The British Retail Consortium (BRC) recently predicted that Britain’s retailers face the loss of up to 900,000 jobs by 2025. The number of stores closures over the next decade is set to accelerate as a result of government measures, including the introduction of the National Living Wage and an increase in business rates are set to compound 'structural change' such as a slowing growth in retail sales and the 'digital transformation' of the industry.
While it’s not perhaps our place to comment on government policy, we must acknowledge the fact that retail has changed, transformed over the past two decades by a combination of new digital technologies and new patterns of customer behaviour.
Retail is just part of the picture
Only ten years ago, Ofcom reported domestic broadband penetration in the UK as reaching more than 50 per cent of households. At around the same time, Apple introduced the first iPhone, and Microsoft invested $240m (£170m) in a 1.6 per cent share of Facebook.
In August last year, Facebook reported that more than a billion people used its services in a single day. 70 per cent of the world’s population are expected to be using smartphones by 2020, and domestic broadband in the UK is taken for granted to the extent that it’s now considered a domestic utility such as electricity, gas or water.
At the same time as these technological developments are taking place, cross-channel retail is being driven by consumers in a way that would have been almost impossible to predict a decade ago.
Now commonplace behaviours such as click and collect, ‘showrooming’, buying big-ticket items via mobile, and sharing photographs of potential purchases over social media, are all relatively new developments. Indeed, click and collect didn’t become a mainstream proposition until Christmas 2011.
These examples alone serve to illustrate just how much retail has changed - and how it continues to change.
Flexible cross-channel commerce
It’s worth considering that the kind of digital transformation currently being seen in the retail industry doesn’t only affect individual parts of a business. No longer does a web team work alone, setting up a transactional site that operates separately from the wider business. Successful cross-channel commerce depends on flexibility, and being able to react quickly to changing customer demands.
A busy customer ordering a new shirt or dress for a night out, for example, is a successful sale, but is only the beginning of the process. The customer is likely to have no time for click and collect and so will opt for same-day delivery. Not only does this require the retailer to have a delivery service available to ensure the product reaches the customer, but also confidence that the product is being held in a place from where it can be quickly and easily retrieved, and that there is someone on hand to pick and pack the product.
While this is just one particular example, it illustrates how a single sale makes demands that cascade throughout the whole business. Failure in any one of these stages would result in an unhappy customer, and potential damage to the retailer’s reputation.
Consistency is essential for agility
As we’ve seen, customers will drive change even when retailers don’t, so it’s important for retailers to react and, where possible, to lead.
But managing change isn’t easy. There will be stresses and strains as companies update systems or introduce new working practices. We would argue that the data held by retailers should be as reliable and consistent as possible to provide them with fixed points required to help alleviate these stresses. After all, initiatives such as upgrading legacy systems, bringing digital technology into stores, or sending personalised messages to customers when they enter a store all require reliable data. Interestingly, and as contrary as it sounds, as part of an ongoing capacity to implement new innovations, consistency is the key to ensuring agility and flexibility.
As we enter the era of the Internet of Things, where increasingly more objects are connected to the digital world and 'talk' to each other, digitally driven retail will become more complex. This will, undoubtedly, present its own unique challenges, but also huge opportunities for those retailers who begin preparing now.
The retail industry is clearly at a crossroads. If retailers are to succeed in the future, it’s important that they adapt to the complexity of the cross-channel consumer and provide a framework which will allow them to adapt the ever-changing needs of their customers. By keeping the customer onside, it might also help them adapt to the ever-changing economic situation.
Simon Walker, director of innovation, Stibo Systems