Feb 10 2014
Last week, my colleagues and I had the opportunity to spend several days at two customer conferences where retailers and vendors got together to check out next year’s product lines and place orders for their stores. Speaking to executives at dozens of retailers and vendor was instructive for us in understanding the pain points and opportunities that retail technologies can address.
In no particular order, five thoughts on key retail technology trends:
1. Mid-sized retailers critical segment to vendors: Despite the growth of big-box retailing and the seemingly endless drive towards retail consolidation, mid-sized and independent retailers are still very much critical channels for vendors in most retail segments. Whether the goods are higher end and therefore higher priced or involve a higher service or knowledge quotient, retailers who focus on this segment of the market continue to thrive despite all those portending doom for mainstreet. That’s the good news.
The not-so-good news is the fact that these retailers risk losing their advantage if they do not keep up with customer and vendor expectations when it comes to technology. Retailers risk losing tech-savvy customers who expect to be able to shop on-line or check product availability before they venture to the store.
Similarly, these retailers risk being de-prioritized by product vendors who expect real-time visibility into their sell-through and stock levels in order to maximize promotional dollars and inventory turns. If a vendor has a hot selling SKU that they can more easily push into retailers where they have visibility, that’s where the extra stock – and sales dollars – will go. Same goes for slower moving goods that need some help: those retailers who spot the problem earlier – and who enable their vendors to spot the problem themselves – will be at the front of the line when it comes to needed markdown funds to clear out the slow moving products.
But there is more good news. With the advent of cloud solutions that offer speed to value and do not require immense IT budgets and deployment teams, mid-sized and independent retailers can now level the playing field with their bigger competitors and in many cases outrun them.
2. Technology is allowing for increased collaboration: Increasingly, technology is breaking down the traditional walls between retailers and vendors that have in many cases caused adversarial ‘us vs. them’ relationships. In fact, technology may even be transforming buying cycles. Is it really necessary for a vendor to require the retailer to pre-buy a season’s worth of inventory a year in advance, if the two – through a linked supply chain – can more collaboratively manage and replenish inventories throughout the year? With the help of next-generation retail applications, this kind of collaboration is a reality for all retailers, not just the biggest ones.
3. Vendors want to win at mid-sized & independent retailers: This point relates to the two points above: Vendors want to help their mid-sized and independent retailers succeed. As a vendor, as great as it is to get your products into the big-box mega chain that drives your volume, you might in fact make more margin selling your non-mass-market SKUs at the smaller retailers. In addition, as a vendor, you’re uncomfortable when too many of your proverbial eggs are in one basket and your business is too dependent on a single retailer and a single buyer who might one day decide to go in a different direction. Fostering stronger retail competitors to equalize the relative power between retailers and vendors is a key reason why vendors want to work with smaller retailers to make them more successful.
4. The next generation of employees will embrace technology: As the next generation of tech-enabled employees enter the workforce, expectations for technology in the retail supply chain are changing. Younger store managers and retail staff wonder why they have to struggle with an archaic point-of-sale system to get an answer to simple questions like ‘what’s not selling in my store?’ or ‘what do I need to reorder?’
Similarly, young vendor sales reps used to having immediate feedback and endless data in their social media lives wonder ‘why do I have to call into stores or go in and count inventory so that I can get a reorder or report back sales trends to my Marketing department?’ In this age of connectedness, ‘why can I not see the information that’s important for me to do my job via a web or smartphone app?’
As the pace of change in consumer tech accelerates, the next-gen workforce is increasingly struck by the huge (and growing) gap that exists between B2C tech and B2B tech in terms of usability, personalization and mobility. New retail enterprise technologies that take the best of these consumer and social technologies are positioned to win in the future.
5. The influence of CPG best practices around data: Workforce mobility across sectors is another trend that is influencing technology needs in retail. In general, due to their volume and fast-moving nature of their goods, vendors and retailers who focus on consumer packaged goods (e.g., food, consumables) have always been at the forefront of the market when it comes to tracking and utilizing data and technology to improve their businesses.
With more and more of alumni from this CPG sector cross-pollinating other sectors, these best-practices are now being adopted by additional retail channels that have generally lagged in this regard. Someone who has spent their careers in places like P&G or Unilever coming to a new sector like home improvement, sporting goods or electronics is quite often shocked by how few of the CPG best practices around data – whether it be consumer loyalty data, logistics data, retail point-of-sale data, market size and share data – have been adopted by these channels. Increasingly, CPG-like thinking is pervading these other channels and is starting to drive decisions around technology that will enable them to catch up to their more advanced retail competitors.
Indeed, when one considers the increasingly blurred lines between traditional market channels – who doesn’t compete with Walmart now? – this need to compete on technology has become a strategic imperative.
I’m a firm believer in the idea that you should take at least one key insight away from every customer interaction. There’s always something to be learned. We certainly learned a lot from those conferences last week and appreciate the opportunity to work with all those forward-thinking retailers and vendors.