Three Retail Investment Priorities for Surviving the “Permacrisis” in 2023
By Joaquin Villalba, CEO and Co-Founder, Nextail
Retail is in a state of “permacrisis”: a period of extended instability and insecurity set to continue. Each new challenge forces us to learn to coexist with change and find new ways to adapt our business planning practices. Winners have been those most committed to digital transformation, such as Nike and Lululemon, who year after year our research finds are some of the most “data-forward”. Retailers of this type also happen to be some of the strongest value creators, demonstrating a capacity to remain agile and foresee, absorb or avoid shocks and are still able to provide a great customer experience.
But future proofing through digital transformation is occurring unevenly. Many retailers still suffer from slow decision cycles, static processes, and legacy mindsets. Therefore, I see three key investment priorities going forward: the digitalization of decision-making, profitable omnichannel capabilities, and data-related talent for a truly data-forward organization.
Digital decisions are faster, require fewer decision makers, and enable hyper-local insight
We have access to more data than ever before. But it often isn’t used to its fullest potential and loses value as it makes its way through traditional processes like top-down budget planning. Worse yet, too many people are involved in decision-making, bogging processes down further. Luckily, the solution to both is digital decision making. In 2023, retailers must invest in merchandising solutions that leverage AI to take a bottom-up approach to data, unlocking key insights for an improved use of product stock. Powerful capabilities like hyper-local, probabilistic forecasting and decision automation mean you can adjust to current in-season demand, updating pre-season assumptions on the go.
For example, you can uncover seasonality differences by product or point-of-sale or even allocate brand new items based on how comparable products or attributes are selling right now. When not enough data is available, dynamic fallbacks can kick in. You’re no longer powerless against outdated, over-generalized, or missing data when you need to meet customer demands.
Automation, another advantage of data-driven solutions, further reduces decision cycles. When decisions can be based on meritocratic principles and not people with misaligned interests, decision cycles shorten and agility increases. The end result of digitally transformed decision-making is better product availability and lower stock levels.
Omnichannel capabilities must go beyond interoperability and truly enable growth
Retailers must also invest in the technology that, beyond interoperability, enables true omnichannel capabilities that also grow overall sales. By connecting the full merchandising process from end-to-end, you gain real-time, centralized insights into product performance throughout the on- and offline points of sale across your networks and maximize the value-capturing potential of each channel.
This will provide the right balance of availability across channels that has become increasingly challenging post-pandemic, while also satisfying customers who’ve grown accustomed to shopping experiences that are easy and consistent across your different channels.
Future proofing through digital transformation is occurring unevenly. Many retailers still suffer from slow decision cycles, static processes, and legacy mindsets.
True digital transformation must occur from the inside out, including data talent
Finally, if you haven’t already, it’s time to bring in the talent - data scientists, analysts, and digital experts who can ready teams for digitally transformed, automated decision-making. Changes in customer behavior and digital advances require retailers to rely on data-driven analytics and less on the gut feeling that has traditionally always guided the role. This is not always an easy or intuitive change to make even if new decisions are better, faster, and more transparent.
But a typical challenge we see is heavy investments in powerful technology that aren’t backed up by teams with the skills for leveraging it. This can lead to technology that is not used to its full potential. True digital transformation must occur from the inside out, either hiring in on professionals with strong experience in data or upskilling existing talent.
When investing in digital agile solutions, the overall mentality of the organization must shift to adopt the cultural change that data-driven retail requires, starting with the talent.