In my previous post I promised to stop complaining about the state of retail today, and to outline how I think successful retailers will operate in the future. With the understanding that the future of retail starts…right…now.
Not that anybody in the world of Big Box retail is noticing, they are still perplexed about what’s happening with the economy and obsessed with figuring out when things will go back to “normal”.
NEWSFLASH: This is “normal”.
Okay, so maybe I’ll keep complaining, but that won’t be all I do.
I’m trying to divine what the retail landscape will look like in the very near future. The Big Box format will continue its decline as post economic meltdown consumers look for new ways, and new places, to spend less money.
The Big Box model can’t survive a slow growth economy.
What will survive, and actually thrive, are smaller retailers and regional chains which continue to be profitable in the absence of growth.
These smaller players, without the burden of excessive debt and short term shareholder demands, will continue to gain market share as they capitalize on the opportunities created by changes in consumer attitudes and buying habits. These smaller, smarter retailers will succeed by using tools and techniques developed by the Big Box industry to dramatically shift the market.
One area where smart retailers are gaining a competitive advantage is through the use of appropriate technology.
I’m not talking about using the latest technology, or having technology as the focus of the business, but using those technology tools which make the business more efficient, and which increase the joy a customer finds when buying.
History can show us how to use the best technology out there to improve business processes. One of the things Big Box retailers did very well was to integrate all the different parts of their organizations through the use of technology. The systems, and the best ways to use them, are in evidence everywhere in retail today.
Global sourcing, electronic ordering, supply chain management, assortment maximization and pricing schedules can all be improved thorough the use of readily available hardware and software solutions.
Second and third generation programs, based on propriety systems developed from scratch and at great expense by the Big Box industry, are now available to any size retailer at a fraction of the original costs.
Smart retailers will use these best in class systems and will piggy back on the numerous industry protocols set up to serve the Big Box industry.
Products contain RFID chips to make Wal-Mart happy. Those same chips, and the costs they save for shipping and receiving, are available to any retailer with an RFID reader. Any retailer can use the same inventory control systems as the Big Box stores because they have done the ground work in forcing suppliers to integrate tracking options into their products.
Vendor managed inventory “solutions” now required by large retailers actually allow smaller players to purchase at lower prices. Big Box stores are forcing manufactures to carry extra inventory in forward warehouses. Manufactures are then selling some of the same products to smaller retailers as a way to offset the inventory carry costs thrust on them by their Big Box customers.
This same logic, of using what the Big Box industry built to lower your own costs, exist in automating payroll systems, labor scheduling, training curriculum and inventory management.
It’s just like the Apple commercial states: “there’s an App for that.” The scope of what’s available is immense, it far exceeds the list of what’s needed and there in lies the rub.
Successful retailers will use any and every tool that will help them do a better job, but they will not use a tool simply because it’s there. They will take stock of what’s needed and use only that technology that can make the store run better, lower operating expenses and help delight customers.
On the merchandising side of the business, smart retailers will stay on top of how customers develop and use technology.
They will adapt their stores, their product mix and their service offerings to match how customers want technology integrated with their shopping experience.
Smart retailers will make their stores wifi hotspots. They encourage customers to download information regarding the products they carry. They will let them use smart phones to check offers from competitors. Since the customer will find out how you stack up soon enough, better to have them do it in your store.
By encouraging comparison, it gives retailers the chance to highlight advantages and it gives them instant learning about what the customer thinks is important.
Successful retailers will stay involved in social media. They will use social formats to start conversations on-line about their company. Social media forums allow retailers to answer consumer questions, to respond to complaints and to thank customers for complements.
Successful retailers will use technology as a way to engage customers as well as a way to sell them.
Big Box also created nearly unlimited ways for any retailer to collect any data they want, and then to analyze what was collected. From simple purchase histories to detailed permission based personal preferences, retailers can collect information about customers and even non-customers. Smart retailers know who buys and who doesn’t buy. They use data mining programs to find out what else they might buy. They constantly test strategies and tweak messages to find out what works, and what doesn't.
However, successful retailers also know that information is not he same as knowledge.
Smart retailers will take the information these sophisticated systems can provide and balance it with a little common sense and all the wisdom they can muster. Information based decisions are usually shortsighted and often dead wrong.
Information, put in the proper context, produces knowledge. Collect the information, use the knowledge.
So that’s more than enough about how smart retailers, the ones that succeed in the future, will be dealing with technology. I expect to see more and more, smaller and smaller, retailers adapting Big Box technology as the backbone of their businesses.
Next on the list is a look at how smart retailers maintain a maniacal focus on the customer.
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