Taken from a paper by IBM and the New York University Stern School of Business
All businesses should spend a bit of time future-proofing: coming up with succession plans as far as staff and teams go, researching new processes and materials to ensure you’re aware of the new innovations and best ways to do things, and having some sort of vision of what you expect your business to look like in five, ten, fifteen, fifty years. It’s the last one that can trip us all up – without a crystal ball (if I could manufacture one of these, I’d earn enough to make even Bill Gates jealous!), it’s tricky to know what your customer will want in a decade’s time, what the trends will be, even what shape business in general will take – will there still be bricks and mortar stores or will we all be solely online? I recently read this paper on what retail will look like in 2020. It was written by IBM and the New York University Stern School of Business and its aim is to get retailers to rethink their strategies and points of differentiation in order to make the customers of 2020 happy. It’s quite a lengthy read so I’ve shared their final findings on how to get a competitive advantage below. (But if you want to read it in its 12-page entirety, email me and I’ll flick you the link; I’ve also edited it down to three pages if you want a more succinct read!)
How to get competitive advantage
To compete and succeed in 2020, retailers will need to challenge and, in many cases, rethink their current value propositions to make sure they are sufficiently differentiated and compelling to the consumers they are targeting. For most, this will be a very difficult task, as it means radically redefining the role of the store and how to turn it into an asset instead of a liability. As brick-and-mortar retailers prepare for battle with the online merchants, they must transform into truly seamless multichannel businesses. In doing so, there are several areas they can draw upon for competitive advantage.
1. Find ways to appeal to millennials
They will be the shoppers to target. Understanding them, embracing their new approaches to shopping and connecting with them individually will provide a strong foundation for a winning strategy.
2. Invest in building and maintaining a strong, compelling brand
Owning or controlling a strong brand and offering unique and compelling products within the brand will provide a basis for a differentiated offer. Simply offering others’ brands without adding significant value will not be sufficient for sustainable competitive advantage. In a market in which anyone can instantaneously share their experience with hundreds, if not thousands, of others, having a strong brand and a consistent way to measure the perception of your brand, is a necessity.
3. Reduce the amount of retail space in your portfolio
With larger shares of retail sales moving online, retail space will become an increasing problem for many retailers. Downsizing, recycling, repurposing and eliminating unproductive space and locations will be critical in order to maintain the level of productivity required to provide adequate returns.
4. Make it easy to shop, wherever, whenever
Get creative in engaging the consumer wherever it makes sense in order to make it as convenient as possible for them to shop. Pop-up shops, kiosks and intelligent displays integrated with mobile devices can offer a multichannel experience that engages the customer. It’s clear that retailers need to aggressively embrace customer-shopping platforms of all types (for example, mobile) and integrate them into their channel mix.
5. Speak to your customers personally
Online retailers know who their customers are and are in a position to tailor their messages and offers to each individual in a way that adds to the overall shopping experience. Most brick-and-mortar retailers will need to do this in order to remain relevant. Making sure your brand messages and offers are heard and understood will require you to engage your customer in a consistent dialog which reflects insights into their needs, wants and prior actions. Generating offers in real time while navigating through the privacy, marketing and IT issues will be difficult, but by 2020 this should be the normal way of communicating to customers.
6. Become a low-cost operator in the segment in which you operate
Price and product comparisons will be made even easier and more relevant in 2020 and will be the starting point for most buying decisions. Competing against online retailers will require a more flexible business model, so that when you need to compete on price, you can. Embracing and integrating technology and shifting costs for nonstrategic functions will, no doubt, continue to be a core competency of successful retailers in 2020.
7. Use the store and technology as a competitive weapon
Consumers have to be motivated to go to a store when there are likely going to be alternatives for shopping that are more convenient. Give them a good reason to do it. The store should offer an environment that makes shopping a positive experience that delivers compelling value versus the alternatives. The shopping experience has been largely unchanged, from a consumer perspective, for over 30 years. Retailers have the ability to integrate analytics and location-based technology to invent new ways to serve their customers. Whether it’s something fresh and unique, someplace visually exciting or entertaining or services that are truly valued, the bar will be much higher for the consumer of 2020 than it is for today’s customers.
8. Invest in associates who solve customer’s problems
Retailers have spent years taking money out of store payroll in order to deliver better financial results. In most cases today’s store associates are at a real disadvantage when they are asked to serve customers. They haven’t been selected and trained properly for that role. They probably don’t have mobile devices as good as their customers’. They are not as informed about what’s available in the market as are their customers. Finally, given all of the back-office tasks they are assigned, they have little time or incentive to help customers, even if they were properly equipped. Successful retailers in 2020 need to rethink the role of the store associate and how they are enabled and measured, to turn them into part of the reason consumers come to shop their stores.
If you need any help recognising or focusing on what could hold your retail business back in 2020, give me a bell or email! Yours in business coaching and planning…
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