Three Retail Investment Priorities for Surviving the “Permacrisis” in 2023

By Joaquin Villalba, CEO and Co-Founder, Nextail

Joaquín Villalba, CEO and Co-Founder of Nextail, is a retail industry veteran with more than two decades of experience in innovation and retail operations.

Prior to founding Nextail, Joaquin was Head of European Logistics for Zara-Inditex, the world’s largest fashion retailer. In this role, he oversaw more than a thousand retail stores with over $10 billion in annual sales and led technical innovation for the company, creating solutions to manage product flow in high-volume flagship stores.

As an industrial engineer by trade, Joaquín has always been fascinated by improving the way things work. Upon entering the retail industry, he quickly observed many opportunities to transform traditional merchandising processes that prevented retailers from acting fast enough to meet customer demand. It was this inspiration to reinvigorate retail through advanced data and technology that Nextail was founded.

Today, in addition to leading Nextail, Joaquín is a frequent speaker at retail industry events and a lecturer in executive retail programs.

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.

The State of the Retail Industry 2023

JAN 2023

07/05/2024 15:52:31

Retail Shrugs Off the Gloom in 2023

By Charles Jackson

Head of Americas region, Pricer

In retail, the person with the easiest job – as it should be - is the customer. Competition and technology have combined to give the customer infinite choice in terms of how they search for, order, pay and get goods delivered.

And they are taking full advantage of these choices, using as many as seven different channels to support a single purchase, choosing from as many as 10 different ways to pay, and selecting from at least five different delivery options.

While the headlines groan under the weight of bad news for retail on account of inflation, slower than expected recovery in the supply chain and the long shadow cast by Covid over consumer behavior, we can at least be confident that retailers themselves will respond as they always do, with optimism, energy and innovation.

(Donald) Charles Jackson

Head of Americas region, Pricer

Over 30 years of international experience within Sales and Management positions mainly within the retail industry. Previous assignments within Pricer; EVP Global Sales, Strategy & Marketing, Deputy CEO & President 2016, CEO & President 2007-2010. In addition, GM Pricer France & Global VP Sales, VP Strategy & Business Development at SES Imagotag 2011-2014, European General Manager at Boston Group and various Sales & Marketing positions within tech and telecom industry.

The big challenges are all on the retailers. Online, they are ensuring that they are front and center for these customers, a growth strategy that has seen social media fast becoming full ecommerce platforms, retailers selling third party brands through their own media, and now the dream world of the Metaverse, which in theory will enable the consumer to operate across the entire shopping lifecycle in a self-directed universe.

In-store, retailers are embracing this by developing hybrid brick-and-mortar models that will serve the customer whether they have bought at the shelf-edge or online. As a result, in 2023, we are sure to see an expansion of what has to date largely been an experiment, into the development of dark stores. Dark stores - warehouses or allocated sections of conventional warehouses that are dedicated to fulfilling online orders, often set up exactly like normal stores – allow operators to pick items for either delivery or click and collect.

The conventional store will also continue to evolve in recognition of its now central role in fulfilling online orders, with more space dedicated to click and collect, curb-side delivery and lockers. But the changes are often more subtle; at the shelf-edge, we will see more focus on the amount and mix of information on display.

As the store space has become more crowded with networks that manage shelf labels, self-checkout, wayfinding, digital signage and product location, overall performance, particularly using radio, has fallen. In 2023, retailers will be looking at technologies to fix this problem, namely infrared, and at how different technologies can work to mutual advantage.

Retailers will be looking to automate architecture that enables them to manage real-time pricing, as well as displaying the breadth of information that will enable promotions to perform more effectively than they do currently, while complementing what consumers see online.

Ultimately, retailers’ goals lies beyond simplifying store infrastructure and boosting performance, as they continue to face problems with labor, in terms of numbers, skills and retention. Technology in 2023 will continue to be central to helping them contain spiraling costs, whilst giving their customers the best possible experience in every channel.

The State of the Retail Industry 2023

JAN 2023

07/05/2024 15:52:31

Competing Amidst Challenges: 5 Trends Transforming the Retail Industry

By Stefan Kalb, Co-Founder and CEO, Shelf Engine

Stefan Kalb, Co-Founder & Chief Executive Officer, Shelf Engine

Stefan Kalb is the Co-Founder and CEO who leads the talented Shelf Engine team. Stefan started his career in the food industry in 2009 when he founded Molly’s, a grab & go food company. While growing Molly's to over 400 regional retail locations, he encountered the problem of food waste firsthand. Hungry for a better solution, Stefan co-founded Shelf Engine in 2016. He studied actuarial science and earned a degree in mathematics and economics from Western Washington University. Stefan feels most inspired by data showing the dramatic reduction of food waste and simultaneous business benefit that Shelf Engine makes possible for customers. His favorite thing about working at Shelf Engine is the team's tireless ability to innovate at warp speeds. When Stefan isn't making it happen at Shelf Engine, you can find him with his wife hunting for fresh tracks, on WhatsApp catching up with his family in France, or baking bread at 2am.

Persistent inflation. Skittish consumer confidence. Staffing shortfalls. Supply chain issues. Changing shopper habits. Growing competition.

Retailers are fighting a battle on many fronts as 2023 arrives. The ones that quickly and flexibly adopt innovative strategies to boost customer loyalty and profits will emerge successfully from this difficult era. These five trends will impact retail moving forward:

It's challenging times. Retailers have to adopt innovative strategies, create differentiators to attract shoppers and boost customer loyalty.

Retailers will get creative to shield shoppers from inflation’s impact: Knowing the impact of rising prices on consumers, retailers will look to cushion the shock by absorbing margin hits and reducing their own costs. They will cut the number of SKUs to weed out poor sellers and stick with tried-and-true products rather than gambling on new items. They will also offer shoppers smaller quantities of goods that are less costly. If they have no other options, they’ll pass higher costs on little by little to consumers so shoppers aren’t hit overnight with dramatic price hikes.
Fragmented shopping means more competition for fickle consumers: When inflation initially hit, customers stayed loyal to the familiar. But in the current phase of recession retailing, they’ll try new ways to make the most of their budgets. One of these shifts is fragmented shopping, where consumers widen their repertoire of stores to chase value and bargains. This fragmented shopping means some are dabbling in club stores and dollar stores for the first time. In this climate, stores that offer more reasonably priced items and promos will win over customers.
Brands will build value-based connections to consumers: Brands will step up campaigns to connect consumers to their mission and values. People decide on purchases based on an emotional response, and they want to believe that the brand’s values align with their own. If companies can demonstrate that they satisfy crucial needs, shoppers will pay more, even when watching their spending. To forge this bond, more brands will promote social responsibility to show how they’re helping people and the planet.
Retailers will automate orders for a competitive advantage: Retailers that maximize efficiency by adopting the latest technology advances will fare the best. Technology that minimizes labor needs, boosts sales, and lowers shrink will expand market share. Computer assisted ordering will begin declining, as it’s time-intensive to manage, introduces error, and doesn’t handle forecasting and inventory well. Instead, automated replenishment systems will flourish. Their forecasting and ordering capabilities sharpen a retailer’s competitive edge by delivering more profit and a better shopper experience. Technology partners offering easier implementation with faster impact will capture share from traditional enterprise system providers.
Centralized ordering will gain mindshare: Another way to heighten efficiency through technology is centralizing ordering for all stores in a chain. Headquarters sets company-wide goals to maximize sales or margins, handles purchasing from a single source, and controls financial performance with a lower range of error. If individual stores oversee ordering, even a small change could result in lost sales or waste. Their manual SKU adjustments may not appear large but do add up. This centralization also frees up store staff for higher-value duties, such as serving customers.

The path forward: innovate with new strategies that shape differentiators

The bad news: 2023 will bring many challenges to the retail industry.

Now the good news: retailers that analyze their shortcomings, think creatively about solutions to mitigate those, and adopt new strategies rapidly will gain the upper hand over those issues. Creating differentiators that attract shoppers and maintain their loyalty will result in advances despite any headwinds they will face.

The State of the Retail Industry 2023

JAN 2023

07/05/2024 15:52:31