The Charles Dickens’ novel, A Christmas Carol, Ebenezer Scrooge gets a visit from the ghosts of Christmas past, present and future. They all take their turns trying to melt the dark heart of Scrooge. Eventually Scrooge wakes up with a whole new outlook on Christmas. So what does this story have to do with retailers and their Christmas? A recent story in the Wall Street Journal points out that retailers, while trying to resist it, have looked to employ deep discounting to flush out inventories and to capture customers this holiday season. Click here for article.
Retailers, as we have stated on this blog, have been scrambling to keep up with customer demands and the shifting sands of retail. We witnessed this even more so this year during the beginning of the holiday season – Black Friday. Retailers were scrambling to allure customers to both their brick and mortar stores as well as their eCommerce assets. Clearly they are continuing to scramble to figure out what is the best combination of discounting and holding the line. The challenge for retailers is that the ghosts of retail past are exactly that…the past.
Consumers have become accustom, if not expect to see discounting take place early and often. Why would the major gift giving season of the December change this mentality? If everyone is discounting…is there really any discount? So what are retailers to do?
- Consumers expect discounts…so you will have to provide them. But can retailers be savvier with them? Follow the Jet.com model – provide discounts but some caveats such as non-returnable. Rather than simply discounting, bundle items. The article points out discounting done at Ralph Lauren on a scarf, what about bundling it with gloves. Discount the bundle but look to capture a higher amount of revenue.
- Lean on your supply chain network for greater nimbleness – the ghosts of Christmas past never had to deal with such new fulfillment models as deliver to home, order on line and deliver to store…add these to the traditional brick and mortar distribution methods. Underlying all these new models are retailers’ supply chains. The ability for retailers to position inventory, respond to demand and fulfill more effectively is vital. As consumers expect more from their experience, retailers need to keep pace. The supply chain is the best way of doing so.
No one wants a visit from ghosts, let alone during Christmas. Retailers are seeing ghosts themselves. They are reacting to consumers’ demands and leaning on discounting to draw them into their stores. The ghost of Christmas past when they had control of their pricing is exactly that, the past. Focus on the future, the game is constantly changing. Nimble retailers, who leverage their supply chain network will have the opportunity stay ahead of their competitors.
What a year 2016 has been. With a unexpected result in the United States presidential elections, the United Kingdom deciding to leave the European Union, one of the world’s largest shipping companies (Hanjin) going bankrupt, Olympic games being held for the first time in South America to name a few, I think we are all ready to close the chapter on this year and look forward to 2017. With every new year we in the retail world, also begin to look towards our annual pilgrimage to the Javits Center in New York City for the biggest retail show of the year – NRF. I have lost track of how many of these I have attended. The nice part is they always teach me something, there is always something new and exciting. So what should we expect during this version? Here are some trends I would keep an eye on:
- The store version 2.0…or is it 3.0 – Okay okay this might be boring and something that I already discussed last year, but the reality for retail is that the store is continuing to undergo a massive metamorphosis. The age of the massive, cold, heartless store is over. Stores will remain points of sale and fulfillment, but how they achieve these goals is what is continuing to evolve. Are retailers going to leverage stores as do brands such as Restoration Hardware with certain stores that are truly only showrooms, allowing the consumer to experience the furniture and housewares in a variety of settings? Will stores morph towards the Apple Store model – a fulfillment center, a showroom, a service and maintenance center. What about stores such as Bass Pro shops, a store where the experience is as much a part of the store as is purchasing product. Brands and retailers will continue to work on figuring out what their stores need to resemble or what mix they want to employ. This will have an impact on their inventory strategies, labor mix, store technologies and integrated omnichannel strategy.
- Retail supply chains, back to the glory days? An interesting report came out recently from the University of Auburn and RILA that looked at where retailers were going to invest their funds over the next year. The supply chain, while not earth shattering news, was one area of focus and investment. But, it is investments not in squeezing out more cost savings from the supply chain but instead investments towards making the supply chain the engine for growth and expansion. I couldn’t agree more! The primary function of a well-oiled supply chain is to get the right product or service, to the customer at the right time, right price and for the right margin. Simple! Too often retail has looked at supply chains as where they can squeeze out cost and instead looked to the customer facing assets – web sites, eCommerce, mobile, CRM to name a few – where they should invest treasure with the idea of capturing customers. This remains important, but now retailers, the smart ones, are recognizing that unless they have a nimble and efficient supply chain, can they meet their customer’s expectations? Expectations that are stoked by, at times, overpromising with the front end bells and whistles? It will be interesting to see how supply chains are discussed and viewed at NRF.
- IoT and digital how are retailers doing? Last year it was interesting to see the number of vendors and discussions that included some degree of IoT (internet of things). Will this hold the attention of the audience again this year or are already past this? I hope not. Reality for retailers and really most industries is that the digital journey, of which IoT is a part of, is only beginning. The digital transformation – where companies are raising expectations to expecting over 40% of their revenue will be generated from digital by 2020[i] – is only beginning. How will retailers begin to adopt digital technologies such as smart displays, virtual reality, connected products via IoT, greater digital connectivity with both customers and their ecosystem? We cannot, and I trust we have not, buried the idea of digital transformation or digital enablers such as IoT. It will be interesting to see how much of the narrative continues to contain a digital focus at NRF.
These are three big themes I will be looking for at NRF. You might ask yourself – well what about omni channel or mobile commerce or even social commerce. I am sure these topics will remain a constant. However, I think it is time we stop trying to categorize commerce and just call it what it is – commerce. There was a great article earlier this year from the Harvard Business press that talked about consumers moving to a model of ambient commerce. A world where being able to purchase, transact and acquire products is always on. Consumers no longer have to think about shopping or transacting. Retailers must be aware of this new reality.
A few weeks away from our annual kick off for retail in New York City and NRF. Hope to see you there.
[i] Gartner, “Create an Industry Vision for Digital Business.” April 11, 2016
It’s December and retailers have kicked into high gear to meet the increasing demands of holiday consumer shoppers, both in store and online. If the Thanksgiving to Cyber Monday time frame in the United States is any indication, the strain felt by the retail supply chains is not going to subside during the Christmas season.
A recent article in the Wall Street Journal highlights the struggles retailers such as Toys “R” Us faced last year when it came to fulfilling all the online orders that taxed their systems. Click here for article. So what are we to make of this? Should retailers
Plenty to go around! If your supply chain is up to par.
throw their hands up and allow the mighty Amazon to march on, unabated? Of course not. Retailers must be increasingly savvy when it comes to their integrated online and brick and mortar strategies.
- Be judicious with online promotions. Easier said than done, as the majority of consumers expect to get deals online, and better prices. But, retailers need to start being disciplined with their promotion and pricing strategies, and avoid running a promotion for the sake of it. They truly need to understand why and how this promotion will impact their bottom line.
- Have a network view of all distribution nodes. The advantage traditional retailers have is the real estate they have invested in. While it is not always a positive, retailers must take a holistic view of their assets. Can they distribute popular, standard or fast moving items from their stores? View them as forward-positioned distribution centers. Hold back inventory that is more unique, less likely to be mass purchased back in true distribution centers.
- Don’t be afraid to set expectations with customers. This is difficult, especially considering Amazon isn’t shy about taking a financial hit on some of their fulfillment promises. But why can’t retailers have a deeper understanding of their product assortment with associated costs? Certain items need to have a cutoff date – if you do not order by this point then there is no guarantee it will arrive by the desired date. Yes, this is available sometimes, but make these options crystal clear.
At times, retailers must feel like they are the dog that constantly chases cars – run, run, run, but alas the car is always faster than you. In a way retailers need to stop focusing all their attention on the car (aka Amazon) but rather focus on other dogs – can they out run them? Focus on your supply chain network. Is it flexible enough to allow the retailer to seek new offerings, new business models? Without the visibility and understanding of what is possible, what can you really hope for?
Retail faces a daunting task. Not only do they have to compete with the likes of Amazon but they have to keep up with our, the consumers’, needs and desires. A challenge, but a great opportunity.