The new Retail mandate:
The first global retail buying model focused on a specific market or category and brought product as fast as possible to the US for the masses. The original model committed almost all of the planned receipts up-front, per product lead times (typically four to six months in advance), and hoped that product predictions that were made on behalf of customers were correct. If product was right, profits followed. If not, markdowns paved way for new receipts.
Some retailers added forms of speed and efficiency, but for many, a buyer-driven push model to customers has not truly changed. Select retailers (Zara, H&M, L Brands, Forever 21) are executing a faster, more efficient, and, in some respects, simpler form of this push model, while developing more sophisticated approaches to testing and quantifying demand to create pull that are based on initial sales reads. In other words, they are building quick-response capabilities for short-life product that enables reaction to actual customer demand as opposed to predicted demand. However, most retailers have yet to completely marry their model with the consumer expectations of seamless all-channel service. Indeed, one (Primark) has chosen to stay out of online commerce entirely.
Today, Retail and Consumer Products companies must go far beyond predicting product success by prioritizing a Seamless Commerce strategy that will be most impactful to their customers.
Retailers need to be able to turn a generic customer (e.g. “Jennifer”) into a specific customer (e.g. Jennifer Smith, 1 Main Street in Chicago, IL) in order to best serve her. There is no roadmap, canned IT solution, or one specific example of a retail operating model to follow, but partial examples do exist.
· Grocery and big-box retailers, dealing with competitive pressures and shrinking margins for years, are prioritizing near-perfect accuracy of inventory throughout their supply chain, dynamic and localized competitive pricing, and various forms of customer loyalty programs.
· Amazon, the biggest retail disruptor, continues to build a fulfillment network and final mile delivery innovation to rival and perhaps surpass FedEx and UPS.
· Many mall-based retailers, in contrast, are embracing technology as late adopters by selling product online, but they are just beginning to seamlessly integrate visibility/reservations/buy/ship across all channels of customer engagement.
· Consumer Products companies are exploring personalized services to design or configure their own products (e.g. Nike), snapping up technology or partnering with third parties to better understand the habits and desires of their customers (e.g. UnderArmour), and competing with the very retailers who carry their products by expanding their direct-to-consumer selling capabilities.
With this in mind, how should retailers move forward?
To determine product commitments and stocking levels going forward, Retailers will need to deploy and rely on new Seamless Commerce strategy that encompasses processes and a sophisticated analytics engine to govern purchasing, positioning, pricing, and fulfillment policies that proactively seek to reduce supply/demand imbalances before they occur.
Seamless Commerce strategies and rules throughout the value network must be dynamic and influenced by each retailer’s unique customer preferences for speed and fulfillment location (e.g. store/home/third party). Additionally, Seamless Commerce shipping models must be vetted by industrial engineers that opportunistically account for shipping speed and expense in proximity to the customer. Ultimately, retailers will have to solve for customers and shareholders in a unified way using Seamless Commerce principles.
Coming soon – Part II Seamless Unified Commerce Requirements