Retail without Boundaries: Forging a New Business Model

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Retail without Boundaries: Forging a New Business Model

By Robert McFarland - 12/20/2010
Although clouds still appear on the retail industry’s horizon, silver linings will shine through in the future for those companies that can capitalize on the new forces that are reshaping the industry.
True, the downturn in the global economy, with its resulting diminished consumer spending, hit retailers hard, harder perhaps than any other industry. And while there is considerable debate about whether the recovery is gaining traction or still sputtering, one thing is certain: Innovative thinking – combined with shrewd investment -- can serve as a springboard to help retailers not just survive the day, but thrive in the future.
Potent new forces face the retail business. Powerful customers who use the Internet and social media are less loyal to traditional brands and stores. According to a recent Gartner analyst report, 85 percent of shoppers go online before stepping foot into retail outlets. These same customers are increasingly drawn to the “mobile revolution,” connecting through multiple channels such as iPads, mobile phones and Facebook. 

Global expansion brings more and different products to the consumer, altering their historic purchasing patterns. Price and margin pressures on retailers have spawned increased competition and customers demand tangible value in their buying. 

Finally, the increased speed-to-market resulting from technologies such as supply chain management has compressed retail selling windows and product lifecycles.

Three Components of Retail Without Borders

Against that backdrop, opportunities abound for those willing to forge a new business model not bounded by geography, tradition or legacy technologies.
This “Retail without Boundaries” business model requires three components: speed, reach and personalization.
Speed: Mobile devices, the spread of consumer information through social networking, as well as online research and browsing have created a demand-driven supply network, forcing retailers to deliver in real-time customer service that meets or exceeds expectations.

Reach: Today’s flat world demands that retailers reach customers anytime, anywhere, on any device. The goal of retailers should be to create a unified customer channel in real-time, where potential purchasers worldwide see the same buying opportunities using whichever technology they choose.

Personalization: One size does not fit all. Today’s buyers have unique, highly specific habits and behaviors. The savvy retailer needs to understand these in exquisite detail. Not only must retailers gather and maintain the most accurate data, but they must use new technologies – called business intelligence or predictive analytics – to understand actions they must take to get ahead of the next retail curve. 
Technology can help retailers harness these three forces easily, efficiently and effectively. Investing in technology may seem risky in today’s economy. However, wise retailers, recognize an opportunity to invest in more focused technologies that can be easily integrated into existing systems to help yield benefits and control costs. Think innovation without disruption.

Workforce management tools can help provide the appropriate service-level response to projected business volumes based on historical data, trends and plans. The resulting business forecast can set the basis for determining the number and skills of store employees needed at a given time. Store labor is the largest controllable cost a retailer incurs, and the second largest overall expense behind inventory. Get a handle on that, and you are well ahead of the game.

Merchandise lifecycle pricing tools let retailers assess the impact of price, promotion and other factors on shoppers’ behavior. With these insights, retailers can execute pricing strategies that appeal to shoppers while optimizing revenue and profitability.

Business user solutions are critical to the retail industry. Retailers have a problem: they spend too much time searching for data and not enough time analyzing and acting on it. 

Business user solutions – such as the business intelligence or predictive analytics tools mentioned above, along with solutions for governance, risk and compliance (GRC), enterprise performance management and basic information management systems – leverage existing systems, data and processes. They also help drive improved user adoption. 

All of these help retailers move quickly to optimize costs, retain their best customers and identify new market opportunities. In short, these business user solutions help turn data into revenue, profits and customer satisfaction.

While still early on the road to economic recovery, retailers must continue to watch costs carefully. However, smart retailers who make the right investments in technology today can position themselves to make the most of silver linings in the future.

Robert McFarland is senior vice president of Retail Industry for SAP.