Earlier this year, I attended the National Retail Federation’s (NRF) Big Show in New York City, a conference attended by over 35,000 people from around the world. I had the opportunity to speak with many industry experts, vendors, retailers, innovators, and consultants about some of the opportunities and challenges in the retail industry. Through conversations about digital transformation, technology, and changing consumer demands, I identified these core themes that are important to keep in mind while serving our clients:
1. State of the Industry: Retail is Not Dead!
Our team found this idea to be prominent throughout the conference. Despite constant news about stores closing and retail employee cutbacks, the US retail industry is expected to grow 3.8-4.4 percent in 2018. US e-commerce sales are expected to grow 10-12 percent. While the industry is trending upward, we will continue to see brick and mortar closings. Retailers will continue to focus on their most profitable stores and will differentiate by adding experiences to entice the customer.
2. Retail Consolidation in Mergers and Acquisitions
Retailers face increased industry pressure, slow brick and mortar organic growth, and aggressive competition to grow market share. Consolidation empowers retailers to expand their reach, streamline operations, and identify cost savings. This, along with extra cash flow from new tax reforms, has contributed to an expected increase in M&A for strategic and financial buyers.
Walmart is a prime example of a retailer who has expanded their reach and skill set through acquisition. Evidenced by the purchase of companies such as Jet.com, Bonobos, and Modcloth, Walmart has diversified its internal capabilities while testing new models. Bonobos was sought after for its mastery of the showroom store concept, where retailers keep limited inventory and ship purchases home.
3. Customer Experiences Must Be Seamless and Consistent
Over the past few years, “omnichannel” has become an industry buzz word. As technology advances, customers expect more from retailers. This desire for a cohesive experience at every touch point, whether in store, on a mobile app, or online, has clearly manifested itself in Starbucks’ strategy, for example. An industry trendsetter with their mobile app, Starbucks incentivizes customers to spend more money by creating a personalized experience and offering rewards.
4. Supply Chain Speed = Priority Over Cost
Retail supply chains will shorten as companies continue to adopt technology that reduce cycle times. Specifically, there is opportunity to digitalize product development, which traditionally takes several months. In the past, retailers have been focused on cutting costs and have globally outsourced supply chains to find the best price. Moving forward, the emphasis will be less on cost and more on speed. Customers are moving quickly, and retailers need to make swift, actionable decisions.
5. Digital Transformation – If You’re Not Innovating You’ll Fall Behind
As we discussed in February, technology is a core enabler of creating a successful retail operation. Retailers will fail to meet the needs of customers and employees if they do not embrace changes or use data to test results. Disruptive technologies constantly emerge, such as Artificial Intelligence (AI), which has forced changes throughout the entire retail value chain. Marketing is now directed towards technology, as opposed to just a consumer. Retailers who have been early adopters of technology, such as Walmart, have experienced an increase in sales and market share.
When undergoing projects, retailers and consultants must ensure they are making sustainable decisions. Complying with these industry trends will enable retailers to become more efficient, decisive, and adaptable. With this new skill set, retailers will be able to tackle some of the industry challenges, such as global competition and decreased foot-traffic, as well as be prepared for new disruptive technologies.