It’s a telling time for retail. In spite of the brief reassurance from last year’s unexpected boost in sales, there’s still a lot of work to do. A fundamental shift in the way things were done in the past is finally unraveling across the industry, and is best encompassed by one recent announcement from Nordstrom after their Q4 earnings reports:
“Nordstrom will no longer separately report sales made online and in-store when releasing financial results. The Seattle-based retailer announced the change Thursday as it reported its fourth-quarter and year-end earnings. Nordstrom said reporting the sales figures as one allows it to more closely represent the company's focus on brands rather than channels, Chief Financial Officer Anne Bramman said. The change is part of a larger shift away from the legacy store view of its business to an omnichannel view that combines the physical and digital experiences, she said.” – The Puget Sound Business Journal
This announcement is powerfully revealing to the position many retailers are in today. Many are at a crossroads where they can either sink or swim against the forceful current of increasingly complex consumer expectations and demands.
The fact a major retailer like Nordstrom is combining earnings from both online and offline only goes to show they’re swimming hard against this current—and a better representation of how they’re delivering to customers is necessary to stay afloat and strategically execute properly.
The New Retail
We are at a point in time where we can find practically anything we want online. For that reason, brick-and-mortar stores need to step up their game and make it really really easy for potential customers to find the right product in the right place at the right time.
Forget the channels.
Toss this view completely out the window, because at the end of the day each source of demand plays a unique role in the consumers path-to-purchase.
The consumer is the main channel.
The consumer drives everything.
- They demand the right product be available at the right location.
- They demand that product be available in the right size, color, or price.
- They demand fast, convenient, and – let’s not forget—free delivery options.
Consumers demand pretty much everything most retailers struggle to efficiently execute on every single day. If retailers don’t execute on these expectations, they lose a customer.
Competition is fierce, and margins are small—there just isn’t any room to make inventory mistakes. Retailers must leverage what they can control (i.e., their assortment of products, their fulfillment options, etc.) to meet the expectations consumers demand. Whether you’re a luxury apparel brand or a large department store retailer, pressures for drastic change continue to mount.
“[T]here has never been a more urgent need [for retailers] to not only embrace radical improvement but to step on the gas.” – Forbes
This shift, much like Nordstrom’s recent announcement, is one step closer towards executing on this new view of retail. It’s a fundamental step closer towards figuring out how to deliver expectations set among today’s digitally savvy, fickle, demanding consumer.
A New Mentality
So what’s one key approach among retailers trying to stay two steps ahead of the competition?
Enabling a data-driven approach to the traditional merchandising process.
A “data-driven" approach is something much more superior than just simple forecasting based on historical sales within Excel. Incorporating deeper, more powerful advanced analytics into your organization can drastically help improve the merchandising decisions you make—such as what type of product to buy, how much product to buy, where to allocate product, and where to best fulfill product from (for online orders).
Advanced analytics and machine learning tools have the ability to optimize across billions and billions of data points, beyond any human capacity to do so. And they can do it 100x faster too.
As a retailer, you know data.
You have plenty of it and you probably leverage it in some form or fashion. However, the problem is retailers have too much data and outdated legacy systems that leave tons of room for improvement when it comes to making decisions across the MP&A process.
While systems you may have in place are able to produce an immense amount of information (through point of sale data, historical data, etc.), can they accurately predict demand at a localized level? Can these systems take into consideration all the constraints you’re trying to balance (like budget, product attributes, store locations, etc.) to make the most efficient plan, buy, or allocation possible?
Progressive retailers are accelerating their implementation of artificial intelligence and advanced analytics to meet the abovementioned expectations to truly adapt to the shift towards a unified commerce experience.
We know adoption isn’t easy—it requires an organization-wide commitment to implement such technology because it requires an openness and new way of thinking.
If we learned anything in the past year, it’s that a new way of thinking is a must.
It’s necessary to survive.