Washington — Brick-and-mortar retailers must rebuild their businesses around the customer in order to remain competitive in an increasingly e-tail-centric world.
According to a report by FTI Consulting, a global business advisory firm, physical retailers are beset by a number of mega-trends, many of which have been challenging the channel for over a decade. These include:
* oversupply of stores;
* maturation (and lack of differentiation) in stores, brands and product sectors;
* a lack of “hot” items
* unfavorable demographics as baby boomers retire and millennials emerge;
* the uneven economic recovery;
* an increased desire by consumers to spend money on services and experiences; and
* the tipping point for e-commerce, which is destabilizing store economics.
Together these factors have contributed to declining store traffic, sluggish sales growth and margin pressure, which will keep retailers stuck in what the FTI described as “The New Mediocre” for the foreseeable future.
“Retailers today are facing a magnitude of issues and challenges in a landscape where the only constant is the accelerating pace of change,” observed Steve Coulombe, senior managing director and co-leader of FTI’s retail and consumer products practice. “Retailers have reached a crossroads, with many of them merely hanging on. It is clear to us that there needs to be an evolution in their business approach to stay afloat.”
To break out of the rut, retailers must build all their critical functions around customer insights, in order to tap into new product categories, extend from goods into services, identify creative new ways to serve the customer and develop updated business models.
“While there is no single solution that will work for every retailer, we do believe companies can consider a ‘Customer First’ philosophy, which can be applied to all aspects of their business,” noted senior managing director Christa Hart. “The accessibility of customers [via showrooms and websites] gives the retail industry a competitive advantage and we see this concept as largely uncharted ground for the sector.”
Among FTI’s suggestions:
* Organize stores around the needs of the customer by re-thinking their structure, layout and location to better engage shoppers and the community while maintaining operational efficiency.
* Shift the marketing program to better align objectives, actions and the brand with the customer’s various life- cycle stages.
* Incorporate regular and ad hoc customer feedback and insights gleaned from the from your e-commerce site across the entire product life cycle.
* Evolve your method of collecting, managing and communicating customer data in order to better capture behavioral, attitudinal, social and transactional information.
* Think of products as a hierarchy based on customer wants and needs, rather than as a traditional classification-driven system.
* Move beyond traditional transaction metrics and gauge relationships, i.e., how customers engage over the long-term and how retailers’ actions positively or negatively impact their participation.
Most retailers already have many of the fundamental building blocks in place to begin the transformation, FTI said, which is imperative given consumers’ changing omnichannel habits.
The full report, “To the Victors Go the Spoils,” can be accessed here.