Retailing in real time
(As originally published in the Financial Post, June 2013)
By Daniel Baer, National Retail and Consumer Products Industry Leader, EY
The retail sector is familiar to change... new products, markets, demographics, competitive landscape, technologies, etc. Today’s shopping experience is, however, changing faster than the hottest fashion trends: with growing accessibility of smartphones and faster technology, the next five years for retailers is expected to look very different from the last five. In fact, consumers are becoming increasingly comfortable with using digital technology in the shopping environment and will more frequently measure a retailer on how well it supports this change.
Online is now the second-most-shopped channel each week which means consumers now expect the purchasing experience to be seamless and transparent, regardless of the channel. Internet shopping has evolved far beyond travel, books and music downloads. Shoppers are buying more products and services online, including fashion, health, beauty and groceries. Research shows that once shoppers buy a product or service online, they become comfortable and start doing it more frequently. This means retailers must rethink how they do business and sell to their customers by embracing digital shopping.
Social media is also an ingredient in the new consumer reality, and generates great business opportunities for retailers. It is more than an information source, however — it’s a key selling tool. Retailers and brands have realized the importance of social media in shopping decisions and are reallocating resources to support social media efforts.
At the same time, social media campaigns may not always end up as intended. They can quickly build a company’s brand, but they can, with equal speed, crush it.
Embracing social media poses unique risks for retailers
Legal, compliance, regulatory, operational and public relations issues are at the top of the list of potential social media risks that can ultimately cause erosion of customers, market share and revenue.
Companies wanting to avoid the potential IT-related challenges posed by social media simply by ignoring, limiting, restricting or prohibiting use may only reduce their risk by an insignificant amount. In fact, doing so will likely cause more potential problems and challenges to the enterprise's ability to protect and grow its standing in the marketplace, as competitors move ahead.
Openness, transparency and engagement are now expected.
Mobile commerce is the biggest game changer in the retail sector
Consumers don’t need to go to a physical store anymore. We’re now in the “digital retail” environment where shopping has truly become anywhere, anyplace, anytime. Mobile devices are already changing consumer experiences in many shopping venues, and several retailers are testing new concepts from enhanced self-scanning to mobile scanning and checkout and beyond.
Implications for retailers and brand
The rise of a new digital shopping world creates many retail implications, including:
- Physical stores: The number, size and purpose of physical stores will change.
- Loyalty: Retailers will need to find compelling reasons for shoppers to come to their stores.
- Increased virtual transactions: Retailers will turn to omni-channel models, including online, mobile and social commerce, and virtual stores.
- Management and utilization of larger data warehouses: Thanks to the transactional and behavioral shopper data gained through social media, omni-channel retailing will provide a strategic advantage to companies who mine and leverage “big” data effectively.
- Supply chain: Retailers will need to review the inventory implications of fewer physical stores, less inventory in stores and of an omni-channel model, including in store e-commerce fulfillment.
The challenge for retail companies is how well they can adapt, how wisely they can make spending decisions on new technology, and how best they can use technology to continuously connect with their greatest asset — the consumer. The only constant will be the need to continuously change and innovate.
Learn more about how companies, including retailers, can benefit from social media – and mitigate risks to avoid nightmares in real time! in Ernst & Young's Protecting and strengthening your brand, social media governance and strategy report. To learn more on how internet and mobile technology are reshaping consumer behavior and retailers’ strategy, discover Ernst & Young's Digital retail, analysing the effect on retailers report.