If you think about it, Amazon’s “Yesterday Shipping”[i] spoof is not that much of a stretch of the imagination after all. As ever so demanding consumers, we expect retailers to practically read our mind and deliver immediately. In fact, I believe we are in the midst of a radical transformation not just in retailing and fulfillment, but also in how offers are designed, produced and delivered.
Everything has already changed
In today’s market reality, consumers have seemingly infinite options when it comes to deciding what to buy and where to buy it from. This abundance of choice has created two major paradigm shifts.
From forecasting demand to anticipating needs
It used to be that retailers and manufacturers could periodically forecast demand, plan what to sell, and execute to that plan. In this sequential “demand driven” paradigm a lot depends on the quality of the demand forecast and the safety cushions we build within the supply chain to guard against anticipated margins of error. This is hard enough. Now, we must go beyond predicting demand of individual stock keeping units to continuously anticipating needs of individual customers in real-time and understanding their attitudes and paths to purchase. It is now less about pushing product to be positioned in the right store or location and more about listening to the customer and presenting the right offer at the right time to the always-connected customer, and then letting her “pull” the purchase on-demand to wherever she wants it delivered.
A related effect of serving individual needs is personalization. A swift and necessary transition is being made from product / product-location centric segmentation to strategies that are more customer-centric and personalized. Segmentation must become much more specific. Not only must retailers anticipate a customer’s needs, they must also target her specifically with individually tailored offers and, perhaps, provide choices for personalizing the product itself.
Retailers, distributors and manufacturers have no choice today but to play on this omni-channel playing field – but most are unable to do this profitably. Even Amazon, which has built its brand on immediate gratification, is actually struggling to make money in this game. According to a March 2014 report, the main reason why Amazon raised Amazon Prime subscription rates by 25 percent was because profit margins dropped from a peak of only eight percent in 2005 to zero and below in 2014![ii]
The Delight Process
I believe the main reason companies are struggling to profitably adjust to omni-channel challenges is that whilst consumer expectations have already shifted from “push” to “pull” and to personalization, retailers, distributors and manufacturers are still using processes and tools designed for the old push paradigm to try to cope in this new environment. What we really need are new processes and tools for these new market realities. We must take an end-to-end view, continuously gleaning insights, acting on them to make profitable offers, and delivering to delight the customer. I call this simply the “Delight” process. In Part II of this post, launching February 3, I will outline the key activities companies must undertake to turn insights into delight— profitably—via this end-to-end Delight process.