Few industries are being disrupted as rapidly as retail. Those left standing will be the ones that can embrace change and keep innovating.
Retailers across the world continue to face strong headwinds. They have suffered a sharp drop in business in recent years, with bankruptcy filings and store closings almost becoming commonplace.
In South Africa, retail giants such as major listed clothing stores Woolworths and Truworths have their backs to the wall amid declining profits. Edcon, the owner of Edgars and other chains, seems to be the hardest hit by the retail apocalypse, with news in December last year that it was restructuring for the third time in just three years in a bid to stave off collapse. This is amid stiff competition from international retailers such as H&M, and changing consumer habits which have seen a seismic shift from brick-and-mortar shopping to e-commerce.
However, all is not lost, and the challenging environment provides an opportunity for retailers to rethink and refresh their approach to business, which could boost profits.
Writing in the Harvard Business Review, Nick Harrison and Deborah O’Neill, noted that few industries are being disrupted as drastically as the retail industry. Pioneers of new business models, such as Alibaba and Amazon, are launching innovations in rapid succession, such as voice ordering and real-time pricing, while simultaneously building scale and driving down costs, they argued.
“The retailers left standing are those that figure out how to treat disruption as business-as-usual in an industry accustomed to slow, strategic planning. Today, even long-established retailers are starting to set and deliver on selling strategies at the nearly real-time pace set by their online competitors. It’s either adapt to the new environment or step aside and make room for a competitor who can,” write Harrison and O’Neill.
Respected British senior retail executive Andrew Jennings agrees: “If you are not open to change, especially in retail, you are in serious trouble. Customers want to be thrilled and entertained by retailers. Bricks and mortar shops have a future, but only if it is an omni-channel business," he says.
Speaking at the UCT Graduate School of Business recently, Jennings, author the book Almost is Not Good Enough: How to Win and Lose in Retail, shared his advice on how retailers can be successful in the face of this kind of disruption.
He believes that some of the key elements for a successful retail business include: knowing your customers and their needs, desires, and aspirations; constantly innovating, with a focus on technology; hiring talented people who are passionate about the store and the entire project; and embracing change at the center of everything you do.
"You have to constantly course correct in the retail industry of today. Artificial Intelligence and machine learning are two very important factors for retail in the future," he states.
Others have provided similar advice to retailers. Claire McCamley, a senior lecturer in marketing at the University of Huddersfield, recently argued that successful shops will spend time with and listen to their customers to find out what will meet their needs and make them feel special. Like Jennings, McCamley also says the right kind of staff who are motivated to provide an excellent in-store customer experience will be a key feature of successful stores. Furthermore, the shops of the future will focus on in-store design and ambience that make a customer feel good being there.
“Stores will reflect the brand’s identity, which has encouraged customers to enter it in the first place. But, more than this, they should make the transition from online to offline not only crucial, but exciting. The future of retail is about social interaction. Customers want to be entertained, engaged, and emotionally stimulated. Physical stores must enable consumers to have positive experiences. This may be done through creating an element of surprise for customers, perhaps through art, in-store pop-ups, or virtual reality. If stores can surprise and entertain their customers, then they are more likely to develop an emotional connection and keep them coming back for more,” says McCamley.
According to Anton Hugo, retail and consumer Leader for PwC Africa, “Competition remains fierce, and focusing on cutting costs and organic growth alone is not enough. Retailers need to be innovative and invest in new markets, products, and technologies that will give them the advantage over their competitors and allow them to connect with their customers.” In the online space, Hugo points out in a 2017 PwC report that new entrants don’t require stores or warehouses; they can be based around the corner or on the other side of the planet. And pure-play online players are popping up in every product category.
Studies also show that that more than half of shoppers indicate that they research products online first before they go out to shop. Jennings points out that “customers demand convenience, value for money, and transparency every step of the way. Younger shoppers, especially, are constantly comparing products and reviews about them online. They know as much as the retailer about the product and where it was sourced."
In such an environment, business as usual is just not an option. Retailers must be prepared to leave no stone unturned in the quest to stay relevant and to meet their customer’s fast-changing needs. It is not an easy industry to be in, but the rewards for those who get it right are considerable.
Jennings sums it up when he says: “It is impossible to be half-hearted in the retail industry today. You need to deliver to be successful.”