7 must-win battles in Retailing
The traditional industry boundaries are changing – manufacturers sell directly to customers, wholesale need to act as retailers and retailers manufacture their own brands. At the same time the customers have multiple touch points across channels operating together and want a one brand experience with coordinated products, services and prices.
Today’s competition is about agility and time-to-market. It is about differentiating service concepts and focusing on adding value for the end-user. The traditional value chain is transforming into customer journey retailing.
For years, vertical integration has been a power game between manufacturers and retailers. It has also been a way to kill complexity in the value chain and slim the processes towards a seamless customer offering across channels.
Slimming the traditional value chain from manufacturing to end-usage is the core of building profit and increasing the end-to-end efficiency and resource utilisation.
Direct customer contact is no longer only a retailer’s privilege. Customers choose where and how to purchase. The need for “one-point-of-contact” decreases relative to their online shopping frequency, while there is an expectation of full transparency across channels.
At the same time, “local means global” to customers as supply systems and logistic capabilities open up to delivery around the globe.
As a result, future market definition is set by the customer and defined by their behaviour. Suppliers and retailers have to adjust, and the winner is the one who is in alignment with the customers’ needs.
Retailing is about generating traffic and demand. It is about influencing as many processes in the customer journey as possible. No part of the journey is willingly left to others, and both manufacturers and retailers aspire to win this game and gain full control of the end-to-end supply chain.
Retailing today is about being a front-runner on the technological scene to reach end-users as seamlessly as possible – it is also a matter of sourcing and procuring at the lowest possible costs.
The winners of tomorrow need to know how to navigate across different channels and platforms with a uniform message.
Implement has defined 7 must-win battles (MWBs) which support a “customer-centric approach” and “new supply chain thinking” to succeed in retailing in the omni-channel era.
As customers expect to be recognised across channels and be remembered for their previous behaviour, it increases the demand for retailers to move from multichannel to omni-channel delivering “one brand to one customer” across channels.
An omni-channel approach forces retailers to be present and interact simultaneously in many channels. It increases demands for new structures and processes internally. To prevent costs from escalating, retailers must find relevant growth opportunities in their customer journey management and choose where to play and how to win to ensure profitable transformation.
The future customers are not loyal to products or brands. They are only loyal to themselves and seek continuously to fulfil their own needs. The phrase “customer is king” is more true now than ever.
Both retailers and suppliers have to be open to complementary services to increase the customer experience, as customer needs do not follow traditional market definitions. If needed, they have to build partnerships to deliver on critical customer requirements. They have to identify new sources of income to add more value to customers.
The key to growth lies within the customer. A comprehensive customer insight sets the direction for increased customer satisfaction and willingness to pay. Winning will also require the ability to transform big data into customer intelligence and make it the focal point for new service offerings in retailing.
Industries, and through them also product categories, are changing. Therefore, category growth is not just about doing more of the same in a more efficient manner. It is about shaping a new category and meeting new demands in the market. It is about merging industries and bundling service offerings in retailing. It is about untraditional thinking in category growth management – and beyond.
Stores appear in new shapes and are no longer forced to be stock-keeping or even physical. Formats are changing and must be flexible to population size and market dynamics. The ‘brand = format’ equation is changing, and retailing is about reinventing network planning and store formats. In the end retailing is about moving goods or providing profitable services to the end-user. New store formats, flexible delivery options, differentiated offerings and uniform digital presence force us to seek new ways of sourcing to ensure a dynamic cost base.
The digital era sets new standards in retailing, and the different players are forced to apply to the new rules with instant and uniform solutions across channels. The retailers need to build up a new infrastructure, both in terms of processes and platforms in order to meet customer expectations in the future.
Few retailers or service providers practice an omni-channel approach today. Still we see some very good examples of seamless retailing where customers are viewed as a “single customer” and met with a uniform service offering in different channels simultaneously. These companies often have a strong heritage in viewing customers as relations instead of transactions.
Danske Bank, SAS, IKEA, Apple, Nordstrom, Walmart.
Customer journey management opens up to new thinking in designing service offerings in retailing. The purchase funnel often starts long before customers appear on the retail scene. The many moments of truth in customers’ decision patterns force retailers to be present throughout the customer journey and adjust their service offerings accordingly.
It is all about fulfilling customer needs the best way at the lowest cost in all touchpoints across channels.
It is extremely complex for even the most established brands to be present in all moments of truth across channels. The diversification in service offerings requires unbundling, complementary services and partnerships. Retailing of the future is about increasing customers’ perceived value and even strengthen their own delivery in the value chain with partnerships, if that is what it takes. Strong customer relations are the entry ticket to open up to new sources of income in the value chain through partnerships and thereby increase profit per customer.
Retailing generates a lot of data. But generating big data without converting them into customer intelligence is a waste. Customer intelligence management is about fuelling our sales engines and optimising our sourcing and processes. It is about increasing our cash flow in the supply chain and allocate resources to the right focus areas. It is about getting a better picture of our business.
Every time you go shopping, you share intimate details about your consumption patterns with retailers. And many of those retailers are studying those details to figure out what you like, what you need, and which offers are most likely to make you happy. The US retailer Target for example, has figured out how to data-mine its way into finding out whether a customer is expecting a new family member long before they start to buy diapers, just by looking into their online behaviour.
Category management is about optimising service offerings within the category with the objective to grow the category. But new technologies make traditional categories grow into new categories. The category disruption has been the entry point for new players in the market, but has also been the stepping stone for other retailers to new market opportunities and growth.
Netflix is an example of a player entering a category by using new technologies and trends to grow the category. Renting movies has moved from a brick and mortar solution (Blockbuster) to an online service offering, where we can stream and download everywhere at any time. The category has grown and opened up for new players to enter.
Amazon started out as a pure online book store and is now one of the largest retailers dealing with all kinds of products and services. They are servicing their customers on all platforms. They were one of the first companies to open a market place for private sellers and other retailers and introduce a share gain solution to traditional retailing. They are now building up postal services, and their lockers are a physical sign of their presence and innovative category management.
Network and store formats change in order to meet new behavioural patterns, cut costs and increase customer experience in key locations. As e-commerce tears down local market boundaries, it is time to reinvent the classic growth formula of distribution, rethinking store formats and network planning.
Omni-channel retailing is not about delivering everything to everybody in all channels at the same time, but rather to have the right products and services in place for the right people at the right time. It is also about being in control of all processes and being agile in relation to new trends and demands. Furthermore, it is about thinking of sourcing and supply in a new perspective to keep a dynamic and efficient cost base despite the omni-channel complexity.
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Implement Consulting Group