Considering the amount of negative press that’s generated about physical retail, it’s easy to get the impression that the epitaph is already written on the wall (engraved in brick and mortar by Amazon, according to most accounts). But it’s important to remember one fact: 80% – 90% of retail takes place in actual stores.
The report of my death was an exaggeration.”
— Mark Twain
Full disclosure: Determine, Inc. has a considerable customer roster of leading retail companies across all consumer segments, as well as deep vertical industry expertise. So, while we’re biased when it comes to the outlook for store retail, it’s a perspective that’s informed by a broad on-the-ground presence. Our VP of Sales, Sean Delaney, delved into the topic from a supply chain angle.
Omni-channel retail: A fancy way to say through-the-line shopping.
A recent article from consultancy McKinsey, called “Where stores can still compete—and win,” did a superb job of laying out the relatives strengths and weaknesses of ecommerce vs. physical stores. The first takeaway is, take away the “vs.” That’s because, while share-of-wallet cannibalism happens on both sides, the truth is less defined between the channels.
Amazon has been experimenting with physical stores for several years already. Purchasing Whole Foods is probably the biggest example. While some of them have had a “driverless car” sort of aspect about them (cashierless convenience stores, anyone?), the move is clearly to tap consumers on the shoulder wherever they happen to be. Call it product testing, self-showrooming, Main Street warehousing, or even a Prime gateway drug (campus bookstores without books – novel idea!), it’s crossing lines to cross sell consumers.
This through-the-line approach is also cross selling other retail outlets at the same time. Consumers who have to go to a physical location to make or pick-up their online purchases will come in direct contact with other stores. Does that then have the potential of making those physical “online” stores the equivalent of a mall anchor or loss leader, attracting shoppers and placing them in the sights of competitors? Who knows how much of that wallet will end up getting diverted into other shops.
Location, location, loc….never mind.
According to the McKinsey piece, the whole concept of what actually constitutes a “store” may be changing. The blurring retail lines, if they exist at all, are clearly evident when you look at the consumer data. Data from the National Retail Federation shows over the post-Thanksgiving holiday weekend the greatest share of audience shopped both online and in stores. The second-biggest online seller was Walmart, one of the biggest in-store sellers as well. In other words, to a certain extent it’s all the same to consumers. As long as retailers have what they want.
Where physical stores are at less of an advantage is in the need to open, maintain, staff and stock actual locations. This is where retailers need to hone their process efficiency to a fine edge. The “front office” side of store retail is meeting the shifting consumer and competitive landscape with a renewed focus on customer service, community building and value-added experience. But, as Sean pointed out in his blog, there is still room for improvement in getting the “back office” procurement, contracts and supplier/supply chain Processes Under Management.
Solving store retail challenges with technology.
This entails achieving spend control across direct, indirect, GNFR and services procurement. Since processes don’t work in isolation (or shouldn’t), retailers also need to know what’s in their contracts, which means having a clear grasp on your supplier information and performance. Ideally, all of these processes are integrated with shared data on a platform – like the Determine Cloud Platform.
This provides the visibility into data that gives retailers the insights and basis for making process improvements – business decisions that lead to better results, more consistently. As holiday shopping trends make clear, this is especially true if stores are to thrive in a more pronounced cyclical environment.
Retail stores aren’t going anywhere anytime soon. They may have to adjust and redefine the value proposition they’re offering, but this is happening. Kohl’s partnership with Amazon is an example of building on collaborative strengths to the benefit of both through consumer “sharing.”
Plus, think of all the ways being innovated to pay – Apple Pay, Google Wallet, NFC, chips, peer-to-peer, etc. You could reasonably expect that not all of the time, effort and money put into developing this on-site payment technology would have happened if the need for them was going to be short lived.
Now, finding a parking spot is a different issue.
To learn more about how we help retail and other industries achieve Process Under Management, check out our Resources and schedule a personalized demonstration of the Determine Cloud Platform.