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Three reasons why retail is tougher today

The rise of multi-channel retailing means there are more demands than ever on retailers to satisfy growing consumer preferences for customised shopping experiences. CHRIS PETERSEN reports.

Retail is retail. It’s still the process of selling products to the end consumer and it’s been that way since the dawn of commerce; however, if this really is the case and it’s essentially the same business, why are so many retailers stressed out and struggling? The reason is the consumer.

Sure, the end result of selling products to consumers is the same but the levels of complexity have increased dramatically and it’s the consumer who is driving this change. Consumer behaviours have changed; expectations are now driving demand for complexity, systems and services that were never envisioned when today’s retail stores and shopping centres were built.

Retail today is not for sissies or those clinging to the past. It’s a very tough business that has grown very complex.

Why this is important? Retailers are no longer in the transactional business of selling products. To survive, retailers are now competing for relationships with consumers who are demanding levels of service well beyond the product itself.

Retailers will be familiar with the popular Four P model – product, place, price and promotion. One cold fact about marketing under the traditional Four P method is that conversations were always one-sided; a retailer would tell consumers about products via a one-way channel. Today, the conversations are multi-directional and retailers no longer control the message.

Multi-channel changes it all

Multi-channel shopping is the new consumer normal. It is how consumers shop today, buying anytime and everywhere. Shopping has become a process; a purchase journey, not a single sales event.

The fundamental truth of retail today is that consumers have the power – they are the ones driving the change, not the retailers. This power comes from unprecedented flexibility and choice.

Multi-channel changes everything about shopping and retailing:

  • Consumers now shop anytime (24/7/365) and everywhere via mobile devices
  • Consumers are the new Point-of-Sale (POS) because they decide where to buy and how to pay
  • Consumers decide where they take delivery, be it in store or at home
  • Consumers expect to check goods availability online, buy online and then pick up in store
  • If not available on shelf, consumers expect to be able to buy goods online from inside the store
  • In short, consumers expect to have it their way, personalised on their terms.
Inherent complexities challenge

To be clear, retailing was always a tough business. Steve Schiro, a co-facilitator of the Retail University workshops here at Integrated Marketing Solutions, had a great summary of retailing: “Retail is not rocket science; it’s harder!”

What he meant is that retailing is a business with many moving parts – retailers have to manage thousands, if not tens of thousands of individual SKUs; these SKUs have to be managed across distribution centres and store locations; to operate the store chain requires a substantial labour force, many of them part-time.

How does multi-channel shopping change all of this? The new consumer behaviours that come with multi-channel create higher levels of service expectations and even more levels of complexity. It is no longer about just stores or being successful online.

What follows are just three examples of how complex and tough retail has become in today’s multi-channel world.

1. Online and physical have merged

While a majority of consumers still prefer to purchase in store, some research suggests that an overwhelming majority – 87 per cent – shop online first. Simply put, consumers don’t differentiate between traditional stores and online sales; it’s all just a stream of shopping experiences. Customers expect a curated assortment in store, supplemented by a great selection of sizes, colours and other options online. Stating this another way, consumers no longer separate the physical shelf from the virtual shelf as they did in the past.

This creates a completely new demand on the part of retailers. Systems must now be able to show virtual inventory in store and be able to show store stock online. Store staff now must be trained what is stocked on the shelf and also to assist consumers in finding what is available online.

The ‘e’ in e-commerce now means everywhere, every day. It means selling products selected from both physical stock and the virtual shelf. It is far more complex to plan, manage and execute an endless aisle as a seamless consumer experience.

The merging of online and physical stores has also encouraged retailers to rethink what it means to be a bricks-and-mortar outlet. Last year I wrote about the new buzzword ‘unstore’.

The ’unstore’ is really just a metaphor for shifting the retail focus away from location and onto experience. The very term is designed to disrupt the notion of a store as a box that merchandises and sells products. With the availability and competition online, stores can no longer be just places that display products on shelves at set prices. Retail spaces need the flexibility to create and orchestrate the shopping experience, which could mean accommodating anything from in-store concerts, product launches or private events.

2. Consumers are the POS

Consumers are not only comfortable browsing online but are also perfectly comfortable making purchases online.

The consumers of today expect to purchase anywhere, anytime.

Amazon’s year-on-year double-digit growth is striking fear in bricks-and-mortar retailers who are clinging to physical retail but what’s often missed in this discourse is that consumers are situational shoppers. Whether they purchase online or in store depends on the items, season and the personal situation of the consumer at that moment in time.

For certain items like apparel, consumers want to touch, feel and try on in store; however, when pressed for time, they might opt to purchase online with next-day delivery at home or, if they hate the hassle of retail dressing rooms, they might choose to use a service such as US-based Trunk or Stitch Fix whereby a personal shopper will send a curated set of items to try at home.

With credit cards, PayPal and Apple Pay, consumers can purchase anywhere and pay however they choose. What makes this tough for many retailers is that stores were created to sell what was there, stocked in the store, and have customers go through the cash register.

To be successful going forward means meeting consumer demand for multiple payment options and the ability to transact the sale in store, online or on their phones.

3. There are no boundaries

The great advantage of traditional stores has been the ability to sell product off-the-shelf to a customer who is in the store and who can then leave with the product immediately. This advantage is rapidly being challenged by the next-day delivery option, which is in turn being challenged by same-day delivery. Even same-day delivery is being challenged in major metropolitan areas with hourly delivery.

Price is always a consumer consideration but the new key components in the value equation are product ranges versus speed of acquisition. Consumers now expect that they will have a wide variety of choices available via the ‘virtual shelf’ (online) and they now evaluate whether they are willing to wait hours or even an extra day to get the exact options and styles they want.

There is also the blurring of channel lines via ‘click and collect’. Many large retailers are realising the power of selling from the vast online inventories and enabling consumers to collect in store. This approach takes incredible infrastructure and real-time inventory systems that merge physical and virtual inventory.

The bottom line

Today’s consumer behaviours and choices are multiplying retail complexity to both engage and deliver a seamless experience.

The successful retailers will have to become far more skilled and invest far more resources into offering consumers the choices they expect – purchasing when and where they want; paying by their method of choice; taking delivery where they choose – at a speed they require.

Meeting these levels of choices and services makes store fit-outs and product displays seem like child’s play. Multi-channel is not a retail model per se; it is how consumers shop, purchase and decide with whom to do business.

What makes retailing so much tougher today are the systems, infrastructure and complexity required to create a seamless experience that satisfies the choice and personalisation today’s consumers have come to expect. Importantly, retailers have to react because someone else is already offering this to shoppers.

Chris Petersen

Contributor • Integrated Marketing Solutions (IMS)

Chris Petersen is founder and CEO of retail consultancy Integrated Marketing Solutions (IMS). Learn more:

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