Love it or hate it, people don’t shop like they used to. Retailers that can tap new technology to enhance the customer experience across channels, create demand-driven supply chains and optimize real estate will be best positioned to compete as the retail industry enters a new era.
Retail is a key driver for the U.S. economy, approaching $5 trillion — more than 25 percent of the nation’s gross domestic product (GDP). Overall, sales in 2017 and 2018 are expected to grow 3.5 percent and 4 percent, respectively, almost double the projected inflation rate. The industry is thriving. However, changes in consumer behavior and digital technology are creating new threats and opportunities, specifically in the areas of omnichannel commerce, supply chain management and retail real estate.
E-commerce has been around for more than 20 years, and the term has become ubiquitous among retailers and consumers alike, but fresh advancements in digital technology like radio frequency identification (RFID)1, beacons2 and m-commerce3 — the buying and selling of goods exclusively via mobile device — are opening unprecedented opportunities to gather data and customize the shopper experience across channels. The potential impact isn’t limited to the digital space. Per a recent report by
Retail Dive citing data from Forrester, web-influenced offline sales — which are either brick-and-mortar sales-driven by online research or online purchases picked up in-store — are expected to account for 41 percent of retail purchases by 2020, up nearly 8 percent from 2016.
In addition to enhancing the customer experience in-store and online, advancements in digital technology are changing the way and speed at which retailers can respond to consumer demand. Studies show that product availability and convenience have a much greater impact on brand loyalty and customer retention than they did just a few years ago. Today’s shoppers not only expect the latest trends, but also full inventory transparency and immediate access to products. In response, more retailers are exploring demand-driven supply chains.
Store closures of major retail brands have made top headlines repeatedly over the past several years, and the “overstored” status of the country is widely accepted. However, more than 90 percent of retail sales in 2016 were made in physical locations, and retail stock per capita — one way of determining if an area is “overstored” — varies widely from market to market. Brickand- mortar is not dead. Recent investments in physical storefronts by online brands like Amazon, Warby Parker and Bonobos affirm that conclusion, but retailers must use their physical storefronts to the best advantage as traffic patterns and shopping culture continue to evolve.
This isn’t the first time that major changes in the economy and consumer behavior have dramatically reshaped retail. In fact, it happened during the last two centuries along similar lines. During that period of change, businesses that clung to traditional models faded into history. Those that seized the opportunity to evolve became retail icons and dominated the industry for more than a century. As the real-world lives of consumers become more integrated with digital technology, retail experiences must evolve once again. By optimizing both digital and physical aspects of an omnichannel retail strategy, retailers have an opportunity to grow and compete through the industry’s next revolution.