The retail industry is undergoing a major transformation right before our eyes—and it’s just a preview of what’s to come. More than a billion Internet users have gone mobile, profoundly changing how people buy and companies sell. As per-store sales decline, all legacy retailers will need to rethink the role of these brick-and-mortar assets, reassess their locations, and rightsize them to meet changing consumer needs. This reevaluation may transform how many companies operate—and lead to massive changes in market shares, the retailer landscape, and commercial real estate.
The explosion of mobile devices and social media is transforming how we connect and how we make buying decisions. As sales channels multiply and the boundaries between them blur, consumers still want a unifying brand experience, no matter where or how they find it. In this new world of retail, consumers are more empowered and influential than ever before: they can instantly compare prices and product quality, voice their opinions online, and help shape new products and services.
But retailers also hold strong cards in their hands. The major players have always used scale to maximize their buying power, but today that scale also delivers a treasure-trove of data on shoppers’ behaviors and preferences. With access to more detailed, real-time information about potential customers—and more ways to reach them—companies can improve on everything from innovation to marketing to the overall customer experience. At the same time, a range of maturing retail technologies can help streamline backroom functions and logistics, lowering costs and sharply increasing efficiency. These and other key trends are transforming the industry behind the scenes.
With pricing, quality, and opinions so transparent online—and the value bar continually rising—how does your retail offering compare? Why should consumers spend their hard-earned money with you instead of with another big-box competitor, an established online player like Amazon.com, or an innovative startup selling through an online marketplace? (See “The Rise of Online Marketplaces.”) Record stores have all but disappeared in our lifetime, and many bookstores are following suit. Given the accelerating rate of change, what is your company doing to adapt and stay relevant today and into the next decade? Do you understand what your customers really want from you—and what it takes to win them over?
By 2015, with Internet access at the office, at home, and on the move, consumers will be full-time shoppers and most purchases will have some online aspect. In order to prepare for this not-so-distant future, legacy retailers must address four critical challenges:
The Informed, Empowered Consumer. How will you continue to attract business and build loyalty?
Complex, Multichannel Shopping and Marketing. With the explosion of touch points and data, in what new ways will you reach shoppers most effectively and deliver the best experience?
Shifting Real-Estate Demands. With even grocery shopping going online, what role will your stores play in the future, what will they look like, and what will drive traffic their way?
An Evolving Supply Chain. What technologies and configurations will give you the flexibility and efficiency you’ll need for tomorrow’s demands?
Any legacy retailer that isn’t thinking about how to answer these tough questions is at risk of falling behind as the industry moves forward. Let’s look at each of these challenges more closely.