Retail landscape

Date

28.07.14

I’ve just returned from the on-line retailers conference in Sydney, wow.

I’m interested to understand where SCS needs to be to position ourselves to ensure we servicing our wholesale customers who supply to retail, our retail customers, pure play (on-line only) and omni-channel (on-line and retail) to keep them at the forefront of supply chain. The conference was not just about on-line it was heavily biased to towards retail in general and had a strong supply chain ‘flavor’ running through it.

Here are some key take-a-ways I got from the conference.

Retail is here to stay, there has been scaremongering for years that on-line will dominate bricks and mortar. The reality is that businesses who are emerging dominant in their category have embraced and are learning to become omni-channel – fact.
- Related to this point is the power of omni-channel, this was a key buzz word 3 years ago, now it is shaping the future of retail. The thing to get with Omni-channel is that it is an emersive experience not just another way to shop. It is set up around the consumer, older consumers buying behaviors are changing for a lot of categories and generation Y is a materially different consumer to previous generations and they are the ones people are gearing up to cater to for the future (obviously).
A key metric for on-line players is the cost to acquire a customer (Customer Acquisition Cost), traditional methods are becoming prohibitive (e.g. Google add words) as competition heats up. This is driving a number of leading pure plays to experiment with bricks and mortar. The initial feedback is that it is working brilliantly. Check out Birds of Prey a traditional on-line store for tailor made shoes now has a store in store in David Jones and it is outperforming traditional shoe stores within the company 2:1!
Key on-line findings
- Delivery is the biggest factor in customer satisfaction, if you buy a fulfillment and/or delivery service based on price you will get a short term win and loose out on massive opportunities mid to long term.
- A lot of e-tailers reported peak buying on a Wed and put this down to a lack of confidence on carriers and warehouses to fufil before the weekend (obviously they don’t use SCS and our network)
- Don’t charge for freight, it increases sales by up to 400%
- Don’t charge for returns and make it easy – there is a lot of science around this I’ll share with you on a later post. Its counter intuitive but the research is very compelling/convincing.
- Fast delivery times (e.g. 3 hours) have been a game changer for many companies (e.g. the Iconic) and propelled them to the front of their industry, they achieved an 81% market awareness when they launched this service and grew 50%!
  - SCS developed a 90 minute service from order placement to delivery for a car parts company (Dasko) who have built a significant business off this service and taken the march on their competitors, I’ve been amazed that despite talking about this innovation and blogging not one other SCS client has looked to take this up. The competitive advantage this offers is potentially massive
- The new term ‘show-rooming’ means walking into a store, trying stuff on then whilst in the store pulling out your phone and checking if the item is available elsewhere or on on-line cheaper – this is a big trend that is effecting retailers and forcing them to improve their digital strategies to keep up.
  - Unlikely to not buy if a comparative product is on sale for marginally less
Key generation Y findings (born between 1980 and 2000)
- Never not known a life that was not on-line and integrated (social media)
- Has developed a on-line digital persona that marketing people need to understand and appeal to.
- Wants to be courted in a meaningful way, high uptake in loyalty programs
- Earns on average around 70k/annum (I though this was high but that’s they said)
Key Mobile statistics
- Mobile is EXPLODING. Last year 25% of people bought something on a mobile phone, this year it was over 50%
- Mobile is used particularly for research
- Tablets are replacing desktops as a preferred means for on-line shopping (so ya better get your site looking good on a tablet)
- NFC (near field communication) technology is increasing and being used in retail to great effect, e.g. tap on the garment in store and see what celebs have been wearing it, whats in stock in store or in other stores, if you like it, order it.
  - Hointer is a new store in the US, its incredibly innovative, you download the Hointer app as you walk in, walk around and tap garments (one of everything in the front) . If you like something you order it and the app allocates you a changing room number. When you are ready walk into the changing room and everything you selected is there waiting for you. If you want to try a different colour or size bring it up on the touch screen in your changing room and it will be delivered to your room within 30 seconds via a delivery shoot or hanging garment conveyor – you dont have to speak to a shop assistant but you can if you like. It’s going crazy.
Key Supply Chain/IT findings
- Class leading r/e-tailers are attributing their success to supply chain innovation particularly in the digital space. Supply Chain is everything.
- Data is the key and the systems to drive them are becoming more critical. You need to capture it, know how to read (analyse) it and do stuff with it.
- Integrated systems are replacing legacy ERP + this and that (e.g. WEB, CRM etc…) –
  - Staples (second largest e-tailer in the world next to Amazon) has just re-designed their IT platforms to be truly integrated, the results are phenomenal,
    - massive increases in B2B sales, a lot of this is being driven by predictive modelling e.g. mining customer data to understand buying trends, say they buy 300.oo worth of paper every 3 months. In scenario A they personalize the website to their log in 3 months to promote products related to paper, in scenario B they note your spending has dropped off so they personalize the website to your log in to offer you compelling discounts on this product to win your business back.
    - They can roll out a county on the new platform in 14 weeks.
    - They have centralised Europe, replaced a lot of their social media and admin staff in different countries to a central office and replaced them with a much lower head count although the new guys are staff with PhDs, scientists, engineers and data analysists.
Key future trends
- 3d printing will become big. They are already printing houses, guitars and guns, the technology keeps improving and getting cheaper, it will be a step change in our history
- image search (instead of text)
- 3d imaging, get a brochure, tap the image and get a 3d rendered on your phone or tablet that you can turn and view from any angle.