The key to a great multi-channel offering for consumers is sophisticated order management. Traditional retailing relied on the retailer being able to ensure that the right stock got to the right place at the right time. Retailers have invested amassive amounts in trying to make sure they get that right.
The problems in the multi-channel, e-commerce driven world is that it is impossible to predict sales accurately. Sales are affected by weather, trends, product innovation, lifestyle and social reccomendations, all of which are extremely volatile factors. Increasing volatility in demand is making it impossible to predict sales, and hence no matter how good your stock control systems are you cannot be certain that you will get stock allocation right.
Consequenlty if you cannot get the stock to the right location, move the order to where the stock exists.
As increasing portion of our sales are becoming order based, it is worth turning the stock paradigm on its head.
Consequently you need sophisticated order management systems that can route the order to where the stock is, allowing services like click & collect, and even store picking and despatch.
This principal can open up vast new vistas for sales growth. Retailers can start selling non-stocked items, and can route the orders to suppliers for direct delivery or delivery to store.
There is then no limit to how far a retailer goes in their growth strategies.
Sophisticated order management systems are the key......
Monday, April 16, 2012
Friday, March 23, 2012
Downsizing, downsizing, downsizing......
Retailers are all starting to downsize. Suddenly we are discovering we have too much store space. Next is about to launch small format stores, B&Q is about to free up space in sheds, Mothercare is reducing overall number of stores.
But how does a retailer downsize? We agree that as footfall reduces and e-commerce sales expand retailers will need to reduce the store footprint.
Options are:
These are all tough choices. Almost all these choices will involve revenue sacrifice in order to maintain profitability, in the face of falling footfall.
Whatever the choices, the overhead costs retailers have been used to will have to be dramatically reduced.
We will see an increase in IT outsourcing, Finance outsourcing, sharing of logistics, and even sharing of outlet space.
There is a looming inevitability.........
But how does a retailer downsize? We agree that as footfall reduces and e-commerce sales expand retailers will need to reduce the store footprint.
Options are:
- Treat stores as service points, reduce space and reduce the range of stocked items
- Keep only out-of-town stores, where footfall is guaranteed
- Reduce total number of stores, and give up physical presence in marginal areas
These are all tough choices. Almost all these choices will involve revenue sacrifice in order to maintain profitability, in the face of falling footfall.
Whatever the choices, the overhead costs retailers have been used to will have to be dramatically reduced.
We will see an increase in IT outsourcing, Finance outsourcing, sharing of logistics, and even sharing of outlet space.
There is a looming inevitability.........
Tuesday, March 13, 2012
Footfall in stores is falling!!!!
The financial times reported recently that footfall in UK high street stores had fallen about 9%. Some of this may be the economy but the rest might be the growth in on-line. Is this the begining of the end of store retailing. I have always maintained that once footfall falls below a certain level, stores become effectively unprofitable. I have called this the tipping point. How much does internet retailing have to grow before we reach tipping point. Or alternatively what do we need to do to keep customers coming back into store.
The advent of click and collect provides some hope, but will it be enough. It is hard to tell, but it has to be supplemented by something else. The in-store experience. We have to make human contact count, otherwise what is the point of going into a store.
There is some evidence that customers are willing to pay more for quality human contact. The retailers who are doing it well, like Majestic, John Lewis are doing so whilst maintaining price competitiveness, however the others will need to find excuses for charging a premium for human contact.
Of course this is all about the value of the services and expertise can be only provided by experienced sales staff.
Richer Sounds is another retailer that does that well.
Whatever the answer, retailers need to re-examine closely the role of stores. This problem is not going to disappear.
The advent of click and collect provides some hope, but will it be enough. It is hard to tell, but it has to be supplemented by something else. The in-store experience. We have to make human contact count, otherwise what is the point of going into a store.
There is some evidence that customers are willing to pay more for quality human contact. The retailers who are doing it well, like Majestic, John Lewis are doing so whilst maintaining price competitiveness, however the others will need to find excuses for charging a premium for human contact.
Of course this is all about the value of the services and expertise can be only provided by experienced sales staff.
Richer Sounds is another retailer that does that well.
Whatever the answer, retailers need to re-examine closely the role of stores. This problem is not going to disappear.
Sunday, May 15, 2011
Are we becoming Promotion Junkies!
It is clear that retailers are fighting over customers. It is not surprising, because if the UK market is not showing growth, i.e. the cake is not getting bigger, retailers are having to promote to persuade customers to come to them (chase marketshare). Particularly as customers have so much choice. Never knowingly undersold is being replaced with Always knowlingly under-selling.
As one retailer said to me, the problem with retailing today is that it is not just about making sales but about making profitable sales. Profitable sales is the golden quest.
When to promote, what to promote and how much to promote? If you get these wrong, you might as well stand outside your shops and hand out cash to customers entering your store.
Sorting out good pricing and promotion strategies is the key to success. With markdowns in excess of 20% any improvement, even shaving off 1% of that is worth its weight in gold.
Doing smarter promotions is the key here. They do not have to be about a discount. In fact promotions that are not about discounts are better.
Targeting is also critical. Knowing your customer segments and sending them targeted vouchers (or voucher codes) is a good idea.
Nurturing not overwhelming customers is what is needed.
Remember that old adage, price says more about you than anything else will. It is the most important brand statement you can make. Dont devalue it.....
As one retailer said to me, the problem with retailing today is that it is not just about making sales but about making profitable sales. Profitable sales is the golden quest.
When to promote, what to promote and how much to promote? If you get these wrong, you might as well stand outside your shops and hand out cash to customers entering your store.
Sorting out good pricing and promotion strategies is the key to success. With markdowns in excess of 20% any improvement, even shaving off 1% of that is worth its weight in gold.
Doing smarter promotions is the key here. They do not have to be about a discount. In fact promotions that are not about discounts are better.
Targeting is also critical. Knowing your customer segments and sending them targeted vouchers (or voucher codes) is a good idea.
Nurturing not overwhelming customers is what is needed.
Remember that old adage, price says more about you than anything else will. It is the most important brand statement you can make. Dont devalue it.....
Sunday, February 20, 2011
Will IT departments be the next focus for cost reductions?
2011 looks set to be another challenging year for retailers.
There’s no doubt that with increases in commodity prices, the fall in sterling, increases in labour costs, and the VAT rise, pressure will be on margins.
Retailers will be looking for ways to reduce costs. Will IT departments be the next target for cost reductions?
IT departments in the client-server world were required for the management of networks, servers, integration of disparate systems, office applications etc, which has all been labour intensive. It is a very fiddly business.
Will the move to browser based, Internet centred applications reduce the requirements for large scale IT departments? A recent set of case studies have shown that based In this world, a ten store retailer could be reaping the benefits of an end-to-end system for the ‘equivalent’ cost of one IT person, a twenty store retailer for the cost of two IT people, and a fifty store retailer for the equivalent cost of three IT staff.
This includes all software, hardware, maintenance, IT operations and 1st, 2nd and 3rd line support costs. You can call this IT on demand, managed services, outsourcing or Saas, but whatever you want to call it, the bottom line is that the case studies show that IT costs will be about 50% lower.
It is also clear that implementation of such systems is easier and faster, so the idea that you need to spend money on IT to get benefits elsewhere is no longer true, the benefits may be within the IT department itself.
So is the IT department as we have known it going to be re-engineered itself? In a cloud driven world, certainly it is hard to see the need for large IT departments going forward. Of course such challenges also create opportunities. Maybe the IT department instead of managing systems, will transform itself into helping businesses use their systems and information more effectively.
There’s no doubt that with increases in commodity prices, the fall in sterling, increases in labour costs, and the VAT rise, pressure will be on margins.
Retailers will be looking for ways to reduce costs. Will IT departments be the next target for cost reductions?
IT departments in the client-server world were required for the management of networks, servers, integration of disparate systems, office applications etc, which has all been labour intensive. It is a very fiddly business.
Will the move to browser based, Internet centred applications reduce the requirements for large scale IT departments? A recent set of case studies have shown that based In this world, a ten store retailer could be reaping the benefits of an end-to-end system for the ‘equivalent’ cost of one IT person, a twenty store retailer for the cost of two IT people, and a fifty store retailer for the equivalent cost of three IT staff.
This includes all software, hardware, maintenance, IT operations and 1st, 2nd and 3rd line support costs. You can call this IT on demand, managed services, outsourcing or Saas, but whatever you want to call it, the bottom line is that the case studies show that IT costs will be about 50% lower.
It is also clear that implementation of such systems is easier and faster, so the idea that you need to spend money on IT to get benefits elsewhere is no longer true, the benefits may be within the IT department itself.
So is the IT department as we have known it going to be re-engineered itself? In a cloud driven world, certainly it is hard to see the need for large IT departments going forward. Of course such challenges also create opportunities. Maybe the IT department instead of managing systems, will transform itself into helping businesses use their systems and information more effectively.
Friday, July 23, 2010
21st Century Retailing
The 21st Century is here. Yes I know that statement is obvious, however, as a retailer have you really considered its full impact on your organisation? You’re competing in a world where the phrase ‘multi-channel’ became irrelevant five years ago – retail is multi-channel! You’re marketing to a consumer base that is probably more technologically advanced than your IT department and more price savvy than your grandparents were during the depression. You might think that you’re an early adopter of certain technologies and best practices but have you really considered what it actually means to compete effectively in this new, dynamic retail landscape where not only you but the customer is living with uncertainty?
The 21st Century is redefining the traditional retail pillars of Price, Product, Service and Customer. In this article we’d like to offer you our views on the subtle - and not so subtle - changes in definition of each of these pillars and hopefully provide you with some food for thought on how we believe you now need to look at each.
Product
Multi-channel - or ‘Retail’ as we would like to redefine it - combined with easier global sourcing offers retailers a huge opportunity to extend their range. Two issues arise here. Firstly, an extended range means increased supply chain complexity and, secondly, you need to ensure that in extending your range you remain true to your brand values. The grocers offer some prime examples here in terms of how far you can stretch a brand yet remain true to and deliver on what it represents as you enter new territories both in terms of geographies and competitive ventures. Take for example the “Tesco Finest” range. The introduction of this range has seen huge increases in market share for the grocery giant and given the retailer the opportunity to compete within a new set of demographics.
Service
Now more than ever retailers have the opportunity to compete on service. For over 30 years we have voiced the words but not lived up to their meaning that “our people matter”. In the 21st Century, if we are not careful, this chicken could really come home to roost. When it comes to your brand, your people are the strongest or the weakest link in the chain. If “value” is the watch word, it can only be delivered through the services provided by your people. How are you going to make human contact count? Whether it is in store, in your call centres or in the DC’s, your brand experience has to have a human face or it will be reduced to a price proposition.
Price
Last year’s recession saw a rush to value (otherwise known as bottom price) by many retailers. Whilst it would appear that the discounters ruled, on the whole the luxury brands and top-end retailers sustained healthy profit margins. So what does this tell us? In the 21st Century, pricing is taking on a new significance. As prices become more visible, you are being forced to define the value proposition your brand represents through the products and services you offer in line with the prices you offer. There needs to be a clear connection between your price proposition and your brand and you need to stay true to it – no matter what channel you choose to go to market through.
Customer
We read a blog recently calling on retailers to adopt an “Office of the Customer”. We couldn’t agree more. Retailers work in an incredibly siloed environment but must not forget that there is not one part of their business that does not affect or touch the customer in one way or another. In the 21st Century, customer demographics are increasingly blurred and customers’ wants and needs are continuously changing. For the retailer this implies increasingly high and continuous levels of customer engagement and a flexible and agile business that can quickly respond to change.
The areas I would love to have your feedback on are:
1. International expansion
2. Customer engagement
3. Localisation
4. Value add services
5. The role of scientific forecasting (or not)
6. Deals & promotions
7. Strategic pricing
If you think I have missed anything out or would like to share your views on what 21st century retailing means then please add to my thoughts.
The 21st Century is redefining the traditional retail pillars of Price, Product, Service and Customer. In this article we’d like to offer you our views on the subtle - and not so subtle - changes in definition of each of these pillars and hopefully provide you with some food for thought on how we believe you now need to look at each.
Product
Multi-channel - or ‘Retail’ as we would like to redefine it - combined with easier global sourcing offers retailers a huge opportunity to extend their range. Two issues arise here. Firstly, an extended range means increased supply chain complexity and, secondly, you need to ensure that in extending your range you remain true to your brand values. The grocers offer some prime examples here in terms of how far you can stretch a brand yet remain true to and deliver on what it represents as you enter new territories both in terms of geographies and competitive ventures. Take for example the “Tesco Finest” range. The introduction of this range has seen huge increases in market share for the grocery giant and given the retailer the opportunity to compete within a new set of demographics.
Service
Now more than ever retailers have the opportunity to compete on service. For over 30 years we have voiced the words but not lived up to their meaning that “our people matter”. In the 21st Century, if we are not careful, this chicken could really come home to roost. When it comes to your brand, your people are the strongest or the weakest link in the chain. If “value” is the watch word, it can only be delivered through the services provided by your people. How are you going to make human contact count? Whether it is in store, in your call centres or in the DC’s, your brand experience has to have a human face or it will be reduced to a price proposition.
Price
Last year’s recession saw a rush to value (otherwise known as bottom price) by many retailers. Whilst it would appear that the discounters ruled, on the whole the luxury brands and top-end retailers sustained healthy profit margins. So what does this tell us? In the 21st Century, pricing is taking on a new significance. As prices become more visible, you are being forced to define the value proposition your brand represents through the products and services you offer in line with the prices you offer. There needs to be a clear connection between your price proposition and your brand and you need to stay true to it – no matter what channel you choose to go to market through.
Customer
We read a blog recently calling on retailers to adopt an “Office of the Customer”. We couldn’t agree more. Retailers work in an incredibly siloed environment but must not forget that there is not one part of their business that does not affect or touch the customer in one way or another. In the 21st Century, customer demographics are increasingly blurred and customers’ wants and needs are continuously changing. For the retailer this implies increasingly high and continuous levels of customer engagement and a flexible and agile business that can quickly respond to change.
The areas I would love to have your feedback on are:
1. International expansion
2. Customer engagement
3. Localisation
4. Value add services
5. The role of scientific forecasting (or not)
6. Deals & promotions
7. Strategic pricing
If you think I have missed anything out or would like to share your views on what 21st century retailing means then please add to my thoughts.
Saturday, April 24, 2010
Are You Making Human Contact Count
Once upon a time, retailers stood next to their barrows arranging their merchandise while warmly greeting and humorously haggling with their customers.
Periodically they would ask a close family member to replenish what was selling while they would vocally promote the continually refreshed assortment and attempt to move the slower moving stock- always casting a wary eye on their competitors. They had an intimate relationship with their markets.
It was a place to chat, to joke, to share smiles and gossip, and the shopkeeper and the customer liked it that way.
The move towards centralized decision-making over the past 50 years has punished both retailers and customers: it traded effectiveness for efficiency. As decisions gradually migrated from stores to the head office, the number (and skills) of people in stores was reduced - and so was the amount they were paid. The result has been that store staff turnover increased, the quality and training of people diminished and service levels dropped dramatically.
Today, customer service and “clienteling” have almost vanished.
Stores are no longer customer sanctuaries but product warehouses.
Chain retailers inadvertently created a self-defeating, self-fulfilling prophecy: they made themselves more vulnerable to non-store retailing. Less friendliness, less information and less service accompanied by higher prices are hardly a convincing purchase argument!
By reducing themselves to high cost service-less product “vending machines” they have made themselves vulnerable to non-store purchase alternatives where price is the only meaningful differentiator.
What is the point of having staff in stores:
• If they treat customers as if they are intruders?
• If the customer has to search the store for assistance?
• If their only purpose is to collect a payment?
• If they do not add value for a customer but add a premium to product prices?
Price differentials cannot be justified by the cost of “worthless” personnel and store overhead.
The disadvantage of the on-line retailer, which is the lack of human contact as part of the shopping experience, is no longer a disadvantage when it is duplicated at the store level through lack of service, expertise and motivation.
It is tragic that people believe it’s more pleasant and convenient to shop on-line rather than in stores. As a result, in-store retailers have lost market share and margins because they have had to launch bigger and bigger promotions to lure customers back into their shops.
Unfortunately, many consumers are so disappointed by their experience of in-store retail shopping that they prefer the lack of human contact on the internet to the in-store treatment they receive!
You can only deliver the human contact that your customers want through your staff.
So is in not time that you start making human contact count
Periodically they would ask a close family member to replenish what was selling while they would vocally promote the continually refreshed assortment and attempt to move the slower moving stock- always casting a wary eye on their competitors. They had an intimate relationship with their markets.
It was a place to chat, to joke, to share smiles and gossip, and the shopkeeper and the customer liked it that way.
The move towards centralized decision-making over the past 50 years has punished both retailers and customers: it traded effectiveness for efficiency. As decisions gradually migrated from stores to the head office, the number (and skills) of people in stores was reduced - and so was the amount they were paid. The result has been that store staff turnover increased, the quality and training of people diminished and service levels dropped dramatically.
Today, customer service and “clienteling” have almost vanished.
Stores are no longer customer sanctuaries but product warehouses.
Chain retailers inadvertently created a self-defeating, self-fulfilling prophecy: they made themselves more vulnerable to non-store retailing. Less friendliness, less information and less service accompanied by higher prices are hardly a convincing purchase argument!
By reducing themselves to high cost service-less product “vending machines” they have made themselves vulnerable to non-store purchase alternatives where price is the only meaningful differentiator.
What is the point of having staff in stores:
• If they treat customers as if they are intruders?
• If the customer has to search the store for assistance?
• If their only purpose is to collect a payment?
• If they do not add value for a customer but add a premium to product prices?
Price differentials cannot be justified by the cost of “worthless” personnel and store overhead.
The disadvantage of the on-line retailer, which is the lack of human contact as part of the shopping experience, is no longer a disadvantage when it is duplicated at the store level through lack of service, expertise and motivation.
It is tragic that people believe it’s more pleasant and convenient to shop on-line rather than in stores. As a result, in-store retailers have lost market share and margins because they have had to launch bigger and bigger promotions to lure customers back into their shops.
Unfortunately, many consumers are so disappointed by their experience of in-store retail shopping that they prefer the lack of human contact on the internet to the in-store treatment they receive!
You can only deliver the human contact that your customers want through your staff.
So is in not time that you start making human contact count
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