Future-Proofing Your Retail Business Through Adaptation (Part 1)
Last week, I joined 300+ global retail leaders in Sydney at the 2016 Retail Leaders Forum, an annual gathering focused on a comprehensive examination of industry and consumer trends and an in-depth exploration of retail strategy for growth and innovation.
It was an honor to share the stage with Launa Inman, former managing Director of Billabong, Target, and Officeworks; and Warren Hogan, Chief Economist at ANZ Bank for our Outlook Session, The Year Ahead: Evaluating the Prospects for Retail 2016. It was an opportune time to explore the trends impacting both economic and political enviroments shaping the retail market.
Throughout the event, retail chiefs from some of the largest global retailers shared their stories of success, failure, and transformation. In my view, the common denominator amongst winning retail was adaptation. With the fast-changing retail and technology environment, what clearly sets retail leaders apart is their ability to respond quickly to changing pressures and competitive forces, while maintaining a sharp focus on business outcomes: profit, sales, and customer engagement.
I’ve outlined a few key takeaways for retailers looking to adapt in 2016 and beyond to future proof their business with a more responsive merchandising model.
Increasing competition and pressure to move to omni-channel
We have been in an extended period of low-growth globally, while at the same time technology is lowering barriers to entry for new competitors and business models creating an ever increasing array of competition for retailers. The mobile computing revolution is still in flight, its full effects are yet to be demonstrated, but it is clearly and permanently altering the retail landscape. This is a formula for ever-increasing competition that is putting pressure on retailers of all sizes and stripes to better understand and address the changing competitive landscape with a coherent omni-channel strategy for retailing.
Prices are changing more frequently
As I shared during the Outlooks Session, more than 75% of retailers have seen the number of price changes increase exponentially over the last 3 years. Our own analysis of this latest holiday season shows significant increases in the number of pricing actions by retailers. Using our proprietary competitive insights technology, we are able to collect and analyze a vast array of online market and competitive pricing information. For example, during a 1-month period of the 2015 holiday season we found that Amazon changed prices on 90% of the assortment we monitored. And on average there were 10 price changes per item.
Value isn’t just about price
As Ken Murthy, President of Global Brands, Walgreens Boots Alliance (USA) said, “Retailers can no longer afford to insult customers on price.” Ignoring market changes and allowing competitors to steal your customers is not an option. But neither is allowing your competitors to dictate your pricing strategy. We’ve seen repeatedly what happens to the margins of businesses that try to win through blind price matching policies. This sort of policy puts you at the mercy of your competitors, and we don’t see this as a viable option either. As Adam Stapleton, GM Merchandise Transformation, Coles put it, “Value isn’t just price.”
The CEO of Build-a-Bear, Sharon Price John, explained how she has evolved the brand, resulting in $6 million USD turnaround for Build-a-Bear. She said it best when she stated: “You have to keep evolving. If you don’t change with the times around you, you could lose it all.” The time is now for responsive merchandising. To effectively compete in the omni-channel world and execute price changes in real time, retailers need to embrace the right set of technologies that can give you the advantage of speed, scale and accuracy. According to Gartner, 1 in 2 retailers in the US and UK are benefiting from price optimization technology today. Retailers unable to turn consumer and competitive data into actionable insights that validate their pricing strategies risk falling behind or risk losing it all.
Also see the second part of this two-part blog, where I discuss the path forward for retailers seeking to embrace agility through responsive merchandising.