Rise of The Digital Consumer
Posted by Chris Gayner on Thu, Jun 30, 2011 @ 07:53 AM
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The impact of e-commerce and technology on brick-and-mortar retailers and their supply chains.
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Retailers are being forced to use their existing store floor space more creatively due to saturation in the market (the UK market alone has absorbed around 1.4million sq m additional retail space per annum over the past 20 years) alongside increasingly stringent new planning restrictions.
Increasingly, retailers who want to grow their business:
- Must do so within the existing floor space
- Understand their cost structures in more detail – looking at both Goods for Resale (GFR) and Goods Not for Resale (GNFR)
- Leverage alternative routes to market
UK retailers are either toying with the concept or have begun to move more aggressively into the digital marketplace (European online retail sales have been forecast to grow 13% over the course of 2011). For some this decision was a response to:
- Consumer shopping behaviours (focus on convenience and finding the best deal)
- Technology advancements in e-commerce backed websites
- Further move towards becoming a true multi-channel retailer
For others, such as HMV and Borders, this decision towards digital was forced from the absolute need to evolve alongside media consumption trends. Over the past 5 years, this rapid evolution has highlighted several opportunities for many UK retailers, it has also highlighted many weaknesses – with HMV failing to adapt fast enough to the rise of digital music and its impact on CD sales (consistently declining YoY since 2007).
A key reason many UK retailers were unable to adapt to shifting consumer trends fast enough was due to the dynamic nature of operating in the digital environment (i.e. open for 24hours, being more responsive to customers, ensuring stock control is impeccable etc). Many larger, more established retailers were/are finding that their archaic supply networks are not equipped to handle this new dynamism that the digital marketplace brings.
Overcoming these legacy systems and processes built into the business (and more specifically the supply chain) requires:
- Greater investment into people (ensuring there is technical knowledge within the business to keep up with digital advancements plus commercial knowledge of operating in a digital market-space)
- Becoming more efficient through the development of more sophisticated back office IT systems (P2P and ERP tools) and customer facing systems (increasing use of self service terminal and scanning solutions) which can automate processes – reducing reliance on front-of-house labour
- Greater investment into cost control (ensuring all cash coming in and going out of the business is being managed right through to the bottom-line – less focus on continually adding to the top-line)
- More sophisticated demand management processes (which go through the entire process – from front of house to back, encompassing Goods for Resale (GFR) as well as Goods Not for Resale (GNFR).
Ultimately, already cash-strapped Retailers face some tough decisions to push through these hard times, all of which involve varying levels of additional investment in technology, people and/or supply-chain. The question is, what should you prioritise?
NOTE: This blog post is part of the UK Retail Series, leading up to the launch of a whitepaper we are publishing around procurement's changing role within Retail. Please email info@proximagroup.com if you would like to receive the full whitepaper when it is published.