Retail
Overview
One Minute Read
Retail has been changing due digitisation for years but COVID-19 was a Darwinian event as the pandemic has created a five- year acceleration in consumer behaviour towards e-commerce. The fallout has strengthened the disruptors and those retailers that had already seriously invested in the shift but has left a culling of many high street brands that had moved too slowly. The cost of living crisis recession will challenge the industry further. In response, the industry is transforming towards to a digital retail ecosystem, driven by five challenges and the widespread adoption of digital technology.
Industry Description
The Retail sector includes any business or individual involved with selling products directly to consumers.
The sector relies on consumer goods companies to create products and many retailers operate.
Asia is becoming the backbone of the global economy. By 2050, Asia is expected to account for more than half of global consumer expenditure.
Global retail sales topped $25 trillion in 2019 but declined by 3-5% in 2020 as retailers were forced to close stores and consumer’s reined in spend and needs changed. The impact varies significantly by segment, for example apparel and footwear was down 25%, whilst grocery was up 10%. In the UK nearly 17,000 chain stores closed in 2021. With deteriorating economic conditions caused by inflation and geopolitical challenges, will continue to seek value, convenience, but post pandemic freedom will drive a return to experiences.
Drivers
Shaped by the global megatrends and now the pandemic, the industry is being shaped by five major drivers:
Demand - Post-pandemic, people are living differently, buying differently and, in many ways, thinking differently. Continued working from home and financial security concerns will continue the existing trends towards online, at-home services and value.
Customer Experience – Digitisation has profoundly impacted customer expectations; choice, convenience and value are expected whatever the customer journey starting or ending point. There is a growing awareness of the importance of data privacy, which has underlined by high profile data breaches.
Sustainability – Retail is one of the worst-polluting industries, accounting for 30% of global GHG emissions, 23% of landfill waste and more than 20% of global wastewater. Sustainability has reached a tipping point that retailers cannot ignore.
Innovation – As a mature industry, retail has shown a lack of business model or service innovation which has allowed new competitors to target market gaps. Retail is under investing compared to disruptors. The pandemic has though shown that innovation can be done at pace.
Profitability – Even before COVID-19 the pressure had been placed on prices by new competition; discounters in grocery, fast fashion in apparel, online players such as Amazon etc. This has pressured margins at a time that retailers need to invest in digital technology in order to meet rising consumer expectations and compete.
Transformation
A new circular digital retail ecosystem is emerging that meets the demand for more sustainable products and processes as well as delivering seamless, personalized customer experiences whatever the channel used by the consumer at any moment in time. The boundaries of “retailer” and “manufacturer” will continue to blur, as companies evolve to meet their customers’ needs.
Transformation will require a shift to the design & development of:
Personalised Engagement,
Online Scale,
New Store Role,
and Sustainable Supply Chains.
These changes will will require continued investment in digital, sustainability and fulfilment.
Digital Technology
Digital transformation will drive needs for Business Applications to help deliver e-commerce, omnichannel, marketing & personalisation, inventory management and store operations. Data Management is needed to capture the rich consumer buying behaviour, whilst Artificial Intelligence helps drive automation and personalisation.
Cloud computing is required to support innovation, flexibility and customer experience, a Digital Workplace to enable an agile workforce, whether in-store, at home or in offices and Networking & Communications to deliver a consistent and reliable experience.
Security, Compliance & Data Privacy is also critical as customers will expect their data to be kept private and payments need to be kept secure. Remote working, cloud and APIs all open up new attack surfaces and potential for security breaches.
Finally, IT Governance & Management will be essential to manage the change and ensure value for money.