Foreseeing Changes Ahead in the Retail Industry

6/28/2017

“The times, they are a-changing,” Bob Dylan famously penned more than 50 years ago. And yet, they are still accurate today. When combined with the fact that 90 percent of the world’s data was produced in the previous two years, we can accurately say that the times are changing faster than ever.

With the consumerization of IT, retail businesses and the technology they run on has evolved.

So with these changes what should retailers be aware of?

nike store basketball court

Digital channels will continue to grow but the store will remain a core part of retail’s DNA

While the rise of e-commerce has certainly had an impact on legacy brick-and-mortar locations, brands looking to stay ahead of the competition have embraced a full omnichannel strategy, both on and offline. Nike and Adidas opened NYC stores in 2016 that are designed to immerse shoppers in the experience and give them incentive to return. Nike encourages shoppers to try sneakers on its basketball court and Adidas has stations for customizing apparel. Some stores even include seating areas for watching sporting events.

These examples of experiential retail would not be possible without technology like RFID and IoT, which provide sales associates with instant access to product and lifestyle information, detailed insights about the consumer they are interacting with, and real-time inventory information. The tools for associates must be mobile and social in order to deliver a user experience that customers are familiar with.

Retailers and brands are venturing into new processes and business models

Shifts in the product journey are impacting the way that goods are put in the hands of consumers. As a result, sourcing models will now consider multiple factors including: customer status, cost and time to deliver, item availability, fulfilment cost and capacity, and opportunity costs to make the optimal decision on a case-by-case basis.

Today the supply chain stops when the product is in the consumer’s hands, not when it reaches the shelf in a store. Brands like Dollar Shave Club are addressing frequent purchases, while fashion and beauty verticals, like Birch Box have adopted a similar model. The sharing economy takes this further with ideas like ride shares and “rent the runway,” which impacts the volume of sales of certain categories.

Organizational models in retail: “how” the retailers are operating

Technology is also enabling departments that once operated in silos to merge, like merchandising and marketing. In order to avoid double incentives that waste marketing spend, loyalty initiatives and merchandising/promotional strategies are now being coordinated.

E-commerce and store operations are also experiencing a merge. This way, inventory can be shared, especially in fashion, where the size/color/style distribution inherently means there are a reduced absolute number of items in global inventory of any specific combination. It works in the retailer’s favor to manage the cost of shipping from a store rather than absorbing a markdown on a product that doesn’t sell and the carry costs to the end of the season. For this to work, it is essential that all parts of the retail business are working from a single, real-time platform that ensures coordinated and optimal business processes.

Bob Dylan may not have been referring to retail, when he said “the times they are a-changing,” but these are exciting times for the industry. For innovative retailers, there is opportunity for growth and expansion everywhere. Retailers with the right strategy and a real-time, digital platform have the chance to transform customer engagement, business process, and even adopt business models that can take their organizations to new heights.

Tim Hood, Chief Solution Technology Officer, Consumer Industries at SAP

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