Retail Delivery Disruption

Customer delivery practices are being disrupted now as a result of changes in consumers shopping and purchasing practices.  You can view the results of the disruption in the brick and mortar retail outlets by the reductions in sales that have hit these brick and mortar outlets over the last year or so as reported in the retails sales figures by outlet.  The delivery disruption is the natural reaction to the disruption experienced across the retail market where increases are being experienced in eCommerce sales and the brick and mortar sales have dropped.  I think this disruption is less focused on the outlet store market because in my unscientific analysis I did not view a large visible reduction in traffic to the outlet malls.  

Retailers are reacting in different ways to this disruption and unfortunately I believe the reactions may be rooted in legacy assumptions which will not address the true market trend.  In my opinion retailers in general are addressing half of the issue when implementing the order online and pickup in store delivery model.  This model simply does not address the complete challenge of strategical location of inventory to support the changing consumer demands.  Retailers seem to be using this strategic model to try to increase consumer traffic in stores and these retailers should be focus on the business problem.  The business problem is that consumers are simplifying their retail shopping and purchasing to focus on shopping when it best fits with their lifestyle demands.  Consumers are focus on simplification of purchasing to allow time to focus on important family and work considerations.  

The challenge is that many consumers no longer have the time to shop like they did in the past and technology allows them to perform a time shift for these needs to a time that is most convenient to their schedule.   This does not necessarily mean that consumers want to shop online and pick up in the store, except for some specialized market channels such as home improvement.  I believe that consumers are now mashing shopping, purchasing and delivery practices across channels and as a result are further disrupting the retail market.

These disrupting practices require an evaluation of the consumer relationships for retailers in an unbiased manner to identify a strategy to navigate the disruption.  I believe that many retailers are still stuck in pre-conceived beliefs of consumer practices as a result of preconceived ‘laws of retail’ that no longer apply.  Retailers must focus on the consumer clues and not on how the consumer actions fit into existing retail practices.  The standard brick and mortar retail model is broken and retailers must develop a strategy based on this fact or they will simply vanish.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Retail Market Creativity

Navigating the changing demands of consumers in the retail market requires a great deal of creativity in order to piece together a strategy and tactics that support the strategy.  Between consumer demands and use of new and emerging technology by consumers to implement their demands retailers are buffeted by changing shopping and purchasing practices that utilize the new technology.  Retailers cannot rest in their efforts to understand and incorporate new practices to support the changes demanded by consumers.  These changes are cumulative and are continuously incorporating new practices driven by a the demands of the changing consumer lifestyles and supported by the creative use and mashup of technologies.

Technology has opened the door to consumer imagination and creativity to support their lifestyles.  These changes are then cumulative in nature and driven in large part by the imagination of a new generation in the market that has grown up with technology and is comfortable with utilizing technology in social interaction to solve lifestyle challenges.  This has been a conflict then with retail practices to identify and then incorporate changes in the retailer methods and practices to support the demands.  Retailers have struggled with technology and a real estate infrastructure that is not conducive to the flexibility demanded by consumers.  As an example, retailers have focused on price while consumers have been focused on the shopping and purchasing practices that can support their lifestyle demands.

Retailers must focus on defining the problem and then can determine how to solve the problem, this is a best practice in any strategic development; first define the ‘what’ and then define the ‘how’.  This requires creativity to repurpose and extend technology and physical capabilities in order to meet the velocity of changing demands.  In order to encourage the creativity the retailer must first focus on what the consumer is demanding and in my opinion the consumer is demanding simplicity and flexibility in shopping and purchasing to allow them to quickly and efficiently come to a purchase decision and then the delivery requirements can be met separately.  

Consumers are compartmentalizing decisions and practices to allow them to perform more activities in the limited time available and shopping is no different.  Technology allows consumers to compartmentalize the shopping and delivery activities to allow them to complete more value add activities in their limited time.  Delivery of purchases is not a value add activity that consumers need to focus and this is a key factor in the market disruption.  This has now disrupted the retailer brick and mortar strategy because consumers have realized they do not need to spend the time on shopping, purchasing and taking the purchase with them as they would have in the past.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Inventory Capacity Planning

Retail omni channel inventory planning and management requires capacity measures to be included in the calculations in order to be able to understand and incorporate the most efficient replenishment strategy.  As a direct result of the disruption experienced in the retail omni channel market, the capacity measurements and formulas have been disrupted as well.  This requires an additional degree of measurement because of the changing factors that are involved in the market disruption and must be considered to accurately plan.  In fact I think the supply chain capacity planning and forecasting is quickly becoming one of the most critical pieces to effectively planning for inventory requirements within the retail supply chain.  

The retail inventory management and control function must react to the market disruption quickly and effectively to limit the impact of positive and negative influences on inventory demand.  Capacity planning used to be relatively straightforward and could be controlled through inventory safety levels at the enterprise level.  In the current retail market the capacity planning and support must be pushed closer to the customer in the delivery channel in order to meet the retailer’s delivery commitments.  This, in turn, increases the complexity and also the risk to inventory capacity planning due to the inventory level under consideration and the spread of quantities across locations.  

These challenges are especially complicated with the larger chains because of the span of locations and the complexity in planning sales across channels.  In this environment capacity planning must be consolidated across all channels which is the easy part really and the difficulty comes from inventory consumption support across channels.  Inventory consumption for large regional and national retailers must be supported across channels, essentially utilizing brick and mortar stores and distribution centers for local consumer delivery.  This strategy allows retailers to move the inventory closer to the consumers purchasing and also allows the retailers to increase the utilization of real estate that has been increasingly under utilized.  

Consumers are increasing online purchases and decreasing their in store purchasing which has caused a drop in store and mall traffic.  This trend is not decreasing and rather than divesting the underutilized real estate retailers can repurpose the stores to provide product show rooms and local distribution capabilities.  This strategy will allow retailers to simplify their inventory capacity management, better utilize real estate, better utilize employees to meet consumer demands.  There are many ways to meet the demands of the market and creativity is the most important factor to meet the changing demands.  This method to react to the changing market allows the retailer to utilize the current resources in a manner that supports the demands of the market and eliminates the cost of divesting resources.  

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumer's experience?  Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?