The New Era of Retailing: Innovations and Predictions for the Future
For years the retail industry has experienced significant transformation in order to keep up with consumer demands and expectations, and while some have found success, others haven’t been nearly as lucky. Amidst a world-altering pandemic, however, the entire industry has been challenged in unexpected ways. Issues surrounding everything from operations, sourcing, supply chain, fulfillment, supply/demand, and ever-evolving consumer behaviors have been accelerated.
In addition to the immediate effects that have taken hold, what will the long-term impact be on the industry and what will the new era of retailing look like in the years to come because of it? Most importantly, how can brands plan for these inevitable systemic changes, continue to innovate their operations, and pivot to set themselves up for greater success down the road?
COVID-19’s Current Impact
Prior to COVID-19, traditional retailers were already facing serious challenges to compete in an Amazon.com-driven world. Challenged by the onset of COVID-19 in China earlier this year, the resulting ripple effect on the market has been pervasive, and retail business owners (RBOs) are now faced with major headwinds. Brands are increasingly tasked with identifying and managing new sourcing options amidst quarantine restrictions and limitations, the last mile is riddled with unreliability, and the majority of consumers still aren’t leaving their homes for discretionary retail shopping at brick-and-mortar stores. However, consumers are fully open to contactless shopping experiences and endless online options at the click of a finger.
With less discretionary income, consumers are also purchasing out of necessity much more than out of desire, and practical items such as face masks and other personal protective equipment have become a driving commodity, whereas many luxury items have taken a backseat. It’s one example of how brands have been pushed to consider where they can fulfill current needs without hurting their overall bottom lines, and many in and outside of apparel have taken initiative. These challenges are likely to continue for the rest of 2020, and the upcoming holiday shopping season that most traditional retailers longingly await will likely prove disappointing. Retailers have already scaled back acknowledging that there won't be the annual mad in-store rush that Black Friday and Thanksgiving shopping bring, and rather focus on their touchless channels.
Where We’re Headed Tomorrow
The impact of COVID-19 on world trade, social norms, and consumer preferences will only continue to transform the way retailers operate now and well into the future. It’s imperative that retailers re-evaluate and pivot quickly. Certain areas that will become increasingly important include automation, visibility from both an internal and customer perspective, as well as re-evaluating fulfilment strategies.
- Automation: The future of retail will rely heavily on technology to innovate, automate and optimize. Automation and digital transformation will increasingly become key for RBOs to survive, and will permeate a RBO’s entire ecosystem. Whether it’s leveraging augmented reality for the development of a garment and its trim, or the use of automated methods for handling and delivering a product to a customer's doorstep, it will be critical moving forward to find ways to do more with less. Creating an immersive experience for the consumer starts with RBOs focusing internally.
- Internal Visibility: As consumers spend less on goods, retailers must shift away from the volume push inventory model and focus more on a pull inventory model, identifying with the consumer rather than just masses. The most effective way to do this is through inventory management technology or RFID solutions that provide the ability to track and trace throughout a retailer’s entire supply chain. Accurately knowing what a retailer has and where it has it needs to be instantaneous. Without this level of inventory visibility, brands will not be able implement a true omnichannel strategy and ensure that their customers are provided with accurate information on their desired products. If a product is labeled as available but is really out of stock, for instance, it can be a huge detriment to the customer experience and end in a company’s competition converting the sale and gaining a loyal customer.
- Consumer Visibility: Without systems providing internal visibility and inventory accuracy, real-time updates to the consumer will be a challenge. Setbacks to a delivery schedule or phantom in-stock status will reduce consumer confidence and trust in the RBO’s distribution process. Lost sales due to out-of-stock products, improper product mix or a slow distribution model will impede a RBO’s success. However, beyond just product visibility, consumers are also interested in the garments themselves — e.g., where they're made, if they're made from sustainable material and how to care for it, if the factory that produced it is ethical, etc. Technology such as QR codes or NFC can quickly offer this information and provide the detailed insight that consumers seek, helping to increase customer engagement — and ultimately loyalty — in a unique and effective way. The key is creating an immersive experience whereas customer loyalty remains constant.
- Re-Evaluating Fulfilment Strategies: Moving forward, retailers must consider the best fulfilment strategy for them. The “right” equation has morphed beyond the standard manufacturer, distribution center (DC), and storefront. COVID-19 has pushed brands to consider new ways to get products into the hands of their customers. In fact, it’s posed the question, “Why ship to a DC when we can provide it to the customer further upstream?” Some retailers are shipping directly from stores, others are leveraging their large DCs and shrinking their storefronts, and others are even using the factory as a fulfilment center and shipping direct to consumer, which will become more prevalent in the years to come. This is only possible if RBOs have item-level inventory accuracy as compared to SKU-level, and are willing to evolve from a traditional business model.
In today’s current environment, previous strategies and operating models are no longer sustainable. COVID-19 served as the impetus for many to hit “reset” and switch gears. As we've recently witnessed from our customers, early adopters of technology and those willing to pivot their business models are recovering faster than those that have not. As the industry moves into the “new norm” of 2021, RBOs that consider these areas, course correct, remain nimble, strategic, and smart through new technology and methods will prove more successful than those that try to ride out the systems already in place.
Gary Moskovciak is senior vice president, Americas region, SML Group. SML Group is a global business and branding solutions provider for brand owners and retailers.