Is Digital Transformation working in the Path-To-Purchase Journey? – Part 2

In our previous blog post, we spoke about the digital disruption of the path-to-purchase journey and how technology is affecting the way in which retailers operate, allowing customers to interact online, in-store, in-app, on-phone, in the cloud and via social media. However, the surprising fact is that in spite of the omni-channel retail experience being the strategic focus for many retailers, a large percentage of shoppers – particularly women and millennials still want an in-store experience. This is because women view shopping as a leisure activity for the purpose of entertainment and fulfillment besides need and utility, while millennial consumers want a touch-and-feel experience while they shop along with an equal affinity towards digital. EKN data shows that 75% millennials shop online and two-thirds shop in-store at least once per month. This shows that both digital and in-store affinity is prevalent among millennials. EKN’s Framework for Omni-channel Personalization data shows that 86 percent of consumers will pay up to 25 percent more for a better customer experience. But are retailers adopting the right measures to enrich the shopping experience for customers? Fortunately, the amalgamation of retail and technology has been an effective and positive one, and retailers are integrating innovative digital experiences at their physical outlets with the presence of digitized kiosks, touch screen navigation panels, interactive digital displays and other digital tools to ensure an engaging in-store experience. According to a survey carried out by Samsung, 94 percent of retailers believe the customer of the future will be driven by technology and 41 percent are already using it to implement a strategy to enhance the customer experience to...

Is Digital Transformation working in the Path-To-Purchase Journey? – Part 1

It is a well known fact that the emergence of online shopping has drastically changed the way we shop and besides brick and mortal stores, online shopping plays a very important role for every brand. But, is digital transformation based on what customers expect from companies or is it based on a tunnel vision of re-producing experiences that may not be relevant to the core customer base? EKN’s 2016 Profitable Omnichannel execution data indicates that only a third of retailers ‘occasionally” consider the customer perspective in devising omnichannel strategies. In today’s digitally connected age, it is a well-established fact that the internet has become an essential part of the path-to-purchase process irrespective of whether the purchase is made online or in a store. Social media is a large influencing factor for customers to make a purchase. From traditional modes of marketing and advertising on television, radio and print media, the path-to-purchase process has now undergone a digital disruption. Such a process often relies on pre-shopping activities like searching for products online, reading their reviews on blogs, forums and shopping websites and comparing them with other products available. The actual shopping transaction may be in store or via online shopping and the post-shopping activity consists of word-of-mouth recommendations, online reviews and social media posts. Thus, the process of buying has now become a merger of various online and offline activities. Shoppers can be categorized into three segments – ones who prefer shopping in physical stores, ones who prefer shopping online and ones that prefer shopping on both channels. Thus, retailers need to keep all three types of customers in mind....

2016 Wrap-Up & 2017 Retail Industry Outlook

While 2016 was a pretty good year for US retail, for most retailers a repeat of 2016 growth will be not be easy replicate in 2017. After all, it is a transition year and as new economic and fiscal policies get activated, some amount of business and consumer spending uncertainty is expected. The good news is that a relatively healthy GDP over the last couple of quarters and a largely stable housing market certainly bodes well for retailers early in the year. The key for retailers is to make sure that they absorb the policy change impact in the front half of the year without inflicting too much self-damage. Registering a bumper back half of the year through faster consolidation and slick execution is a must i.e. a robust Q3 & Q4 growth plan through proper customer segmentation, new product introduction and sound execution plans. Humbly stated, my own fiscal round-up for US retail in 2016 indicates medium to strong fundamentals across a majority of retail concepts or segments. According to U.S. Census Bureau’s latest reported retail sales data total US retail sales from September 2016 through November 2016 were up 3.7 percent from the same period a year ago. The 11-month non-adjusted total retail and food services sales were up 3.1 percent from the same period a year ago. While electronic, gasoline, general merchandise and department stores showed clear signs of a sizeable slump in comp sales; other store retailers including DIY/building materials, drug, and furniture reported healthy positive sales comps when compared to 2015. As expected, within the eCommerce channel, retailers saw the biggest gains as the...

Improving Store Labor Standards: A Key Ingredient for Successful Store Execution

While the chorus around omnichannel and digital commerce’s growing impact and the need to transform stores becomes louder every day, retailers need to account for how these changes affect the work associates perform and the store’s labor budget. The reality is that a majority of retailers are unsure of how to upgrade labor standards and labor hours for maximizing store productivity and ensuring smooth operations. Labor standards are defined as the average amount of time it takes for store associates and managers to complete customer service, sales and operational tasks in the store. Retailers use a varied set of sales, customer service and operational labor standards for day-to-day store execution. In order to achieve consistent store execution, retailers need to ensure that all these standards are always in line with constantly evolving customer expectations, labor regulations and related store labor policies/procedures. Effective labor standards and related standard operating procedures (SOPs) in the stores include accurate labor planning for all tasks, performance evaluation, insights for operational improvements and cost minimization and above all documentation of the best methods. EKN recently conducted a survey of 63 US retailers and spoke to several softlines and hardlines retail executives to understand their viewpoint on this key retail store execution area. The general consensus is that labor standards are not well documented or updated effectively within the retail organization. In fact, nearly two-thirds of retailers (64%) update labor standards and labor hour models infrequently- range from quarterly, annual or on an ad-hoc basis. Another major business pain that retailers are experiencing is the lack of proper organizational management and consensus on issues related to...

Lack of a Demand-Centric Pricing Strategy is a Big Stumbling Block for Retailers

Best-in-Class retailers are responding to competitors including the likes of Amazon by undertaking price changes in close to real-time by using advanced competitive pricing analytics, price elasticity analysis and in some cases even using smart shelves for real-time dynamic pricing updates. Dynamic pricing takes a consumer’s perceived ability to pay for a product. On the other end of the spectrum, most other retailers are facing the wrath of unrelenting promotional pricing pressures and sub-optimal markdowns that are hurting operating profit and margin. Lack of optimization and dynamic approaches in pricing, promotions and markdowns gets translated into loss in operating profit, gross margin and inventory turns. Despite having the knowledge that effective pricing and promotions is the key to remain competitive, both large (turnover over $1 bn.), and mid-market retailers (turnover between $100 mn. and $1 bn.), have faced challenges in such implementations. EKN surveyed 105 softlines and hardlines retailers in November 2016 of which the larger retailers highlighted the top 2 challenges as (1) lack of actionable pricing & promotion analytics to drive profitable decisions and (2) inability to measure pricing or promotion effectiveness and financial impact. For mid-market retailers, the main challenges faced are (1) increased vendor costs and ineffective vendor negotiations and (2) inability to connect pricing, promotions and markdown approach to a company strategy. It is quite evident that large and mid-market retailers are struggling to connect the dots between pricing and promotion effectiveness and profitability. Is a more dynamic pricing approach the answer to the retailers’ problems? Retailers have tried to adapt themselves in this dynamic environment by resorting to frequent in-store price-related changes which...

Global Sourcing Uncertainties Continue Amid Brexit, Commodities Market Slump and Currency Fluctuations, Reports CBX Q3’16 Retail Sourcing Study

The continued uncertainty in Europe over Brexit, rising wage pressures in low cost sourcing countries, low commodity prices, weak freight transit  and major currency fluctuations are shaping a rather grim sourcing and supply chain outlook, according to CBX’s Q3 2016 retail sourcing report. In fact, the aforementioned results are in line with EKN’s own Q2 2016 retail private label sourcing study that indicates significant headwinds being felt by retailers in terms lack of speed to market, global commodity price sensitivity, high merchandise unit costs, among other business pressures. While other uncertainties across economic indicators, manufacturing activity, currencies, transit and commodities are evident, CBX’s report indicates that Brexit’s true impact will play out in the next two years. It remains to be seen how Brexit will impact retailers and their trading partners that do multi-country sourcing or deal in trading with or through UK and other European countries. The report provides useful synthesis of varied economic and supply chain indicators that can impact overall retail branding and private label private sourcing. The data has some particularly useful insights and implications for apparel, fashion, specialty and other softlines companies that source products from low-cost international countries through their own buying offices or agents. Nearly 1 in 2 retailers (45%) source through their own international operations or buying agents like Li & Fung1. Among the top 8 global sourcing impact points covered in CBX’s report, most do not indicate a positive Q2 performance. Moreover the outlook towards forward looking macro-economic measures (i.e. infrastructure, labor etc.), manufacturing indices and freight demand scenarios do not seem that positive either, except for a handful of...