“AS VIEWED THROUGH THE EYES OF THE SUPPLY CHAIN”
As the present day Managing Director of 3P Logistics Limited, a privately owned UK Logistics Company, I have lived and breathed blue chip supply chain on behalf of many retailers for some 25 years to date. This has afforded me the somewhat privileged opportunity to witness the evolution of retail through the eyes of a third party logistics operator and I have to say that the evolution of retail has been nothing short of mesmeric.
The first thing that really grabs you in more recent times is the level of diversity and the actual pace of change. As the world becomes increasingly more virtual there are less physical barriers to overcome and therefore evolution accelerates at an ever increasing rate of knots. Statistics, trending and new found terminologies are in plentiful supply and those retailers agile enough to keep up with or even drive the pace of change are more likely to succeed.
Appetite for such change should be embraced albeit always with a hint of caution applied.
Traditional tried and tested retail methods that have withstood generations should not be thrown out with the bath water but instead they should be fused with pioneering “on trend” initiatives. When combined they make a compelling and competitive omni-channel retail proposition for consumers to ponder.
As the world becomes more connected and online trust increases the ease and convenience of online shopping is too much of a temptation to resist even for the most hardened of high street shoppers.
The buyer dilemma nowadays is more so one of social pleasure normally associated with high street shopping versus the privacy, speed and convenience of shopping online from home or on the move. Quite often a consumer will browse something in store then make the purchase online and today this is commonly known as “show rooming”.
We must remember that the convenience of home shopping has been around for years in the form of catalogues, Avon parties etc. and the same principle of browsing from home has simply moved to the cloud.
For any retailer to remain successful they must already be living and thinking in the year 2026. Getting a good feel for what the retail sector will look like 10 years from now will enable a clear growth strategy for the next decade.
Understanding demographics and “big data” is essential when compiling growth strategy.
For example, those aged 50+ now represent more than one-third of the UK population and are commonly referred to as “baby boomers” or the “grey pound”. This share is expected to continue rising, making this demographic increasingly important for sales volumes
To Stick or Twist
A recent study by the Centre for Retail Research warned that 62,000 shops could fold in the next five years as online shopping surges to account for up to 22 per cent of retail by 2018. The report also estimated that UK retail store numbers could also fall by 22 per cent – doubling the current store vacancy rate to 24 per cent if no action is taken.
Adoption of New Technology and Platforms is Paramount
With ever faster broadband connections such as 4G already a reality, mobile tablet devices will play an increasingly pivotal role in retail with Verdict Consulting predicting that by 2023 more sales will be made via mobile than via desktop PCs.
A Changing Retail Mix
In the last two years the mix of stores has changed with value shops up by 12.4 per cent, independent convenience stores by 17 per cent and health and beauty salons up 10.4 per cent suggesting the high street mix will continue to radically change over the next 10 years. Chain stores are already down by 5 per cent and as a result there is likely to be a further divide of primary and secondary locations by 2023 and a continued rethinking of how retailers use their stores including the injection of digital interaction within a physical store.
Timing the Investment
To decide whether to focus more on inward or outward investment, retailers have to assess where they sit in their growth cycles. Have they grown significantly over the last 10-15 years and need to get their house in order, or are they at the start of a growth cycle and therefore there is a lot of growth to go for? Are stakeholders comfortable with medium term return or are they driving for shorter term benefits? For most businesses the best option is a balance of both inward and outward investment to seize on the opportunities for growth because of their complementary nature. A decision to expand outwardly without strengthening internally is a recipe for collapse. Five years ago it was all about outward investment to roll out new stores and worry about the infrastructure later. Retailers have learned harsh lessons as many have bricks and mortar stores that are creaking from the rapid expansion and ever changing demands they have placed on them instead of ensuring that their entire infrastructure from IT to warehousing and logistics is fit for purpose.
The Retail Mix
In the last few years alone we have witnessed an avalanche of new initiatives implemented by retailers looking to gain a competitive edge in a highly competitive sector. The most notable initiatives tend to be of a digital nature and largely originate overseas with the USA and China being particularly active in pioneering change. Primarily most initiatives are aimed at enhancing the key elements of speed & convenience that are primary components within the overall “customer experience”.
Such initiatives to land on the UK retail landscape in recent times include:
|Cross border Trade||Same Day Deliveries||Social Media Shopping|
|Show Rooming||Midnight Order Cut Off||Returns Management|
|Click & Collect||Omni-Channel||Re-targeting|
|Pop Up Stores||Use of Marketplaces||Use of Big Data|
|Adjacent Selling||In Store Digital||Loyalty Apps|
|Mobile Payments||Localised Offering||B Stock Solutions|
The Future is Already Upon Us
The pace of change in retail is such that no sooner have we scoped initiatives for the future the consumer demands them TODAY. The top consumer driven trends in retail right now includes:
- Shopping is social: Up to 70% of consumers do their research online before shopping in store.
- “Millenials” are leading the way: The term millennial is a classification of a group of consumers born between 1978 -1995. This group will have more spending power than any other previous generation.
- Mobile is the new norm: Mobile is no longer an up and coming medium, it is here and now. Smartphones are everywhere and it estimated that commerce on smartphones will sky rocket from $3 billion dollars in 2010 to some $31 billion dollars in 2016.
- Omni-Channel is a given: Omni-channel is best interpreted as a combined online and offline consumer offering that fuses a physical store offering with an ecommerce site, social channels and mobile apps. The key is to blend all such touch points into a seamless consumer experience. Data shows that shoppers who interact with more than one channel spend between 18-36% more than those consumers that only interact with one channel.
- Embrace “big data” to gain a qualified insight: The unrelenting rise of mobile and social are all adding up to the biggest development the retail world has seen and this is in the form of “BIG data”. Retailers using data to its full potential could increase operating margin by as much as 60%. For example Argos used 1.6m pieces of consumer data to help shape future business decisions. This ultimately improved both the bottom line and helped to reshape the entire customer experience.
The message here is simple:
“Be the retailer that consumers are looking for”
- The face of the retail sector is simply unrecognisable from 10 years ago and therefore it is essential to have a vision for what retail will look like 10 years from now and identify the key milestones along the way.
- The successful retailers will be the ones that pioneer and embrace change and have an agile enough supply chain to react to on-going developments and a step change in consumer demand.
- If you’re offering consists of quality, value for money, speed and convenience and you can retain these elements then you`re in the box seat for a hugely successful decade ahead.
“Put the consumer at the heart of decision making”
Key buzz phrases to look out for in 2016
- Show Rooming
- BIG data
- Baby Boomers
- The Grey Pound
- 62,000 shops could fold in the next five years as online shopping surges to account for 22 per cent of retail by 2018.
- UK retail store numbers could also fall by 22 per cent – doubling the current store vacancy rate to 24 per cent if no action is taken.
- By 2023 more sales will be made via mobile than via desktop PCs.
- In the last two years the mix of stores has changed with value shops up by 12.4 per cent, independent convenience stores by 17 per cent and health and beauty salons up 10.4 per cent
- Up to 70% of consumers do their research online before shopping in store.
- Smartphones are everywhere and it estimated that commerce on smartphones will sky rocket from $3 billion dollars in 2010 to some $31 billion dollars in 2016.
- Data shows that shoppers who interact with more than one channel spend between 18-36% more those consumers that only interact with one channel.
- Retailers using data to its full potential could increase operating margin by as much as 60%.