Ready, Set, Go! Retailers Are Gearing Up for Action in 2020
The 2020 event season started with the National Retail Federation’s Big Show last week. This year’s event drew more than 38,000 participants. As attendees and most in the retail space know, the show brings together the retail industry's varied brands and the vendors that help them deliver great experiences to learn, share and talk about current market conditions and how the industry is evolving.
What made this the 2020 show different from recent years’ events is that the overall mood seemed more positive than it had been before. Previously, many retailers had felt more threatened — and some might say paralyzed — by issues like economic uncertainty or what to do about the growth of online competition. As such, they were cautious regarding how much to invest, when to do so, and what they should invest in to grow and transform their businesses.
This year, however, the attitude appeared to be one of action. The retail sector now seems to have accepted that a certain amount of uncertainty is part of the game. That's removing paralysis, revealing a desire to start securing the competitive advantages needed to ensure a strong and growth-focused future.
At the core of this desired competitive advantage is technology, which is disrupting every interaction in the consumer-retailer-manufacturer chain. And retail is realizing it must accelerate investment in and experimenting with technology to create impact at scale. Not everything will work, so an agile test-and-learn approach is essential. The retailers that resolve how to scale new technology will be the winners.
Leveraging data — sharing it, analyzing it, and using insights gained from it to inform better and faster decision making — has been a central tenet of how the consumer-retailer-manufacturer chain has evolved over the last decade. Automation, also, has been critical to the evolution of retail, including supply chain optimization, analyzing data to develop assortment strategies, and presenting real-time recommendations to consumers. But as was evident at the Big Show, there are more creative and unexpected ways that both retailers and shoppers are stepping up their game and taking more advantage of technology:
- In China, a company has developed a consumer app that allows people to group their purchases together as a way to encourage retailers to offer bulk discounts.
- New artificial intelligence visual technologies are allowing retailers to passively observe, track and analyze where shoppers are looking in-store (e.g., which aisles), what products they look at; how much time they look at them; etc.
- Consumers will be increasingly able to shop online and simply pick up groceries in their cars, with machines bringing products together and making automated substitution recommendations when products aren't available.
- There are cash registers now available that can scan groups of products visually and in automated ways (without barcodes), even produce in plastic bags.
- Electronic shelf labels continue to evolve, allowing prices to be changed instantly and additional product information to be presented to shoppers. We can certainly expect to see retailers using this technology with its performance and design flexibility advantages.
And, as many of us have seen, innovative augmented reality/virtual reality technology can allow people to visualize apparel on and measure themselves, and consumers can personalize products like shoes and electronics with their own “skins.” There are seemingly endless ways that technology can help drive competitive differentiators and the retail experience of the future.
With technology it’s clear that traditional retail models are being disrupted. However, the right way to think about this is as an opportunity, in exactly the same way the internet proved to be. However, technology isn't the only substantial force disrupting retail: social fears, economic anxiety, financial worries and social disconnection are all changing the behavior of shoppers and expectations being placed on retailers.
The key word above is behavior. Understanding the behavior and needs of customers has been at the heart of successful retail for hundreds of years. However, now we have more information about customers than ever before, as well as of the wider market environment. The challenge is how to understand and capitalize on all of that information. And this goes both ways — customers have much greater access to data that informs their buying decisions, too.
Data is the key to turning disruptive technology to the advantage of retailers. Behavior evolves quickly, and data indicates those changes. With regular analysis, retailers have the opportunity to observe those changes to avoid being blindsided by perceived “sudden changes” and feeling compelled to make knee-jerk decisions.
Retailers must see themselves as in a state of continuous evolution, looking for the next tweak that needs to be made to their offering, testing new ideas and learning from them. At the Big Show, we saw retailers no longer frozen in the headlights of uncertainty, but rather looking to how they can evolve to meet the challenges and opportunities that lie ahead, setting themselves on a growth trajectory and acting to achieve. And the future looks very bright.
Brian Elliot is partner, founder and head of innovation at Periscope® By McKinsey, a platform that combines world-class intellectual property, prescriptive analytics and cloud-based tools with expert support and training to drive revenue growth now and into the future.