A looming recession. Supply chain struggles. Household budgets under pressure. For retailers, it's shaping up to be a challenging holiday season. As stores begin to execute their all-important fourth-quarter plans, they’re having to adjust, anticipating logistical hiccups and changing shopper behaviors. Amazon.com is even rumored to be planning a second Prime Day holiday, partially to deal with shortages. Called Prime Fall, it will mark the first time the company added an additional Prime Day event.
People are becoming more discerning as discretionary income shrinks, and less likely to make shopping excursions because of gas prices, for example. And they want to make sure stores have their favorite products in stock. There are lessons to be learned from retailers that are showing resiliency — from inventory transparency and curated recommendations to immersive moments and hyperconvenience at brick-and-mortar locations. They’re discovering operational innovations. And they're differentiating experiences in these fast-changing environments.
No Store? No Problem. Retailers Are Setting Up More Delivery Networks.
Traditional brick-and-mortar retailers are taking lessons from Amazon to bring products to new markets. Kroger, which has no physical stores in Florida, delivers on-demand to residents in that state. It built a customer fulfilment center in the region to fuel its Kroger Delivery service and reach a new set of customers.
'Frenemies' Team Up to Take on Amazon
Consumers’ increasing demands for rapid delivery solutions and real-time availability strain companies’ operational capabilities. To meet expectations, retailers are turning to an unlikely source for help — competitors — to expand supply chain networks. American Eagle Outfitters is investing heavily, creating an “anti-Amazon” solution by building its logistics platform. And it’s offering other retail and apparel peers the opportunity to join in.
Many retailers are incorporating brand purpose in these behind-the-scenes efforts, linking them to environmental, social and governance initiatives. That includes full lifecycle design through circular supply chains and repair and repurposing programs, as well as delivery systems.
Virtual and IRL Merge With Connected Profiles
Retailers provide in-store associates access to consumers’ preferences and connect mobile wish lists to in-store inventory.
They're leveraging new technology and models to speak, listen and market to consumers in more personalized ways. Enhanced contextual search capabilities and personal shopping bots provide intelligent guidance and support. These stores make it easier for consumers to find what they want. Similarly, retailers are seizing social commerce opportunities, launching shoppable creative and engaging consumer affiliates.
Not Just for Apparel Anymore: More Retailers Tiptoe Into the Metaverse
Companies in every sector are experimenting with next-generation digital commerce experiences that enable shoppers to virtually browse and buy products in the metaverse and deliver them to their homes. While youth-oriented apparel brands, such as Nike and Gucci, and fast-feeders, including Chipotle, Wendy’s, and McDonald’s, have been the brand pioneers, more retailers are experimenting with Web 3.0.
CVS is working to patent its pharmacy and health clinics within the metaverse and the virtual sale of items, including medications, beauty, and health and wellness products and services. Sephora is also exploring. Retail banks are planting flags. Grocery giant Carrefour has purchased a plot in the Sandbox, a large blockchain gaming platform. And Walmart is quietly amassing trademarks that will ease its eventual entry.
Success in the next generation of omnichannel retail will be all about delivering solutions rather than just selling products. That will certainly be true in the metaverse as consumers spend more time in digital realms and cross-world commerce becomes the norm.
The holiday season may be a good time to test out the metaverse. However, with so many questions still unanswered about what this space will look like and how it might fuel sales, smart brands are also staying light on their feet to quickly pull back, at least short term. For example, Tinder recently stepped back from its “Single Town” and cryptocurrency efforts.
What these four moves share is that each increases resiliency, which determines which companies will thrive in the months ahead. Whether or not the economy enters a recession — or even if we're already in one — it’s crucial for retailers to rethink their transformation efforts.
Businesses have a choice in how they respond in this climate, as they did in the economic crises of 2001, 2008 and 2020. Each downturn has produced new economies that didn't exist before, from e-commerce to the sharing economy to the experience economy to the world of subscriptions and crypto.
Not many leaders enjoy managing through this turbulence. But they can still channel anxiety into strength and resiliency. Those that evolve and make intelligent choices will emerge stronger than the competition. These retailers will find uncommon growth with logistical innovations and better customer experiences.
Read more in our Retail Transformation Report conducted in partnership with retail innovation consultancy PSFK.
Kristen Groh is a senior partner at Prophet, a growth consultancy, specializing in digital transformation strategies that guide brands toward uncommon growth and exceptional relevance.
Kristen Groh is a senior partner at Prophet, a growth consultancy, specializing in digital transformation strategies that guide brands toward uncommon growth and exceptional relevance. Kristen has built her career on the combination of deep client-centricity and hands-on practical experience, working in digital product, marketing, technology and design. She has worked with a range of retail brands including Estée Lauder, Aldi, Unilever and SC Johnson.