Jarek Matschey – Retail Industry Director VMware EMEA Few sectors have experienced such a dramatic polarisation of fortunes than retail. On the one hand we’ve seen major names – those that we have come to rely on – such as Amazon and supermarket chains like Tesco strengthen their position and market share. Others shut, some […]
Ed Durbin, global director for retail end user computing, VMware
Nothing quite changes buyer behaviour like a pandemic. Particularly in retail where the last 18 months have irrevocably altered how, when and why we shop while resetting consumer expectations in terms of experience.
Improve, stand-out and innovate
As a result, we’re in a situation where retailers are constantly seeking to improve, stand-out and innovate. At the same time, consumers are looking for best-in-class service. It’s the perfect storm that is creating a self-perpetuating cycle of retail improvement. And the figures bear this out. In spite of some fairly gloomy predictions, the UK retail sector as a whole is doing well and though the high-street is bouncing back to some degree, much of the buoyancy is from online. According to data presented by Finaria.it, the revenue of the European eCommerce market is expected to hit 30% more than before the pandemic struck. In May 2021, retail sales volumes in the UK were 9.1% higher than in February 2020 according to the Office for National Statistics and non-store retailers reported sales much higher than their pre-pandemic level, with volumes in May 2021 46.0% higher than in February 2020.
The skewed retail landscape of the last 18 months has led to a proliferation in innovations like curbside pickup, BORIS (buy online, return in store) and ROPIS (rent online, pick-up in store). There are several more acronyms but these innovations were in the pipeline anyway and have been accelerated to go-live with no going back from here. According to McKinsey, 60% of consumers globally are now not going to change their buying behaviour from the pandemic. I.e., they’re not going back. Over two-thirds of Italians, Spanish and French consumers intend to continue with their new shopping behaviours. It means that retailers need to keep doing what they have been doing but find ways to make improvements with the goal of eliminating friction for consumers to consume. For instance, Walmart has bought 740,000 Samsung devices for its employees – personal, but fitted with business applications – so that their employees can work easier and be as useful as possible.
This foundational and fundamental way of retailers doing business is leading to four main trends in the sector.
The first of which is the in-store experience – somewhat ironic given the huge rise to prominence of online. But this is why it is such fertile ground for improvement. Retailers need to go beyond a nice window display and a sale to entice customers in and keep them coming back. The concept of an in-store experience is not new – you could pet a lion in Harrods in the 70’s – but now retailers are armed with something with a much mightier roar – technology.
Take the increasingly popular zero touch check-out service as an example. AmazonGo is the poster boy here but there are others. This year alone $2bn of product will be sold via this method but this figure is predicted to rise to $387bn by 2025 – a huge increase of around 2000% in around three years. In-store video and tracking also aids retailers too by helping to cut shrinkage, which amounts to around 2% of all retail revenue though its influence on a frictionless future of retail is arguably far more valuable.
Creating customer fulfilment
How products are moved and exchange is also evolving at breakneck speed. This is where the pandemic has truly altered consumer expectation. People now expect overnight delivery and to receive their goods at a location of their choosing. In terms of fulfilment, Amazon got retailers ready for the pandemic in terms of speed because its Prime service was well established by early 2020. US retailer Kohl’s has seen an increase in sales in every store that it has put an Amazon return centre. Of course, many retailers can’t match the scale of Amazon or its reach so have responded by turning local outlets into fulfilment centres.
Target, the eight largest retailer in the US, is a good example of this being done well. Throughout the pandemic, 80% of orders placed on Target.com were fulfilled by local stores. This mechanic means faster delivery and brings the brand as close to customers as possible. But it’s not as black and white as a shop and/or fulfilment centre. Retailers are not looking for separation but for the ability to be flexible when it comes to how goods are bought, stored, collected, changed and delivered, mixing and matching to find the right balance that works for the consumer and market.
Why size doesn’t matter
What is abundantly clear is that the old days of ‘stack ‘em high and watch it fly’ simply do not work anymore. What matters today is offering something more to the consumer – better availability, shorter delivery, tailored service… anything to make the shopping experience more interesting, attractive and relevant. This is driving a trend of retailers using data to know how to respond to customers and skewing the established belief that big is better.
The necessity to know each and every customer is thrusting the use of data mining and machine learning right to the top of the retail agenda. Again, this isn’t new – UK supermarket chain Tesco was an early pioneer here with its clubcard scheme which propelled it from a reasonably-sized UK supermarket to one of the world’s biggest retailers. But we’re now in a more granular era where retailers want to know your preferences, shoe size and what you’ve had for breakfast before you’ve had it, all with the objective of serving up tailor made products and experiences friction-free.
Net Zero retail
One of the biggest trends shaping socioeconomic behaviours on a macro scale, and therefore retail, is in sustainability. This is impacting every corner of the sector from where consumers are buying from to how brands operate. According to Deloitte, the notion of Net Zero retail has meant brands have accelerated their efforts to decarbonise operations, products and their supply chain.
This was how Whole Foods started, with the environment as its number one concern but back then, it was an outlier. Now everyone is doing it. Amazon is releasing electric delivery cars and UPS and FedEx are doing the same thing. Groceries are moving away from plastic packaging too. Supermarket chain Iceland is a good example which has pledged to be plastic free by 2023. Fashion is also seeing sweeping changes which is huge for an industry predicated on constantly evolving materials and designs. Nudie – a Swedish jeans company – will repair jeans for the life of the jeans.
Foundation for the future of retail
These trends are the foundation for the future of retail but are being embraced because technology companies are not talking complex IT language. Instead they’re focusing on working hand-in-hand with retailers to address their pain points to curate solutions to solve problems. This matters because IT is not a separate part of business but simply part of everything brands do. And what they’re doing now is reducing friction to ensure retailers, retail and consumers, consume.
You can follow Ed Durbin at LinkedIn for more retail insights.
For more information on how VMware can help on your modernisation journey in retail or to talk to our team, please contact Jarek Matschey at firstname.lastname@example.org and Lenka Kanakova at email@example.com or your assigned VMware account manager.
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