The Future of Retail Is Not Pureplay

The Future of Retail Is Not Pureplay 1440 428 ASG

Most of the people predicting pureplay and ecomm as the future of retail could not have foreseen what would really happen to the infrastructure when challenged the way it has been during the pandemic. We now realize that the future of retail is not Amazon (or Target or Walmart), and that Amazon was not the golden child everyone thought it was. They have the largest ecommerce infrastructure in the country, yet when retail closed, they had to curtail Prime shipping because they didn’t have the capacity to keep up with the demand. They were not prepared. No one was. There was no infrastructure in place to handle 100% online consumer demand. From manufacturing to the seamless delivery to consumers, every single point along the way highlighted the problem areas. There is no way everything can move to online only.  Daphne Howland deep dives into the challenges of pureplay – with or without a pandemic. 

Brick and Mortar Is the Future of Retail

If it wasn’t already clear, which it should have been, brick and mortar is the future of retail. But it cannot be the brick and mortar of the past. We need to leverage local, regional, and niche brands. We need to make malls interesting again. We need to focus on the experience. And we’re going to need to get to know customers all over again. Who are they? What do they want? Given our “new normal,” what are their new expectations and how do we help fulfill them?

Changes You’ll See Across Retail

The biggest changes are designed for health and safety compliance. The number of people allowed inside a store will be limited; there will be hand sanitizing stations and plexiglass shields at check-out counters. Many stores are completely closing fitting rooms; those who are leaving them open will quarantine unpurchased clothing that has been worn or modeled. Improved cleaning and screening standards will be essential. All department stores will remove sample makeup counters or move to a single disposable sample standard. 

Leveraging Technology

From thermal scanners to monitoring technology that manages capacity to AI that helps deliver improved customer service, the future of retail will rely more than ever on technology. A recent survey revealed that 87% of consumersprefer to shop in stores with touchless or robust [items are identified when put in the cart, no scanning required] self-checkout.”

Consumers Have Changed

For retailers, it will be important to remember that the customer whom you knew two months ago and the customer who walks into your store when you reopen are vastly different individuals. Priorities have shifted almost overnight. What you do now – how you adjust both your in-store approach and your omnichannel experience – will be critical. You should already be working on and implementing your post-pandemic strategy. Not sure where to begin? CBUS Retail hosted a virtual roundtable in May featuring Amy McCormick, Corporate Affairs Manager for The Kroger Company. Kroger has made their entire retail blueprint available for download here.

Moving Forward

For everyone in retail – from grocers who struggled in the beginning but have adapted remarkably well, to the fashion industry, which experienced perhaps the biggest decline – the future is anything but certain. What we know:

  • From Zoom calls for work to ordering groceries online, consumers adapted very well to digital. There will continue to be a shift. This means your retail locations and your ecommerce solutions need to work together to present a seamless brand experience (yes, we’ve been telling you this for a long time; now it’s not an option).
  • This may only be the first of many coronavirus pandemic waves, especially since social distancing protocols were largely ignored for the sake of the protests. Retailers need to anticipate at least a second wave. This means better data, less reliance on just-in-time inventory, more cash reserves, and better planning.
  • You’ll need to plan how you’ll maintain social distancing, what your cleaning protocols will be, and who will be responsible for monitoring and enforcing those protocols. Customers will not frequent your business if they are not convinced that you – and they – are safe. Your locations must be meeting and exceeding minimum CDC standards. This means installing handwashing and sanitizing stations, reducing the number of occupants in your store, providing clear signage, and establishing policies to deal with everything from sick employees to what you’ll do after someone tries on clothes but doesn’t buy them.

Small Changes Won’t Be Enough to Retain Customers

For the retail industry, emerging from this pandemic may be comparable to the post-9/11 era in terms of how consumers responded to the uncharacteristic environment. When consumers finally started to recover from the shock and fear of 9/11, they sought out ways to be inspired, to forget, and to help. Post-pandemic, consumers are going to be seeking out those retailers that are committed to health, safety, and wellness – the ones that authentically commit to a higher standard and demonstrate that they are concerned more about protecting consumers and employees than making a profit. Consumers will also expect you to meet them where they are – both emotionally and physically. This means being able to provide online shopping with curbside delivery, even if you never have before. It means understanding that no matter when you reopen, people will be more sensitive about personal space and they’ll be looking for experiences that help them escape. And no matter what your brand, consumers better see you cleaning – often and efficiently.

Huge Opportunity for Wholesale Brands and DTC

Huge Opportunity for Wholesale Brands and DTC 1440 428 ASG

There are a billion or more retail dollars up for grabs for the retailers that figure out how to navigate the future of retail. But in my mind, the bigger opportunity is in the ripe pickings available for wholesalers making the leap into retail for the first time. Whatever disadvantages these players may have had prior to the pandemic have now been leveled. There is going to be a continued hesitation to step inside any store that isn’t making it clear that safety is their top priority. But similar to the period of the Roaring Twenties that occurred on the heels of the Spanish flu pandemic, people are going to be ready to do, go, spend, and experience. 

Consumer Behavior Has Changed in Surprising Ways

The disadvantage that wholesale brands have always had is that department stores have held all the customer data. For a given wholesale brand that might have been sold at Macy’s, Macy’s would retain that customer data. Macy’s would become familiar with the customers’ habits and trends; the brand, however, would know little or nothing about the end consumer. 

Well guess what? Nobody has a lock on customer data now.

Wholesale Brands Have a Level Playing Field

If you’re a wholesaler, the playing field has been leveled. You no longer need to simply operate a department store or an outlet. You don’t have to depend on the dwindling number of department stores in order to thrive. In fact, if you do, you may struggle. While virtually everyone is in the midst of redefining who their customers are, wholesale brands from Calvin Klein to Dyson have the opportunity to pivot during the transformation of retail, whether by opening their own retail stores or by creating popups to test out new markets. 

Maximize Existing Opportunities

Before wholesalers can determine the best path forward, they need to assess where they stand now. The picture likely isn’t very pretty, given the number of department store closings and bankruptcies we are seeing and will continue to see. This is also a good time to look at what wholesale competitors are doing – there’s no need to reinvent the wheel if someone has already paved the way for you. Some wholesalers may have an opportunity to partner with retailers, such as L.L. Bean. Others may find that cutting out the retailer and opening their own stores makes more sense. Take a look at what Levi’s and Nike are doing to transform where and how they meet the consumer.

Get to Know Your Customers

Consumer data is a gold mine. By understanding your customers better, you can customize what, how, and where you do business in ways you’ve never been able to before. Yes, it’s taking longer to reopen and stabilize than any of us ever predicted, but there are opportunities to be had if you’re willing to take the chance.

Consumer Packaged Goods Need a New Plan

Consumer Packaged Goods Need a New Plan 1440 428 ASG

When it comes to surviving the evolution of retail, it’s not just retail brands who are having to reinvent themselves and find new, customer-centric avenues to survive. The future of wholesale is in the same boat and so are consumer packaged goods (CPG). According to McKinsey, CPG losses over the last decade ranged from 7% (food) to 18% (household products and beverages), and disruption in the CPG market is coming from everywhere:

  • Ecommerce has leveled the playing field to a degree, allowing unknown startups to compete effectively against well-known brands.
  • Younger consumers are not as brand loyal.
  • A consumer shift toward healthier products has left some brands lagging far behind the trends.
  • Amazon.
  • Increase in local competitors.
  • Private label brands are taking a significant share of the market.

Costco introduced the Kirkland brand in 1992, 27 years ago, and that brand did $39 billion last year, whereas all the Kraft and Heinz brands did $26 or $27 billion. So here they are, a hundred years plus, tons of advertising, built into people’s habits and everything else, and now Kirkland, a private label brand, comes along and with only 750 or so outlets does 50% more business than all of Kraft-Heinz brands.
– Warren Buffet, Forbes

How Do Traditional CPG Brands Compete? D2C Is the Answer

Just as wholesalers have been discovering, many CPG brands have sensed a change in the market and are likewise making the move to direct-to-consumer models – and if they’re not, they should. Startups are agile enough that this shift is easy for them; traditional CPG brands, however, struggle to adjust to the shift. Unfortunately, those that don’t adjust will struggle more so. There are benefits to D2C for CPG brands:

  • Direct communication with their customers.
  • More control over their brand presence, instead of being at the whim of the retailer’s shelf space and competing brands.
  • More control over the price, making the brands better able to compete. 
  • Total control over brand image.
  • Deeper understanding of data about, and engagement with, their consumers.
  • New opportunities for strategic growth.

Overcoming the Challenges to D2C

It’s crucial to understand the difference in strategy and execution for digital brands, wholesale brands, and CPG brands versus traditional retailers. The strategy and approach are different for the execution of a DTC model for those not traditionally involved in retail. The biggest challenge CPG brands have to overcome is much the same as wholesale: Well-established brands often get stuck doing the same thing because that’s what they’ve always done – but they have different stakeholders to please, too. 

Most large CPG companies still have a 1980s view of private label. They are not aware of how much the industry has changed or how much it is driving and impacting retailer activity. A lot of marketers overestimate the importance of their own brands and underestimate the importance of the retailer’s brands to the retailer. Others don’t understand the private label threat well enough to take it as seriously as they should.
– Jim Wisner, former Jewel-Osco executive who runs a marketing consultancy in Libertyville, Illinois. (PPIQ)

Will private-label CPGs put big brands like Kraft Heinz and Proctor & Gamble out of business? Unlikely. But these legacy brands are having to justify slower growth, lower profits, and in some cases, product line losses to their shareholders. At the end of the day, CPG brands that don’t consider D2C may not survive.

D2C: A Roadmap to Success and Survival for Wholesale and CPG

Before a wholesale or CPG brand can shift to D2C , they must first shift their mindset. These brands have been insulated from direct contact with – and in many cases data from – the consumers who enjoy their brands. To succeed in a D2C world, that has to change. Marketing, branding, market position, and location decisions must be based on a deep understanding of the consumer and their relationship to the CPG brand. The talent shortage in the CPG industry is a big hurdle to accomplishing this.

Challenger brands and private label brands have a lot of the same appeal. Private brands provide value and a lower price with the perception of similar quality. Challenger brands may be priced higher, but they offer a tangible benefit to justify the premium. Big brands are stuck in the unenviable middle. They’re not telling their story in a compelling enough way about why shoppers should be willing to choose them.
– Timothy Campbell, senior analyst at Kantar Consulting (PPIQ)

Then, CPGs must create a relationship with the consumer. How? It starts with data. Where are your customers? Who is loyal to your brand? Why? Do you have the insight you need to open flagship stores?

D2C data is a gold mine for any business and this is even truer for the CPG industry. If you think about it, there are no other data sources within the four walls of a CPG or FMCG organization that afford the richness and ‘always on’ feedback loop to demand and supply metrics. This is a dream come true for those tasked with advanced analytics and measurement as it is the cleanest way you can stimulate and measure consumer loyalty and then develop robust data-based decision behaviors around demand sensing and forecasting.” – Vidyotham Reddi, Global Director of Advanced Analytics & Measurement at Mars Inc. (LeadsRX)

Finally, you need to use the data to make strategic decisions about your brand. Do you build out your own retail shops across the country or test pop-ups in certain high-traffic areas? Do you sever ties altogether with the retailers who carry your brands or focus on some kind of hybrid that allows your brand to remain on retail shelves even as you build your own branded stores? How do you keep your brand-loyal consumers engaged?

The Way Forward for CPG Brands

So many CPG brands have no visibility beyond the retail space they occupy. That space is quickly shrinking, especially as retailers compete with their own labels. The CPG industry needs to embrace communication, branding, and risk taking. To have the ability to understand consumers, CPG brands must learn to take calculated, educated risks to discover what works and what doesn’t, incrementally expanding into direct-to-consumer markets as they refine their testing. Pick a market. Do a test. Refine and do a bigger test. But DO something.

Outsourcing Retail Strategy and Lease Administration

Outsourcing Retail Strategy and Lease Administration 1440 428 ASG

There are 10,000 Boomers retiring every day, and they are taking an enormous amount of institutional knowledge with them. This has been most noticeable in the healthcare and insurance industries, but in the next decade, we’re going to feel it in every industry. 

The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions.  Consequently, these replacements have limited high-level work experience, creating a giant skills gap. And as these succeeding generations aren’t having kids quickly enough to create future replacements, the gap and skills shortage will continue to widen.

What does this have to do with retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand.  While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail – I’m seeing this painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit. 

Lease Administration Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. For example, in one instance affecting a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.

The Case for Outsourcing Lease Administration

It’s not just the constant back and forth with ASC 842 updates or even lease negotiation; at the end of the day, outsourcing lease administration ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center. ASG saved its clients $5 million last year.

ASG manages leases effectively, ultimately serving as a profit center for many of our clients. An investment made with us results in measurable savings – without the headache of arguing over every dollar saved, because we don’t charge an additional contingency fee on the recoveries we generate.  You keep every dollar. For one client last year, that amounted to $1.1 million.  We will do the heavy lifting for your implementation of ASC 842 reporting capability on our lease management platform, many times at no additional cost over the base service fee, saving you thousands in accounting consulting fees and headaches. Your experienced lease administration executives are going to retire. Now is the time to outsource that function to a highly skilled and effective organization who lives and breathes leases.

6 Tips to Generate Customer Loyalty

6 Tips to Generate Customer Loyalty 1440 428 ASG

In today’s retail landscape, the loyalty of your customers is one of your greatest assets, particularly as you leverage an efficient omnichannel strategy. Research has shown that customers that make their purchases both online and offline have lifelong value, but what is it that attracts consumers and keeps them coming back for more? These tips will help businesses maximize their return on marketing efforts and build a brand that consumers will love.

1. Stand for something

Consumers want a transparent brand that boasts a sense of community. They’re looking for brands that back, focus on providing ethically sourced products, and demonstrate how they value employees. Your consumers want to know that you treat people and the environment right. Your brand should have a stance that consumers can get behind and feel good about when they make a purchase.

2. Do more

Excellent customer service should be obvious, but many retailers fall short in this area. Sometimes return and exchange policies don’t resonate with the needs of the customers or HR isn’t hiring the right people for the available positions. Your culture should create an environment in which the people working at your business are driven to help the customer – and empowered to do so.

Not only should you meet your customers’ expectations, but you should exceed them whenever possible.

3. Emotional Connection

We’re well beyond the time where encouraging a sign up for your email marketing and customizing your newsletter with coupons will even deliver ROI. Today’s customers expect to be surprised and delighted; they want a reason to come to your store – and that reason is highly-customized, hyper-focused, and experience-driven.

4. Create convienience

We’re well beyond the time where encouraging a sign up for your email marketing and customizing your newsletter with coupons will even deliver ROI. Today’s customers expect to be surprised and delighted; they want a reason to come to your store – and that reason is highly-customized, hyper-focused, and experience-driven.

5. Encourage conversation

Human connection is what drives retailer, regardless of innovations like AI and machine learning. Consumers love technology, but they still love being heard by a person. Ask for reviews online and encourage both positive and negative feedback from existing loyal customers. What attracted them to your business and why do they keep coming back? Such information could drive future marketing campaigns. Don’t hide behind chatbots or self-help checkouts. Your consumers want access to every aspect of retail, both robotic and human, and an honest conversation will offer better insight than any focus group.

6. Loyalty Programs

Rewards are the driving force of many purchases, like a simple points system or the classic McDonald’s Monopoly game. Loyalty programs encourage repeat visits to your store, giving you a chance to impress your consumer base even after a promotion is over. Give customers a reason to visit your business beyond the usual daily engagements.

A loyal customer is also your best marketing strategy, because they will speak highly of your brand to friends, family, and across social media. There are no limits to the benefits of a loyal customer, and with retailers fighting over consumers, engagement is a top priority. Generating leads for sales is important, but not nearly as crucial as gaining the trust of repeat customers. It costs more to attract new customers than it does to retain loyal ones. When you already know how to connect with your target consumer base, it significantly reduces marketing costs. It’s easier to promote new products to those that already love your business.

Transforming Retail Fulfillment

Transforming Retail Fulfillment 1440 428 ASG

The menace of ecommerce giants, such as Amazon, has been looming over brick-and-mortar stores for several years now. However, the threat is not as real as brick-and-mortar retailers are led to believe. Amazon capitalized on a functioning business model, and consumers are in love with convenient shopping and fast shipping. However, brick-and-mortar retail is capable of many strategies that the ecommerce industry is desperate to tap into.

Brick-and-mortar retail is dead? Hardly.

Consumers still love to browse in store, explore assorted products, and feel items in their hands before purchasing. The biggest challenge that brick-and-mortar retailers face is being able to maximize the value of the retail location. What can your store offer beyond that which can be purchased online? Consumers demand instant gratification, but what that looks like varies from shopper to shopper, and even moment to moment. Physical stores are an essential piece of an omnichannel strategy, and the ability to offer diverse product choices and delivery preferences will change how retailers do business.

Change the supply chain.

The traditional model ignores the crucial connection between the manufacturer and the retailer. Until recently, retail fulfillment has been a component of purchasing that remains rather independent. However, this reliance on drop-shipping is how consumers are lost. Colors and sizes vary depending on location, and without consolidating distribution channels, mistakes are common. Consumers want to be able to order online and pick up in store, because in-store delivery for certain items may be days faster. Others see items in stores, but an in-store app or kiosk may offer a more desirable color that can be shipped to homes. Fulfillment within brick-and-mortar retail demands collaboration to meet the changing demands of consumers.

Leverage real-time inventory

The most important aspect of retail fulfillment and required collaboration is a real-time inventory. Business associates and consumers should easily be able to track shipped items, as well as notify a customer if an item they are interested in is truly available. Even ecommerce giants have struggled with issues such as requested items on backorder and websites not updated at the time of purchase. This results in frustrated customers and incomplete orders. Over time the overall brand can be damaged.  Be mindful of your inventory movement and shipping and invest in a digital infrastructure that will allow your omnichannel strategy to flourish.

The key is to create a seamless and consistent customer experience that not only improves efficiency but also meets demands. The customer experience, not the product, is the most important factor. How you fulfill your promise to the consumer relies on more than just shipping, which is why brick-and-mortar retail is far from dead.

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