Amazon who has changed the face of retail through its use of bold supply chain strategies reinvests almost 25% of revenues into logistics R&D for example.
The retail industry has undergone several major transformations, challenges, and disruptions during the past 20 years. Several external factors shaped this transformation such as macroeconomic conditions, demographic changes, evolutions in consumer behavior and the democratization of new technologies.
The pandemic added fuel to the fire.
The retail sector has been very resilient and although the crisis has not triggered major disruptions, however it has been the tipping point for some retailers, underlying some trends and accelerating the rapid transformation towards what we would call the 'Unified Commerce':
- A unified 'hyperagile' Supply Chain to stay competitive in this rapidly changing world
- An e-commerce acceleration and an even more client-centric experience to deal with the highly digitalized context
- An evolution toward more intimate client relations in order to meet the increasing demands of a 'more digital' world
- An increased collective consciousness regarding environmental and social solidarity
- A promotion of contactless or touchless commerce due to new social distancing rules
With the recent events of 2020, the complexity of forecasting demand and market fluctuations have highlighted the need for retailers to shift from a traditional cost driven supply chain, based on networks in silo, to a customer centric 'supply chain of services'. The latter relies on a unified network, which allows synergies between distribution channels.
Supply Chain dexterity is needed at different levels: traceability, inventory visibility, order management, 360 vision, integration of logistics partners… Today more than ever, it is a major competitive advantage in a world where speed, flexibility, and free services rule. Distributors must rethink their models and invest in their Supply Chain. The quest for the right partner will be essential in accelerating the launch of new services and ensuring the ability to compete on execution.
25%
In France, Baby Boomers and Generation X made an important shift to online purchasing during the periods of social distancing and the return to 'pre-COVID' habits seem unlikely; digital shopping is here to stay. According to a study by The Economist and SAP (2020), 60-65% of people interrogated in these age groups believe that they will not return to their pre-COVID habits. Covid-19 has dramatically shifted more customer traffic to digital channels. It accelerated the shift to e-commerce by 5 years in only a few months, and this acceleration has also increased the penetration and popularity (beyond punctual tests and buzz) of technologies to enhance customer experience such as Augmented Reality, Virtual Reality, 3D and live streaming. Those who were not as prepared or that did not have online presence had to be creative, innovative (especially luxury brands) and developed very quickly new local services such as the 'call and collect', or the 'try at home'.
Customer relationships have also been shaken up by the pandemic, and brands have had to reassess their codes.
'Goodwill and solidarity' became two very popular mottos for companies to show consumers their engagements. Brands had to be creative to maintain the dialogue with their clients and create services that would simplify their lives and their decisions. The 'ultra-personalization' of client relations, in this ever-increasingly digitized world, is the key to maintaining client intimacy.
Environmental awareness has also come to the forefront.
Consumers demand more durable products, more transparency, and a strong CSR, in response to current weak models which were highlighted by the pandemic. Brand confidence is a key motivator for one third of consumers, who would not hesitate to stop buying from their favorite brand should they lose confidence in the brand. Consumers are looking for products or services in line with their values, beliefs and lifestyle and brands that publicly champion values that align with their own. Consumers expect companies and distributors to play an active role in the resolution of social problems and actively invest in certain causes.
Facing this new set of consumer expectations, retailers have introduced, developed, and accelerated their commitment through climate actions and have invested in traceability technologies, for example, to offer more transparency regarding their products (sourcing, procedures, processing, carbon emissions, animal rights, …).
And to conclude, the new sanitation requirements have boosted 'contactless' or 'touchless' experiences.
This has become the new norm in a context where sanitary safety is essential for staff and clients. Retailers must be prepared for this new world and rapidly adopt existing and mature technologies. 'contactless' must be embedded along the value chain, from the operations level to the Customer experience by relying on automatic identification technologies such as NFC, QR codes as well as voice command technologies.
The abilities and robustness of client services at the front end have been tested during this unprecedented period and retailers are finally becoming aware of the stakes of reinvesting in the back-office ecosystem to sustain their services and brand image.
For a long time, retailers focused on the development of digital services and often ephemeral contact points with their clients as part of an experimental innovation strategy rather than on back-office investments.
The pandemic has refocused businesses on the need to ensure that back office operations can stand up to the new service requirements. Where previous investment emphasis was on digital services and front end experience, there is now recognition that investment in areas such as supply chain are pivotal ensuring businesses can deliver the customer promise, maintain market share and protect brand reputation.
Retail as we used to know it is dead, long live the 'contactless' after world!
In 2021, retailers will continue to undergo significant changes and adapt to the shifts led by the 2020 crisis. They must continue to work hard and to transform their organization across all services (HR, innovation and customer experience, back office, economic model…) to develop agile ways of working that will allow them to face all types of future challenge, even the most critical ones like the one we are currently going through.
To ensure the transition and sustainable transformation of their organization, retailers will have to make important choices, aligned with their DNA and image, focus their investments to deliver their promises.
