New Rules for Retail

Parker Avery Point of View

Revealing Retail's Biggest Challenges and Hottest Growth Opportunities for 2012
as Consumer Preferences and Technology Changes Accelerate

Originally published and adapted from RISNews' 2011 IT Services Guide

Q1. Considering the major trends facing the retail industry today, what single project have you done in the last year that has had the biggest impact on a customer's business?

One of our most exciting projects was a merchandising transformation initiative that re-engineered processes, roles, organizational structure and standard operating procedures to improve sales, margins and inventory performance. The results have been outstanding. As a result of the project, the company publicly released benefits that included a 7.7 percent increase in total revenue, a 4.4 percent increase in comparative store sales and an 80 basis point improvement in merchandise margins. In addition, retail operating margin was up 220 basis points, a record for the company. Our ability to combine practical industry expertise with proven consulting methodology enables us to recommend improvements for our clients that consistently deliver results.


Q2. From intent to purchase, the shopper journey has never been more chaotic. How can retailers best position themselves for multi-channel shoppers?

We completed a study earlier this year that benchmarked retailers and their investments in mobile retail and customer communications, i.e. social media et al. Our research indicated that 77 percent of retailers have a social media and mobile commerce strategy. However, 48 percent of these retailers have only adopted a "fast follower" strategy to remain competitive. We believe Holiday 2011 underscored that a significant segment of consumers now use smartphones, social media and emerging channels to make retail purchases. Retailers who recognize this will invest more aggressively in 2012 and will do three things: Expand their direct channel organization; integrate marketing more directly into the planning, merchandising and pricing process, and revisit their supply chain strategy to support multiple channels.


Q3. Today, new and innovative technologies are gaining traction – from item-level RFID and inexpensive mobile devices to cloud computing and Software as a Service (SaaS). Which solutions/technologies would you say offer clear benefits for retailers?

An exciting innovation is the maturation of assortment localization and applied analytics. With the emergence of social media and mobile commerce as a powerful consumer channel, it's important that a retailer understand local preferences, buying behaviors and alternative fulfillment models to capitalize on the changing market. The scalability and power of technology today has finally made this possible.


Q4. Even in tough times retailers are searching for areas of growth and business improvement. Where do you think these are located today?

Although there is no single answer across all retail segments, there are five themes that we have helped our clients build on over the past 12-18 months: international expansion; product development; global supply chain strategy; merchandising optimization, and promotional and pricing improvements. As an example, we worked with a $3 billion retailer this past spring and saved $3 million in working capital within 90 days by improving supply chain practices. Based on our experience, there are a number of opportunities for growth and business improvement.

Q5. As we head further into 2012, what challenges or opportunities can we expect to see that will have a big impact on retail business models, technology or customer shopping patterns?

We are at the beginning of another exciting cycle in retail. Consumers have gone mobile. As a result, they provide more information to us than ever before about what they want, how much they will pay and how they want to receive it. This presents a great opportunity for retailers to improve merchandising, marketing and fulfillment models. But it also means you have to be selective about where you invest. If you're a large retailer with a high number of stores, you may need to consider localized promotions, pricing and assortments. If you're a small fashion retailer you may need to consider developing a more flexible supply chain and cross-channel initiatives. Regardless of your position in the marketplace, 2012 will be an exciting year of growth.


Conclusion

Key Retail Growth Strategy for 2012: Consumers provide more information to retailers than ever about what they want, how much they will pay and how they want to receive it, which means they have to be selective about investing. Large retailers need to consider localized promotions, pricing and assortments. Small retailers need to consider a flexible supply chain and cross-channel initiatives.

If you’d like to learn more about our vision or understand how you might take advantage of this strategy, contact us at Contact@parkeravery.com or call 770.882.2205.

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