates and
managers for sales made online, but fulfilled in the store—for example, where is revenue for the sale assigned?
Additionally, for larger and irregular items, customers are expecting home delivery to be an option that can be purchased parallel to their goods. Additionally, for complex electronics and entertainment merchandise, in-home set-up and installation must be available to avoid being an impediment to purchasing.
7. Growth of the “dark store” - Retailers have started to turn strategically placed, but underperforming stores into non- selling “dark stores” designed to fulfill online orders for same- day or next-day deliveries. This practice will require massive changes to the retail space and tremendous focus on how they source, fulfill and deliver products in a timely fashion through supply chain planning and warehouse management execution. It must also be combined with a flexible and dynamic transportation network in order to move goods profitably with greater emphasis on collaboration
with suppliers.
Brick-and-mortar retailers who want to not only survive these seven trends, but also leverage them to become retail leaders in 2020 must consider the entire shopping ecosystem to excel in the following five disciplines.
Deliver an all-channel shopping experience – Consumers want a single, consistent shopping experience regardless of which channel they choose to engage your brand at any given moment. But this entails more than providing a consistent look and feel across channels. It requires that retailers have a 360 degree view of the customer, using contextual data to create personal marketing strategies that engage the customer based on their unique shopping patterns and preferences.
All-channel demand sensing – Creating a seamless all-channel shopping experience begins with accurately sensing demand across all channels simultaneously to create a single forecast
of consumer shopping behavior. Using disparate forecasts from each channel is no longer an efficient or effective practice because that is not how consumers shop today. Therefore, retailers must break down the demand silos and create a single, unified version of demand truth to feed the all-channel forecast engine.
Customer-centric channel assortments – By leveraging the all-channel demand forecast and 360 degree view of the customer, retailers can create curated assortments tailored to the customer’s shopping patterns and preferences. It is important to recognize here that the channel of demand (where the order is placed) may often be different from the
channel of fulfillment (where the merchandise is picked up or shipped from). The curated assortments must be coordinated with the customer’s channel of demand while inventory and distribution operations must be coordinated with the channel of fulfillment. Based on the customer and their type of purchase, these could be the same or separate channels.
Flexible, real-time and responsive supply chains – Fulfilling the brand promises made to consumers in the all-channel shopping experience requires supply chains
that are immediately responsive and flexible. This can only be accomplished with real-time supply chain solutions
encompassing all channels and directing all distribution centers concurrently. Inventory must be pooled virtually across the network to support these real-time operations. Segregating inventory and distribution operations by channel will no longer be efficient, nor will it provide the level of customer service demanded by the all-channel shopping experience.
Profit-based distributed inventory management – As retailers evolve supply chain operations from single channel transactions to all-channel order orchestration, processes become more complex, and thus, more prone to escalating costs. Therefore, to ensure the profitability of all-channel operations, supply chain solutions must carefully balance the cost and service variables in distributed inventory
management. This requires a real-time view of orders, inventory and expected deliveries from suppliers.
There is no question that life for brick-and-mortar stores in 2020 will look vastly different than it does today. But the change
is already in full swing. Retailers who want to survive and be winners must start their transformation now. Do you have the right people, the right infrastructure, and the real-time
supporting systems for all-channel commerce, store operations and supply chain management to compete and thrive in 2020? It would be unwise to let your competitors get there first.
