Features, Strategy and Operations

Happy New Year: Are You Ready for 2018?

Are retailers about to walk through the front door of a welcoming and prosperous 2018? As of the day after Christmas, the New Year was being ushered in with a potentially better than expected bump in retail sales. According to Mastercard Inc., retailers received a huge gift of the greatest rise in sales (excluding automobiles) since 2011, of 4.9 percent from November 1st through Christmas Eve, compared with a 3.7 percent gain in the same period last year.

This includes both online and brick-and-mortar stores, with e-commerce leading the increase, rising 18.1 percent.Customer Growth Partners is predicting a whopping 5.7 percent sales growth during the same period, the biggest increase since 2005, which was 6.1 percent. Regardless of who wins the growth predictions, retailers will have had a big reason to break out the bubbly on New Year’s Eve.

Furthermore, at the time of this writing, consumers were embarking on what has been typically one of the biggest shopping weeks of the season. Between Christmas and New Year’s, they are expected to spend about 11 percent of the season’s total, according to CGP. And finally, inventories were kept down across the board, which portends strong bottom line growth.So will 2018 “make retail great again?” That phrase is going to be popular (even though its original messenger may not be) since the retail industry has been under siege for such a long time.

Of course, one single year, 2018 by itself, is not enough to make retail great again. Consumers are in the driver’s seat on that one. But even with a major consumer shift back to purchasing, they aren’t going to let all boats rise equally. Regardless of a potentially better retail climate, consumers will once again prove that it’s a share wars industry. There’s still too much stuff to go around, and they will be more demanding and selective than ever.

So only those retailers who focus on continuing the pursuit of six strategic, and structural challenges and opportunities will win the tech-armed new-world consumers.

The Six Imperatives for a Successful 2018

1. The Power of the Consumer and Redefinition of Personal Value

Most of us who live on this planet and have been participating in one way or another in consumer-facing industries have clearly observed the rising power of consumers. It began during the late 1970s and early 80s, coinciding with the early shift of supply outpacing demand. Therefore, as consumers gained increasing access to more goods and services, retailers and brands had to win a consumer’s purchase over the hundreds of equally compelling competitors. Therefore they had to ratchet up their offerings and differentiate themselves by adding value in some unique way. And rather than insult my readers’ intelligence by rolling out that very long narrative to its most recent conclusion (where the Technology Revolution begins), in a word, consumers are not just more powerful, they are omnipotent. And it’s their shopping, buying and consumption decisions that are literally forcing all industries to transform drastically and quickly. I call that the ultimate power of omnipotence.

We’re not talking about some textbook or research definition of “consumers” in the aggregate, or even in cohorts. The boomer generation was historically the biggest lump of consumers who had big wallets and loved stuff. But as they ride off into the sunset seeking experiences and wellbeing over stuff, retailers must opportunistically take what they can get from their shrinking wallets. Simultaneously, as retailers say good bye to the boomers, they must quickly transform strategies, structures, merchandise, service and experiences to the larger numbers of incoming millennial and Gen Z consumers who have smaller wallets and who are also less interested in stuff.

If you try to lump these nextgen consumers together, they will not like you and they may even hate you. Tech-armed with infinite and instantaneous access to whatever they desire, they expect personalized and exclusive products, services and experiences.

So, retailers are asking the obvious question: how in the world am I going to know who each shopper is and what he or she demands so I can satisfy them all beyond their simple needs? This begs the more obvious question: how am I going to do this? How am I going to deliver each individual consumer’s wishes, especially since they are demanding that you don’t just fulfill their needs, rather, you must satisfy each of their dreams. Furthermore, the work of satisfying dreams pretty much puts price promoting way down on the list of dream determinants. For the new-world young consumers, their priority dream determinates are product or service newness; where, how and with what ingredients products are created; how responsive is distribution/delivery (fast and free and convenient); how it’s presented (the environment, the package, the experience) and the entire holistic, frictionless and personalized experience. This is the stuff that dreams are made of, redefining the personal values that satisfy dreams, beyond price.

And of course, the power of the consumer to demand all of this is not just in response to the horrific piling up of more and more mountains of stuff and services. You’ve heard it before and you need to hear it again. The smartphone packed with all of the retailers and brands in the world into its pocket sized device is being carried around 24/7 wherever the consumer goes making the consumer at any moment in time the de facto POS (point of sale). If you are a retailer or a brand that is not in that device, then you are a dead man walking.

As an aside, Primark, the discount, fast-fashion phenomenon, spread across Europe at lightning speed without being online. They made a conscious decision not to build an e-commerce business so that they could keep their pricing at the absolute rock bottom level. As they stormed into the U.S. just two years ago with eight store openings, they were advised (advisor will go unnamed), that developing an online business in the U.S. would be imperative to succeed. It was suggested that they view e-commerce as a required investment in a growth strategy. They chose not to, and they are floundering here and may very well fail.

2. Personalization and AI

Some may say that the terms personalization and AI are overused. Well forget it. I will not stop pounding their importance into the heads of every C-level executive in the industry, until they have understood and embraced the strategy of identifying and profiling every single one of their consumers. And even more important, these executives must implement and deliver personalized products and services — each customer’s individual dream.

Big data and predictive analytics must be every retailer’s and brand’s strategic priority to drive customer personalization. As I’ve said before, Amazon is leading the way, ranking on top of the one-to-ten personalization scale, while the industry at large ranks at about two. So step on the gas in 2018 and keep the pedal down, because ultimately the ability (or not) to respond to, and deliver personal dreams will determine the future winners and losers.

Amazon’s analytics are on steroids: the company knows when you will run out of toothpaste and will have a package on your porch before you know you even need it. On another level, the predictive analytics of subscription model Trunk Club, Birchbox and Stitchfit deliver a personally curated, regularly scheduled delivery of items the recipient will love. Smaller mom and pop neighborhood retailers have forever personalized their offerings because of their intimate knowledge of every one of their customers. Retailers now need to deliver that knowledge at scale.

3. Fluidly Ubiquitous, Laser-like Distribution

The commonly used term omnichannel is too often mistaken to mean the integration of digital and physical distribution platforms. A fluidly ubiquitous, yet laser-like distribution strategy is more accurate in defining the winning model for this century. While laser-like ubiquity could be considered an oxymoron, in this context it means that every brand, retailer or service must be operating on, or distributed through every relevant digital and physical distribution platform possible (even if it is with a collaborative competitor such as Amazon), to provide quicker and easier access to all current and targeted consumers, and quicker and easier access for those consumers.

The consumer is not only a moving target and the new POS, (wherever they are, whenever and how often), they are also individuals. Therefore, every supply chain must be liquid, capable of flowing anything and everything quickly and efficiently to each and every one of those fragmented, personal points of sale. This will force organizations to de-silo, de-layer, flatten and seamlessly integrate functions, allowing faster and more fluid decision making. These liquid supply chains must be demand driven (pull), vs. the old forecasting models (push).

So, let’s talk about the word “platform.” This should replace the word retail, which immediately brings to mind a traditional store, and now, a store and its website. By replacing retail with platform, and understanding liquidity and fluidity as described above, we can unlock our minds from being trapped inside a physical store or on a website, both of which “store” stuff. Amazon is a nation-state sized platform, upon which anything and everything in the world can operate, flow through or flow from — including competitors. Platforms can also provide great personalized experiences. Integrated digital and physical platforms provide synergies. Research has found that consumers who have several platforms to choose from spend three to four times more than when they only have one. Also, consumers who buy online and pick up on platform (BOPOP) purchase additional impulse items when they’re on the platform for pick up. These synergies, in addition to consumers demanding ubiquitous, immediate and experiential distribution, is driving pure e-commerce players to launch physical platforms and vice-versa. The posterchild examples: Walmart acquiring its way into digital and Amazon acquiring its way into physical.

Again, in the physical world, the need to follow the consumer (the new POS) wherever they may be, requires all kinds of flexible, agile and even temporary distribution platforms: small neighborhood platforms; kiosks; pop-ups; airports; mobile vans; and just use your imagination for many more.

Finally, competitive or compatible platforming provides a huge synergy and will continue to accelerate. Amazon has a lot of competitors operating on its platform. Nordstrom has Brooks Brothers, Topshop and J.Crew and Macy’s has Apple. And there are many other examples. Here’s how it works: Synergy results when a loyal Apple customer goes to Macy’s Herald Square because it is closer to where they live, than the one they usually went to across town. This is-resulting in new traffic for Macy’s, which may also result in additional purchases while in store. Likewise, Apple gains a Macy’s customer with a new sale. So, think about the new traffic Kohl’s will gain from Amazon’s small shops on its platform, which will be used for pickup and return of goods. You get the synergy idea.

And the “last mile” wars will continue for the fastest, cheapest, on-time delivery process to wherever and whenever the consumer demands receipt. Where will the capital investment in these processes end when delivery is within an hour by drone, a driverless vehicle or from a blimp in the sky?
Mark my words, this is the distribution century!

4. Co-Created Experiences

The word experience is overused and in danger of an eyes-glazing-over syndrome, which results in executives ignoring it, or placing it somewhere down on their to-do lists. It may be overused, but it is the key ingredient for personalization. It must be on the top of all consumer-facing businesses priority lists. Every step in the consumer’s digital or physical journey, from search to discovery to purchase, must be embedded with experiences. Even the bare bones experience of the convenience, speed and value provided when ordering a commodity item from Amazon satisfies expectations. And the Amazon experience is only heightened when placing the order through Alexa.

Subscription models like Birchbox, Stitchfit and others offer a personally curated experience. And then there are the “treasure hunt” experiences at TJ Maxx and Costco in the physical world.

Co-created experiences take the concept to another higher level. Apple, Lululemon and Starbuck’s provide experiences that the consumer co-creates with the brand. Consumers proactively co-create Lululemon’s yoga classes. Apple customers proactively co-create a meaningful educational experience with Apple’s geniuses. And Starbuck’s is not just a coffee shop, it’s a co-created community for coffee lovers to hang out in.

Co-created experiences can be addictive. Each time the consumer proactively engages in creating the experience of these brands, they are indelibly shaping that experience to their mood of the moment. Because each moment is new and unique, consumers are compelled to keep coming back, metaphorically they become addicted. Obviously, this increases the value of the platform and everything on it. Think about pricing power, which as we know, is an oxymoron today. Furthermore, these addicts will travel miles to get their fix (at full price or higher) when there may be a generic competitor just across the street.

What is there not to understand about the power of co-created experiences? Consider the message this sends to all consumer-facing businesses. If I were a big box or old-world department store “retailer” (now a defunct word), I would be inviting brands with co-created experiences to operate on my platform. It’s a no-brainer.

And they would be adding these valuable experiences to the in-store streets of interesting shops that these large platforms must create for a more personalized, intimate community. In addition to these shops there will be restaurants, bars, food courts, hair, beauty and nail salons, fashion shows, product demonstrations and other innovative experiences that will replace the old-world platforms simply piled high with stuff.

5. RetailTech

RetailTech is another imperative strategy for the future of retail. In addition to all the tech required for e-commerce, inventory control, supply chain management, analytics and databases, augmented reality is an engaging strategy that creates frictionless, co-created entertaining shopping experiences. New AR gizmos and gadgets enhance the shopping journey with interactive touch screen kiosks or windows, virtual fashion mirrors, interactive dressing rooms, games and bar code scanners that open AR storytelling videos of a product’s inspiration, creation and production.

Beacon technologies further facilitate personalized experiences, interacting with the customer by sending coupons, upselling, cross-selling, etc. Associates equipped with iPads or tablets containing personal information can engage more intimately with the customer and is an imperative strategy for winning. These devices also provide the sales staff with inventory transparency for immediate access wherever the product may be in the supply chain.

Automatic checkout through mobile digital pay systems personalize and provide a frictionless experience. Millennials and Gen Z expect no less.

6. Sales Associates

And finally, an essential imperative for both physical and digital platforms will be the elevation of the most important link in the value chain – the human link that interacts with the consumer at the nanosecond of search, discovery and purchase. This human being, currently called an associate should be educated to earn a master’s degree in customer engagement or in brand ambassadorship: an MCE or MBA, if you will. Plus they should be compensated accordingly, near the level of the Masters in Business Administration. While this may be a stretch, the principle is spot on. With the cold, non-human advancement in technologies across the consumer’s shopping, discovery and purchasing path, the most important asset in danger of being lost is the human social experience. Consumers cherish the proactive intimate engagement with a personally knowledgeable and human “master.” Businesses who want to win big will provide this level of service.

In closing, I welcome you to 2018. The clock is ticking and telling all old-world consumer-facing businesses that time is not on their side. There are hundreds of entrepreneurial upstarts that are leapfrogging over all old-world strategies and structures, and embedding all of the six principles into their models from the get-go. I’ve called them little speed boats circling around the old world slow-moving battleships. Nine out of ten won’t make it. And the one out of ten is not an imminent threat. However, the one out of hundreds of “tens” in the aggregate adds up to a real existential threat.

It’s a new year and even though you’ve made resolutions before the proverbial ball fell, it’s not too late to accelerate your implementation of the six imperatives to prevent getting sidelined, or even worse, obliterated.

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