Retailization is spreading as businesses across all industries vie for closer customer connections. The rise of retailization and increase in competition means that traditional retailers will need to be a step ahead in fighting for the customer’s wallet. The changing environment affects relationships with the consumers and their loyalty. It is critical that retailers evaluate the impact on their loyal customer base, as the defection risk of loyal customers is exorbitantly high. Retailers need to find ways to lower this defection risk; ignoring the impact of the changing environment on this vital customer base will not lower this defection risk. In this transformed shopping environment, traditional retailers need to differentiate themselves in how they enable the customer experience. The high performers will be those who can offer a combination of great customer experience, selection and price. Going global presents opportunities and challenges retailers need to take the time to understand. No longer just passive partners in a world economy dominated by the United States, Europe and Japan, countries like China, India and Brazil represent increasingly robust consumer markets and are attracting many retailers to expand globally. But going global may not be the right strategy for every retailer. Nor does successful globalization require a presence everywhere. Despite the challenges, we expect the case for globalization to continue to gain momentum in 2008 and beyond. Our extensive experience of working with retailers that have gone global confirms that successful globalization can significantly boost revenues and eventually profitability as well. Approaching new markets successfully, however, requires enormous effort and different entry strategies. To deliver exceptional customer experiences, retailers will need to build their talent capability. Executing such strategies as increasing customer interaction and personalization as well as exceeding customer expectations relies on developing talent at all levels of the organization and building capabilities within the business to do so. The industry is seeing a shift from cutting out labor in the stores to leveraging productivity gains to free up labor to focus on how to best serve the customer. Accenture believes a prevailing trend for retailers in 2008 will be determining how to use talent to gain competitive advantage and figuring out how to best use talent to drive value for the business. To gain competitive advantage, we believe retailers need to place an increased focus on powering their customer-centric strategies by building analytical capabilities in merchandising and supply chain and customer relationship capabilities in the store, among other priorities. Retailers will need to shape talent programs that fit their particular strategic priorities and address key objectives of driving top-line sales, getting more profitability from the business and improving the customer experience. Shoppers continue to gravitate toward products and experiences that offer individual focus, interaction, customization and cradle-to-grave offerings. Retailers embracing customization and cradle-to-grave concepts view consumers from the perspective of their lifetime value. They believe establishing the relationship is worth more than the marginal loss of creating a manufactured-to-order product. The high performers are determining the earliest point at which to serve a consumer and are doing so with different shopping options as specific customer segments age and evolve their lifestyles. The supply chain to support the cradle-to-grave approach consists of multiple supply chains to serve multiple concepts. This means developing a supply chain with the flexibility to create a lot of one, starting with design and manufacturing and ultimately shipping the product to the customer, completely bypassing the store. The desire for faster fashion is here to stay and will extend into other categories. The digital age creates expectations of instant results and the same expectation is extending to fashion. Consumers today want fast fashion. And with this trend comes the dissolution of the traditional fashion season cycles. Increasingly, the standard four seasons are giving way to new waves of product every four or five weeks for some retailers. And faster fashion is not just about fashion anymore. Faster fashion is becoming an expectation that customers are applying to other categories, and one Accenture believes will only continue to grow in 2008. A green program is one every retailer will need to create. Almost overnight, the retail industry is being forced to create a value proposition around being environmentally conscious. By making green a core value, involving the entire enterprise in a process of transformation that embraces all of the supply chain, retailers can establish real credibility and drive significant competitive advantage. To create a green program, Accenture believes retailers will need to take a holistic approach focused on customer centricity. Leading green retailers really understand their customers. They strive to actively shape these customers’ needs and aspirations. And they show them just how to make appropriate green lifestyle choices. Demographic shifts in spending power will drive retailers to rethink go-to-market strategies. A distinctive development of the consumer economy is a fairly dramatic shift in spending power to that of young and older spenders away from the traditional 30-to-50-year-old demographic. While the middle-age demographic remains a spending powerhouse, these shifts signal that the traditional spending base is changing, and will continue to change. Accenture also sees the growth of a trend we call “renting the good life” offered by companies that enable consumers to wear and use designer products such as handbags, gowns and jewelry, and even drive luxury recreational vehicles and sports cars, without the expense of ownership. In addition to continually evolving marketing efforts, retailers will also want to consider creating store formats that cater to a more mature generation. Retail channels will continue to blur and expand, generating new expectations from consumers and more cross-channel challenges for retailers. Whether a consumer views a product online, orders it over the phone or sees it in a store, he or she expects a retailer to always have it in stock at all times through all channels. Today’s consumer also expects that the experience through any channel will be either the same or very similar. For a retailer, this means that behind the scenes, the company needs to operate seamlessly across channels and integrate data and services across all points of contact, having ready access to the same level of inventory visibility, product knowledge, promotions, customer information, loyalty program information and the like. Another way in which retail channels are blurring is through the creation of service-based businesses. A services-based business enables a retailer to create a new type of relationship with the consumer, one that provides solutions rather than just selling products. This type of business holds the attractive possibility of establishing that direct customer intimacy as well as offering the consumer a longer-term value proposition. Next: Recommendations |