Retail in crisis: these seven challenges stationary retailers must tackle now to create a long-term perspective
Long months of lockdown have increasingly threatened the existence of many retailers. Yet they have only reinforced a trend that was already visible before the Corona crisis: brick-and-mortar retail has been losing relevance for years. The share of sales accounted for by online retail is growing steadily. Mike Zöller and Dorothée Fritsch, retail experts at the consultancy FTI-Andersch, describe seven challenges that retailers must now address - and what they can do concretely to avoid disappearing in the long term.
1. Virtual experience on-site: experimenting with digital concepts in stores
'Smart Mirrors ' measure customers or put them in the limelight when trying on clothes. Other examples of digital in-store experiences nclude: customized mobile phone navigation, interaction with remote advisors, automatic payment through sensors and AI. Mike Zöller says: “It's not just younger customers who are frequently online these days. The past lockdowns have interwoven digital and real life even further. Retailers have to take this up – and develop a smooth transition between the two worlds.” In order to better understand what might be of interest to their own target group, retailers can experiment in 'digital stores'. "Before digital initiatives are rolled out on large scale, tests via pilot projects or test stores might be sensible. Shops in metropolitan areas are particularly suitable for new approaches."
2. Trend spotting and setting: (Social media) making trends tangible on site
Following the traditional way, retailers order what the wholesalers have listed before. "And that is increasingly becoming a problem in the fast-moving world, partly because of long lead times, " says Dorothée Fritsch. "Platforms such as Amazon or Zalando, but also verticalized retail chains act directly and quickly, as they know their target audience and thus relevant trends." Social media scouts who analyze the social networks and platforms for new trends might be a solution for traditional retailers. "Retailers can then make these trends tangible and thus experienceable in their own stores," says Fritsch. That means ordering trend products identified by the scouts and making them available to their own customers to look at and try out. Fritsch: "In this way, retailers give their customers a head start in terms of knowledge and experience. And not just virtually, but physically. This makes a store visit relevant again." Greater flexibility, for example by (partially) relocating production back to Europe, can also promote "trend proximity" on the industry side.
3. Focusing on the individual: Making individualization a component of the retail concept
Individualization is one of the biggest trends in Western society. "A master in product individualization is the automotive industry: almost every smallest detail of the new passenger car can be chosen individually today," says Mike Zöller. Even suppliers of electronic products are now making it possible to underscore one's own personality with their products by enabling engravings, different colors or individual details of their products. Zöller says: "It will become indispensable for stationary retailers to increasingly offer such products. They can benefit particularly if the individualization of a product can be experienced live and on site. The prerequisites for this must be created both in purchasing and in implementation on the floor." One conceivable option: the product is individually pre-ordered online in advance – and then finalized in-store in the presence of the customer. This is also a way to reduce inventory.
4. In addition to "green" products: Make supply chains transparent and clarify social responsibility
Due to rising demand, almost all retailers now also offer sustainable products, for example with a reduced carbon footprint. "As a first step, retailers can initiate campaigns to buy back old goods, offer remanufactured or “pre-loved” products or even sell products made from recycled materials," says Dorothée Fritsch. "However, sustainability needs to be thought through further to really become part of retailers' DNA." This includes making supply chains transparent and the origin of goods more traceable. "Making a promise is good, transparency is even better," Fritsch said. And: Sustainability also includes social responsibility toward employees, suppliers and partners.
5. Customer journey across all sales channels: serving customers exactly where they are
Whether customers make initial contact on their own website, in the store, in an app, on a platform or in a social media channel – it must be possible to continue this contact in every other channel. In the future, it will be quite normal for customers to jump between these channels again and again. And when in doubt, they will want to make their purchase in exactly the channel they are currently using. To achieve this, customer journeys will have to be completely rethought. This development reaches deeper than just sales processes: it will have to result in a change in the organization and structures of many retail companies. "Technology is the driver, but it can only be implemented successfully if the entire organization changes," says Mike Zöller.
6. Fundamentals for digitization: Preparing the IT landscape for new challenges
The technological prerequisites for such changes must also be created. Dorothée Fritsch says: "Those who have an outdated IT landscape, which in case of doubt is also inconsistent, are in danger of failing early on due to technical hurdles, despite the best concepts." The experts at FTI-Andersch advise taking stock of the IT landscape now and checking where systems can be merged, processes standardized and software renewed. "If you want to go digital, you first have to determine your own maturity level and work on the 'basics,'" says Fritsch. "At the same time, the good news is that there are technological providers for almost all of the ideas also outlined here. In many cases, it will be necessary to weigh up where hardware is still classically purchased and software licensed - and where IT programs can be purchased as services (software-as-a-service), for example for data collection and analysis."
7. A place for leisure activities: bringing the brand to life in personal encounters
Mike Zöller says: “ lick & Collect is not just a concept for stationary retail in the Corona crisis. Unfortunately, many traders still see themselves today as a warehouse rather than a place of experience. This means that they cannot win against pure online retailers in the long term, as they can work much more efficiently. ”The stationary experience in particular can help to build online brands. Zöller: “Retail, that can be the place to literally touch a brand, where I can experience something. ”A reading, a concert, a fashion show, the tuning of a car. “Where I can get to know people. In the future, stationary goods will only be picked up where this is faster than shipping. Or where they can experience something. Retailers must now adjust to this simple rationality."
The ideas presented here are based on Part 2 of the study series 'Future. You can download the full report 'Store Concepts of the Future - New Opportunities for Stationary Retail' below.
FTI-Andersch is a management consultancy that supports its clients in the development and implementation of sustainable future/performance and restructuring concepts. FTI-Andersch actively supports companies that have to deal with operational or financial challenges – or that want to align their business model, organization and processes for the future at an early stage.
Clients include medium-sized companies and corporations that operate internationally. FTI-Andersch is part of the internationally active FTI Consulting Group (NYSE: FCN) with more than 5,500 employees.