The Retail Revolution: 5 Ways to Adapt, Survive, and Thrive

With the rise of e-commerce and the decline of the shopping mall, the last two decades have seen massive shifts in the world of retail. Consumers are migrating online and demanding more from their purchases: lower prices, faster shipping, sustainable practices. Amazon looms large and threatens players at every stage of the supply chain as both a demanding partner and ruthless competitor. So what can more traditional retailers and manufacturers do to maintain and grow market share in what feels like an entirely new marketplace?

1) Invest in e-commerce

For years, it’s been a sink or swim situation for retailers: get on board the e-commerce train, or get left behind. But how do you keep up with digital giants that have made online transactions their bread and butter?

As Forrester recently put it, “there has not been a time when technology has had a more profound impact on customer experience and revenue performance. By the sheer force of nature, this places CIOs and technology front and center.” To sell in 2019, you need excellent infrastructure supporting e-commerce and merging it with brick-and-mortar processes to create a fluid omnichannel customer experience. Successful retailers are abandoning the traditional model of basing their IT spending on the previous year’s revenues. Instead, they are growing tech spending as a forward-looking endeavor, understanding that state-of-the-art user experience is crucial in both generating sales and making sure customers return. In fact, IHL reported that leading retailers are outspending their weaker competitors sevenfold on IT.

In 2016, Walmart put out a call to technology companies, looking for partners that could offer solutions for its inventory management, cybersecurity, and e-commerce platforms, to name a few. As a result, Walmart is now partnered with Microsoft, using Microsoft’s cloud services to innovate its external services and internal applications through artificial intelligence and data solutions. Walmart’s investment in technology has paid off; according to a benchmark report by SimilarWeb, Walmart is the third most trafficked online retailer. The superstore giant is topped by only Amazon and Ebay, making it the most successful brick-and-mortar retailer in the e-commerce space.

2) But Find Channel Balance

This isn’t to say that retailers should abandon brick-and-mortar entirely and migrate to the web. Omnichannel is the name of the game now, and retailers can no longer pick and choose between digital and brick-and-mortar. Even Amazon, the poster child for online retail, has found a use, and in fact, a need for physical retail in its model. In addition to the 2017 acquisition of Whole Foods that netted Amazon 460 grocery stores, the website that was founded as an online bookstore has built over a dozen Amazon Books stores. Amazon has also recently announced mutually beneficial partnerships that increase its brick-and-mortar presence, such as delivering tires purchased on its platform to Sears Auto Center locations, where the customer can have them installed, or accepting returns at Kohl’s stores, where store-within-a-store space is also set aside to sell Amazon products. At the same time, Amazon is doubling down on its digital presence, for example experimenting with a Snapchat feature that would allow users to search for an item on Amazon based on a picture of an object or barcode. As an industry leader, Amazon demonstrates that if you want to be successful in the current retail space, you can’t be afraid to bring the physical experience online and the digital experience offline.

3) Take Back the Channel

Most manufacturers understand: you can’t rely on your distribution channels to own your relationship with consumers. That’s why the concept of CRM exists. But, in practice how do you get closer to the consumer, and get a better idea of what they want from you?

The Clorox Company has a successful CRM program, where they rely on distributors to sell their products and to provide accurate sales data. However, Clorox also puts heavy emphasis on its Early Performance Indicators. These are signals of performance early in the funnel, drawn from online engagement, that examine how conversation and buzz about the brand could translate into sales performance. While Clorox’s CRM partners manage valuable customer transaction data, EPI’s allow Clorox to assess its brand perceptions and predict sales activity in between CRM reporting cycles.

In this Amazon-dominant retail environment, some manufacturers have taken more extreme measures to regain control over their sales. The decision to become an Amazon wholesaler can be a Catch-22 for manufacturers. You cede control of your pricing, and potentially brand value, but in a world where over half of online shopping traffic goes to Amazon, not being present in the marketplace can be detrimental. Some manufacturers, such as Birkenstock, have taken the calculated risk to pull their product from Amazon altogether, in protest of unpredictable competitive pricing and the presence of counterfeit and knock-offs that dilute brand image.

With omnichannel so ubiquitous, manufacturers need to step back and take stock of the strengths and weaknesses of each channel. In channels where progress can be opaque or where partners require more control, it may be necessary to get creative in order to maintain the caliber of performance your brand expects.

4) Activate Sales Networks

While e-commerce is clearly the direction retail is moving, there are real challenges of implementing e-commerce platforms for more complex services or offerings. Grainger, the largest industrial B2B online retailer, relies on digital transactions. But, Grainger’s notoriously large catalog (over 1.6 million products, most of them highly specialized) can make it challenging for customers, particularly those with larger business accounts, to decide what to order on their own. The company reports that more than 60% of transactions are completed online, and expect that number to rise to 90% in the next several years. However, many of these transactions are aided by a sales rep at some point in the process. These reps may not be closing the final sale, but they are a crucial step in the customer journey.

Industries that have been historically dependent on agents are beginning to feel the threat of digital channels. With the rise of self-service online insurance enrollment, both offered directly by the provider or through third-party aggregation sites, some industry watchers are announcing the death of the agent and broker field. However, brokers and agents are still valuable in some areas. Employers and HR reps report depending on brokers for their group insurance needs and often maintain contact with their brokers for other resources outside of traditional enrollment season. The roles of agents and brokers may be diminishing, but they will not disappear entirely.

To maintain their standing in this shifting landscape, agents are demanding more from their carriers, such as digital tools and technology that bridge the gap between the growing digital and traditional personal customer experiences. Allied has built tools that help its insurance agents develop online content and digital marketing, and has integrated agent-enabled plans into its mobile app, reducing the administrative burden on agents. Transitioning to the digital marketplace, retailers must take stock of where their e-commerce model may fall short, and empower their human salesforce to fill in the gaps.

5) Empower Consumers

Consumers are more demanding than ever and companies have to either move quickly to meet those needs or make way for those who do. Distribution channels are more democratized than ever, allowing consumers to use platforms to curate the resources around them rather than depend on (and frankly, wait for) companies to offer what they want. This gives consumers access to goods and services they didn’t have before due to financial or geographic obstacles. Consumers’ ability to quickly and temporarily find and use anything from a car to a dog-walker has dramatically changed their spending and purchasing habits. This provides both opportunities for companies that get creative and break out of traditional models, and risks for those that can’t adapt fast enough.

Digital channels are making smaller brands more visible to consumers, and that means more competition for established brands. Search engines give consumers easy access to brands they may have never heard of, consumer reports, and customer reviews, allowing them to make more informed purchasing decisions and giving them broader choice than their local store’s shelves. At the same time, digital marketing and the online marketplace is making it easier for smaller, niched brands to get a foothold in market share, following the model of Warby Parker or Dollar Shave Club. These new brands cater to specific, untapped consumer needs or concerns, offering better value, higher quality, health benefits, more sustainable sourcing, or a departure from long-standing oligopoly. Often these emerging brands debut with a direct-to-consumer model, meaning that companies fail to view them as competitors until after they have already established a customer base.

As consumers become more empowered in their purchasing journeys, companies need to adapt to meet them where they are. For larger established companies, agility is key. Your emerging competitors are listening to customer concerns and you need to as well, and develop marketing, product lines, and business models that satisfy these consumers.

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Retail is dramatically different than it was just ten years ago, and it continues to evolve at breakneck speed. The shift to e-commerce may be intimidating for businesses, especially those not digitally native, so to speak. But by investing in a strong online channel, leveraging the strengths of existing channels and using technology to patch their weaknesses, and taking cues from consumers, retailers and manufacturers are finding success in the Amazon era.