With the historic rate of brick and mortar retail operation closures, the competitive stress of eCommerce is deeply upon us.
Many have blamed the reduction in customer traffic in brick and mortar stores as a reason for the decline. Rather, is this a reflection of the store experience or a real change in the traffic behaviors of the base consumer? At the same time, businesses that offer high customer service (e.g. Starbuck’s, Chick Fil-A, and Apple) have carved out a competitive stronghold with price not being the driver.
eCommerce has realized a double-digit growth every year since 2000. This number only constitutes a little more than 10% of the total US retail sales revenue. This reality means that traditional brick and mortar retailers still maintain a lions-share of retail revenue.
Diving into the numbers, the rate of sales growth has outpaced the cost of inventory. As margins have leaned out, teams have had to be focused on where to invest and ensure that items purchased deliver on the sales required. This has left many weary of the risk-taking positions that would garner the better margins. As a result, many retailers have seen flat or declining margins without ways to drive growth.
What is Next?
To address the competitive landscape, retailers must realize that demand can be satisfied from any channel. Savvy customers search the web for the best deal possible. They are willing to wait a reasonable time (two-three days) if it garners a 15%-25% savings. Recognizing this trend will help in focusing on assortment, pricing, and supply chain strategies that will add value.
Deploying a flexible supply chain that can ensure you manage your supply chain costs without a long-term commitment ensures optimal supply chain competitiveness. MonarchFx, the latest supply chain offering, provides this flexibility. It provides a network of facilities that unleashes the power and flexibility of the consortium. Through a co-managed network, you have the ability to move between locations as your customers’ demands move.
On top of this, planning must be more inclusive to acknowledge the competition and the various channels in which you are competing. Teams must begin to be creative and review traditional and untraditional customer buying routes.
Internally, the business must begin to work collectively to evaluate the business alternatives and ensure decisions are made with entrepreneurial speed. At the rate of today’s change, teams must decide and move on major shifts in days, not months. Practices that formalize this process (e.g. S&OP) are critical in aligning the sales and operations teams for success.
Margins are being squeezed at historic levels. Teams must begin to recognize that true prosperity will only come from aligning your organization to customers’ demands. Gone are the days when the retailer could dictate what a consumer wanted. Today’s open marketplace allows the customer to get what they want when they want it. Be a leader in listening to your customer and deliver to their needs.