Supply Chain Nation asked Susan Reda, Editor of STORES Media, to share highlights from her recently published article concerning her predictions for retail in 2014. In Part I of this Expert Insights blog series, Ms. Reda discussed her top predictions from her article. In Part II, she will share her thoughts on how retailers are reacting to those trends, with a special look at the difference in reactions between industry leaders and laggards.
SCN: In Part I of our blog series you predicted that the use of geo-location technologies to better engage customers and the rising importance of inventory visibility and order fulfillment across channels would be the hot trends for 2014. How should retailers react to these trends?
Reda: What I see retailers doing —and I applaud them for doing it—is get more serious about technology and innovation. Two or three years ago you never heard a retailer talk about their own retail innovation center. Now that is becoming more common, and the leader on that front was Nordstrom, who started an innovation center quite a while back. They have a couple of YouTube videos that are really interesting about how they have a team that works on innovation, and how they test innovation, sometimes right on the selling floor under the nose of the customer who doesn’t realize they are part of this test. They are able to take their learnings and apply them to how they are going to change their business and how they are going to innovate. And I see that at more and more retail companies. Last year one of the predictions that we talked about was that retailers were buying small tech start-ups, and that is continuing. Walmart Labs is probably the leader on that front and has been in place for some time. They are continuing to look at start-ups and bring them in house so they can have that technology to call their own and figure out how to deploy. And that is happening more frequently with other retailers, as well. Retailers are starting to open little satellite offices in Silicon Valley so they have access to the best and brightest, and they can be part of this leading edge, because they don’t know what’s to come. Retailers are not sitting back. They are being very nimble and agile in their approach to innovation.
SCN: Will these trends further separate the leaders from the laggards?
Reda: I would say that we have winners and losers and there is a bifurcation that is going to happen in retail. There are those who “get it,” who react, innovate and move forward. And there are those who say: I think I know my customer and I’m going to stick with what I know. But you can’t; you have to be constantly looking on the horizon, constantly testing, and if you’re not innovating, you’re writing your own epitaph.
I watch Amazon and Walmart very closely—two extremely different companies—but two companies that never stop challenging the norm, and I think that speaks volumes about what you have to do to make it in retail. It’s never enough to rest or take a breath. You just have to keep moving forward and looking at what’s to come. And lots of people will put eBay in that same lot—a company that only a few years ago folks were starting to wonder who they were and could they make it. No one has those worries any more. It’s: what are they doing now and how will they rethink retail? There are so many innovative new companies that are forcing us to think differently. You have to study it; you have to look at every side of it. Just look at what is happening on the mobile payments side. We don’t know exactly how that is going to shake out or who the winner is going to be, but if you are not on top of that and you’re not experimenting with it and asking customers and seeing what customers react to, you’re not going to be able to suddenly leapfrog everybody and get there.
SCN: What can the laggards do to stay viable?
Reda: I think there are ways that the laggards can quickly get up to speed, and one of the ways is partnering. We have some amazing big, strong companies in retail; companies like JDA, IBM, SAP, and Oracle. They are willing to partner with retailers to help them get this done. While I know that it’s not an inexpensive commitment, every single one of those companies has a cloud solution that can help manage cost and help move the business forward. By using cloud computing, retailers can gain a lot of ground quickly.
I also think it is important that retailers make a commitment to follow the Millennials. That generation is pointing very clearly at what the future of retail is all about. Maybe it means hiring some folks who will create your retail innovation team, but I do think that standing still is the mistake. You have to reach out and look for new ways to do business without breaking the bank. I understand that is a problem for retailers because their gross margins are very thin. Making investments in technology is hard, but if you’re going to be part of the future, you have to make the changes now.