Innovation and adaptation drive success in all competition-based systems. In the natural world, animals that evolve to have competitive advantages like size, speed, or cunning will exploit those competitive advantages to set themselves apart from others, fighting for shared resources. Those who do not adapt and find methods to outperform rivals they compete against ultimately face starvation and extinction. In the retail world, new competition and changing consumer habits are making it harder for retails to survive. What can retailers do to evolve and keep from going the way of the dodo?
Retail Is Changing
With the influence of the digital age, the retail landscape is facing one of the most rapid shifts ever seen. Online retailers like Amazon and Zappos have conditioned consumers to expect the products they’re looking for, at a low price, with the convenience of the click of a button. This effect can easily be seen with store closings of well-known retailers like Sears and Toys-R-Us.
Despite the doom and gloom of the retail apocalypse, many brick-and-mortar retailers using foresight and innovation, despite a smaller market share, are thriving. So, what is the secret sauce to their recipe for success?
Evolution of Technology
For retailers, the secret sauce lies in technology. Competition in the retail landscape is largely being driven by the evolution of technology, where — much like in the natural world — slow and outdated options are replaced with more optimal solutions. Gold standards which whole industries were founded on were replaced or outpaced with new, more efficient choices. It wasn’t too long ago we that our phones flipped open and the only functions available were talk, text, and maybe play snake (if you had a cool one).
Just as railroad travel gave way to commercial aviation and road atlases were replaced by satellite-based radio navigation systems (GPS), antiquated merchandise tools are being enhanced with artificial intelligence and advanced analytics. In the shadow of big data, new technology-centric, forward-thinking retailers are leveraging advanced analytics to optimize inventory decisions in a way like never before.
Make More with Less
With the influence of online vendors, smart brick-and-mortar retailers realize the need to make the most of their inventory to maximize full price sales. Exciting new advanced analytics technology is helping optimize inventory decisions at all stages of the MP&A process, from planning all the way to fulfillment. A recent U.S. retailer survey titled, “Revealing the Hidden Costs of Poor Inventory Management, ” found that in 2018 retailers had lost $300 billion in revenue to markdowns, equating to 12% of their total sales. Interestingly, 53% of unplanned markdowns were attributed to inventory misjudgments, which, as a result, left billions lying on the table. Clearly, the best way for a struggling retailer to stay relevant is to maximize what they already have and put a tourniquet on their hemorrhaging profit margin.
The need for insights from advanced analytics grows for retailers implementing a multichannel strategy, who, according to the report, typically sell less inventory at full price than their single-channel counterparts. The irony is as online juggernauts drive brick-and-mortar to try and compete by implementing an e-commerce option for consumers, they are seeing an overall decrease in the amount of merchandise sold at full price.
Don’t be a Dodo
Until some unknown new tool comes along that’s better, faster and stronger, advanced analytics will help determine who is at the top of the retail food chain.
As inventory optimization is used in retail at an increasing rate, in short order it will go from being something leveraged by forward-thinking retailers to an industry standard. Over the next few years, the decision of whether or not to take advantage of such tools will determine who evolves and survives and who goes the way of the dodo.