2013 Outlook on Retail
Interview with Alison Kenney Paul
When growth is not easy and economic conditions are uncertain, retailers should continue focusing on and investing in understanding their customers better, according to Alison Kenney Paul, vice chairman and U.S. retail and distribution leader, Deloitte LLP. In the following interview, she shares her thoughts on challenges, trends and the road ahead for the retail industry.
What is one of the most important issues facing your sector in 2013?
Growth and innovation are two of the top issues that many retailers are facing and will likely confront in 2013 and beyond. U.S. retailers are at an inflection point. They are dealing with both moderate growth in domestic markets and more informed, budget-conscious consumers.
Retailers face consistent pressure from shareholders. Developing profitable growth strategies will likely be challenging in slowing economies such as North America and Europe. Discerning shoppers equipped with Internet-friendly devices will likely continue searching for value in the products they desire at the right prices. Engaging and enticing them to spend more may not be easy. Topline growth is likely to result for those retailers able to drive customer loyalty through innovative products and service offerings, and by expanding into untapped international markets.
When it comes to global expansion, figuring out the right markets to enter and the products and services to offer in these locations can be difficult. Another challenge is that retailers are operating outside their home market and regulatory comfort zone. For example, when doing business internationally, retailers will be required to familiarize themselves with the local rules and regulations and monitor compliance with the U.S. Foreign Corrupt Practices Act. For many retailers, this is often a brand new challenge and one in which they have limited controls in place to address.
Another important step toward achieving growth is the need for retailers to consistently reevaluate their budgets. A willingness to allocate additional funds to pilot new technologies and experiment with different channels and selling formats is important. This increased level of flexibility and openness to experimentation should be built into retailers’ culture and operating model. Retailers do not typically budget for research and development, but in today’s environment it is important to research, prototype and learn quickly. Funding for these activities will likely need to come from other low value-added activities like overhead and aspects of selling, general and administrative costs.
What are some steps companies in this sector can take to manage through the current climate of economic uncertainty?
There are two simple rules that may help retailers mitigate risk and survive weak economic conditions. Rule No. 1: Know the customer and Rule No. 2: Refer to Rule No. 1. In retail the customer is king. Retailers should focus on connecting with the customer through whatever means their shoppers desire. If you are serving teens, you should be in the middle of the digital and social revolution and think about the mobile devices in their hands. The focus should be on engaging the customers in a two-way dialog, not just pushing messages to their smartphones or tablets. At the same time, retailers should consistently solicit feedback from their customers and use it to provide them with desired products, service and a shopping experience.
In addition, retailers should leverage the vast amounts of consumer data that have been at their fingertips in their data warehouses for years. By examining and analyzing traffic patterns in stores, mining loyalty data and monitoring consumers’ online and social media behaviors, retailers can be positioned to connect more intimately with their shoppers and understand what they desire. A deep understanding of the customer’s psyche may enable retailers to up-sell, cross-sell and engage the consumer in a more compelling way. While it may be difficult for retailers to fix a slumping economy, they can certainly work hard to retain their customers and keep them happy.
What are high-performing companies doing to foster innovation and growth?
“It is becoming increasingly common for customers to enter stores knowing more about the products than the store associate themselves.”
Innovation is in the eyes of the beholder. For grocery retailers, innovation may come in the form of a customized shopping list or app that customers can access in stores. At high-end luxury retailers, it may be a 3-D video screen in the window of a store drawing customers in. For a discount chain, it may be flexible, easier to understand terms for layaway plans during the holiday season. Irrespective of the type of retailer, to be effective innovations should be meaningful to the customer and add value to the company.
There are three important things for retailers to keep in mind as they seek to be more innovative and drive growth. First, customers no longer think only in terms of channels in retail. Instead, they may think in terms of solutions. Assisting your customers to smoothly research, browse and purchase products whenever, wherever and however they desire is likely to be an important differentiator. Second, it will be critical for retailers to develop and maintain a well-defined talent strategy that yields well-trained associates to execute against an omni-channel retail model. It is becoming increasingly common for customers to enter stores knowing more about the products than the store associate themselves. To avoid these situations, greater investment in training programs may be important to assist store associates in providing the shopping experience that customers have come to expect. Third, providing an opportunity for customers to share feedback with retailers is imperative. Customers want to be heard, and in today’s environment where mobile, social and digital tools are taking on greater importance, they will likely find a way to share feedback about your brand whether you give them the opportunity or not. By monitoring what they have to say, retailers may benefit by gaining valuable customer insights.
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