Retail firms can seize growth this year by optimizing distribution systems, enhancing supply chains, and better utilizing existing retail space, among other initiatives.
Improving existing distribution systems, incorporating digital technology into the physical store experience, and identifying innovative ways to leverage existing estate will be among the critical success factors for retailers in 2016, says Rod Sides, vice chairman and U.S. Retail and Distribution Leader at Deloitte Consulting LLP.
Where do you see opportunities for growth in the retail sector?
Sides: Retailers with optimized distribution systems and enhanced supply chains will be at a competitive adtage this year. While supply chain and distribution costs are not necessarily rising, consumers increasingly expect faster delivery at the same price point. This pressure is due both to increased consumer demand and to competition from digital retailers operating with lower overhead than many inbent retailers. We have seen the most significant shift in consumer expectations with regard to shipping: Our annual holiday survey indicated loud and clear that consumers do not want to pay for shipping costs.¹ Sm retailers, then, are investing in their supply chains to provide faster and more efficient fulfillment.
Forward-looking retailers are not only improving their distribution and supply chains, but are also identifying alternative fulfillment methods by better leveraging existing estate. Going forward, retailers are likely to consider dedicating more of their supply chain net space to fulfillment (for example, enabling customers to buy products online and pick them up in physical stores) and shipment processing, incorporating digital and other adced technologies for improved efficiency.
Wise retailers will also revisit the role their physical stores can play in the consumer shopping journey. Pnerships based on the store-within-a-store concept can not only enable retailers to offer a wider range of products and services, enhancing customer experience, but also allow them to expand their reach and monetize existing estate.
What should inesses keep in mind as they plan for growth?
Content curation. Content curation will be one of retailers’ ggest pain points during the next two to three years. Retailers are recognizing that creating a seamless, omnichannel customer experience is difficult, and perhaps even an unistic goal. Instead, they are focusing on closely examining each of the customer journey. This one-to-one marketing—providing a peralized and relet experience for each customer—requires more content and curation.
While digital technology enables the creation of targeted messages, retailers still need to fine-tune content and images for each media outlet, and synchronize this content with the consumer’s in-store experience. Most retailers are investing in content management systems, but the manner in which they are addressing this issue tends to be insular, focusing on the stories they want to tell, when they ought to be asking themselves, “What are the stories consumers want to hear?”
The role of user-generated content. Complicating matters even further is the decreasing reliance on retailer-generated content and the corresponding rise in influence of user-generated content and r nets. In 2013, Deloitte Digital’s retail practice found the majority of consumer action was still driven by retailer advertising.² Two years later, with the increase in social media and user-generated content, the influence of retailer-generated content was responsible for driving less than one-third of consumer action.³ Mining consumer insights to help understand the stories consumers want to hear will be critical in the year ahead.
Cyber security. With more data mining and increased digital communications comes more risk. Cyber security will continue to cut across all aspects of the iness. There also remains the unsettled issue of who should pay for any breach-related losses—the retailer or the credit d rier?
What is the next g thing in retail?
Cloud technology and mole payments. Expect to see retailers continue to upgrade and modernize technology, with brick-and-mortar retailers striving to identify ways to dominate the intersection of digital and physical. Cloud computing is central to this modernization and a key issue in retail, which often lags behind other industries in embracing cloud use. This year, expect to see retailers accelerate their move to the cloud, as IT depments no longer view its use as simply a cost savings technique, but as a way to allow more rapid adoption of the latest cloud-enabled solutions.
Additionally, this year will usher in more rapid consumer adoption of mole payment technologies, driven in p by the introduction of competing payment platforms. While not exponential, this adoption will be more pronounced than we have seen in the past.
Sd of concept to ity. Traditional retailers must to move ideas from concept to ity much faster, instituting ideas as ly as their online competitors, rolling out the resulting features in weeks, not years. With the market becoming more fragmented, sd and agility will become a clear differentiator for retailers.
In 2016, retailers will have the opportunity to improve supply chain and distribution nets, to reconfigure estate, and to embrace cloud and mole payment technologies to better meet consumer expectations. These s will put inbent retailers in a better position to compete with digital counterps, and to make the most of their technology investments.
1. Rod Sides and Susan K. Hogan, Deloitte’s 2015 annual holiday survey: Embracing retail disruption, Deloitte University Press, October 26, 2015.
2. Kasey Lobaugh, eff Simp, and Lokesh Ohri, The digital divide: Retailers, shoppers, and the digital influence factor, Deloitte Consulting LLP, 2013.
3. Kasey Lobaugh, eff Simp, and Lokesh Ohri, Navigating the digital divide: Capitalizing on digital influence in retail, Deloitte Consulting LLP, 2015.
“Retail Industry Undergoing Mive Disruption”
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