Wouldn’t it be fantastic if there were superstores made just for retailers where the shelves were stocked with solutions for all our industry woes? We’d pick out the items we think would put our companies on solid footing now and into the future. Let’s see, I need more customers, faster shipping, more working capital… By the time we finished shopping, I think we’d have a cart full of, well, everything.
most significant issues across the entire industry, the reality is we each have our own set of priorities to address. And more often than not, choosing what to add to our shopping carts is limited to our budgets, our capabilities, or both.here are so many issues affecting retail today that it’s becoming overwhelming. But while we’re all familiar with the
What’s On Your Shopping List?
Our 2016 Retail Executive Survey revealed the urgency. When we spoke with 100 C-suite execs to rank 15 strategic initiatives, such as employee productivity, competitors and cybersecurity, from most important to least for their companies, we got a wide range of individual concerns. At least half of the respondents ranked 14 of the 15 initiatives as being “essential” or “high priority,” meaning there is no single “magic bullet” to today’s retail environment.
Like many in the industry, one CEO of an apparel retailer is grappling with a major industry challenge—an abundance of square footage and a decline in foot traffic. That’s one reason she ranks “store portfolio optimization” high on her shopping list. “With the decline and the acceleration of the shift to online, restructuring real estate is priority one for our portfolio,” she says.
No matter where the executives ranked the priorities, however, most shared one thing in common: a focus on boosting revenue. That’s not a big surprise in an industry marked by little to no growth, where strategies that concentrate on topline and sales growth, such as loyalty programs, omni-channel experience, shifts in consumer preferences and competitive impact, were near the top of the list. Closer to the bottom were issues related more to internal and operational issues, including supply chain and pricing/promotion.
“If you have a connection with customers that is bulletproof, it’s easy to be optimistic,” adds the CEO of a large specialty retailer. “If you’re in the herd with 25 others, you’re in a tough spot.”
Are You Capable?
A different picture emerged when we compared the strategic initiatives with retailers’ ability to actually execute them. Among the four highest priority items, three had large capability gaps – employee productivity, omni-channel and loyalty programs—areas where new skills, tools and technology are involved.
What’s going on? Because most of our business is transactional in nature, we tend to have a better handle on initiatives that focus on increasing operational efficiencies and effectiveness. When it comes to more fundamental or foundational transformation we struggle—especially with those that require rethinking our business model or overhauling the customer experience.
One example is omni-channel, which requires rethinking the way retail organizations have been run for the past 50 years. How tough is it to go from being store-centric and channel-centric to customer-centric, where operations and metrics are built up by customers, segment and geography and success gets measured across, rather than within, channels?
Very tough it turns out. “There have long been mismatches in reinvention,” says the large specialty retailer CEO. “People that are in functional leadership positions today cannot really visualize what we can, and must do—that’s especially true in omni-channel. It’s really difficult to get your people to cross functional lines, physically, intellectually and emotionally.”
The transformation of loyalty programs from transactional to customer-centric also presents a gap. In a digital era in which the consumer is always one click away from a better deal you need to win not only their hearts, but their wallets. One way to close the gap, says a board member of several retail and wholesale companies, is by concentrating on brands. “They still matter. Customers respond when they feel that the brand experiences, whether in-store or online, is ‘just for me.’ Those brand experiences cannot be approached in isolation or quickly – there are no panaceas or quick hits.”
Are You Spending Strategically?
Though most of us may be struggling to figure out how to succeed in the new retail environment, the survey indicates we are not standing around waiting for solutions. We’re well aware of what needs to get done and we’re putting our money where our mouth is, so to speak. How? By concentrating our efforts on the issues most important to our individual situation. You see evidence in the near-identical alignment of action taken to ranking of strategic initiatives.
We retailers know the score. There are large, industry-wide issues but we are prioritizing the initiatives that affect us on the ground. In these lean times, we recognize that driving topline sales growth is more important than improving operational efficiency. And when possible, we are aligning our spending with our priorities. In essence, we are designing a bespoke playbook of solutions tailored to our individual companies.
As challenging as the environment is, there is plenty room for optimism. “Lots of us have stumbled, which has stranded many consumers,” says the board member. “But that’s why there’s so much opportunity. However, we must speak to consumers personally and emotionally. The margin lives in emotion.”