Chris Osborne, retail industry principal SAP UK and Ireland, explored the changing retail scene at the SAP Forum in London last month (22 May 2012).
Osborne painted a background of disrupting influences including intense rivalry in retail.
“There’s a huge lot of competition because of the economic situation and a lot of retailers going after a small amount of disposable income that people have,” he said.
Suppliers also have increased bargaining power since brand owners are now in a position to develop their own direct relationship with the consumer.
“That’s changing the dynamic of the retailer/supplier relationship,” said Osborne.
Online giants, Amazon and eBay, have already had a massive impact on the retail marketplace and will continue to do so. Retailers must learn to deal with that and harness the power of buyers ie the end consumer, he said.
Levers retailers can pull
Retailers must differentiate from the competition, Osborne advised; and said there are a number of levers they can pull. These include ensuring their product range is as exclusive as possible and being fast to market with the products their customers want.
Retailers must also provide a level of customer service their competition cannot emulate, he said.
Thirdly, retailers must have flexibility in their pricing model in order to provide rewards for loyalty that are still profitable.
Finally, retailers must innovate around the shopping experience with personalised offers, for example.
To action the above, Osborne said retailers must understand who their customers are and what shoppers want from them.
“Customers are easily bored therefore retailers need to have a dialogue with customers and be dynamic to remain relevant,” he said.
It’s also critical retailers respond to life cycle and lifestyle changes and understand how a consumer’s needs change over time.
IT expenditure is changing in an omni-channel world
On the importance of IT, Osborne said 85% of retailers in a SAP survey thought IT was extremely important or somewhat important to their businesses but where IT budgets are spent is changing.
Osborne referenced a Gartner study, which showed by 2016 CMOs would be spending more than CIOs because the shopping process has changed and the customer journey is an omni-channel one today.
Shoppers research products and brands via networks and it is a social and collaborative process, said Osborne.
“It’s a late part of the process when a consumer walks into the physical store,” he said, and reminded delegates of the level of influence some customers may have among their peer groups.
Osborne said the role of the store will alter and move from being transactionally-focused to a process of interaction.
The high street will remain important and new players will emerge, however.
“Retailers are struggling to make stores profitable but new entrants like Amazon and eBay are thinking about opening new stores.
“Shopping is a social experience and people like to go and interact with people, therefore retailers will build a physical store experience into an omni-channel presence,” he said.
Three top retail trends
Osborne highlighted three key retail trends. They include the mobile revolution. Consumers will expect to involve mobile devices in the shopping process – bridging the gap between e-commerce and the store.
Social shopping and allowing the consumer to compare products will become more important and provide an opportunity for retailers to build dialogues with consumers, listening and interacting with them in real time.
“Retailers need to be engaged but proceed with caution,” Osborne advised.
The third trend is for big data, he said. However, a recent SAP study found 88% of retailers had issues accessing usable insights from data.
Osborne recommended retailers have integrated applications across marketing, merchandising, retail operations and supply chain and a single version of the customer.
Osborne said it should be possible to send a message to a shopper, buying biscuits in real time in a grocery store, to encourage them to switch to another brand, for example. However, to deliver that scenario is difficult and requires knowing who the customer is, their purchase history, their physical location, the product location and whether the product is in stock or not.
In reality, he said, most retailers do not have interfaced systems architecture and a common data foundation for people to use.
Data has to be current and access has to be faster, he added.
Summing up, Osborne said the focus areas for future IT investments are on social media (49%) and a mobile strategy (39%) but that any strategic IT platform retailers create today needs be able to support them for the next 10 years.
It must also offer real time personalisation, be omni-channel, have real time supply chain visibility and mobile device integration plus the ability to bring new devices on stream when they emerge.