Implications for retailers and brands

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The rise of a new digital shopping world creates many operational and financial implications:

Store closures are expected as chains no longer need as many physical stores.

  • Physical bricks and mortar stores will not be entirely eliminated, but they will change. Store closures are expected as chains no longer need as many physical stores. Store size will also change, as categories go online. This will drive leasing decisions, physical layout and merchandising plans.
  • Retailers will find ways to rethink shopper loyalty to create reasons for shoppers to come to their stores. This will include differentiated in-store experiences, enhanced service models and new loyalty program benefits. Exclusive brands and products will also become important to retailers, as a way to differentiate from the competition. These changes can affect the accounting for many pre-existing loyalty plans, or create newer and more complex structures.
  • Transactions will occur more in the digital space. Retailers will turn to multi-channel models including online, mobile and social commerce, and virtual stores, in addition to physical stores. As these virtual transactions occur, retailers will need to ensure that their revenue recognition policies and practices are appropriate and supportable.
  • Multi-channel retailing will provide a strategic advantage to companies by virtue of the transactional and behavioral shopper data gained, but with that will come a greater need to mine and leverage this data more effectively. Additional stress may be put on existing systems and the people that operate them. Ability to manage and utilize larger data warehouses of critical information will be imperative.
  • All of the impacts above create massive supply chain implications. The most obvious – the inventory implications of fewer physical stores, less inventory in stores and a multi-channel model.
  • There are also significant organizational implications. Leading retailers will utilize these new technologies to enhance their supply chains, while identifying efficiencies and cost effectiveness as critical components to competitive advantages.

The future is now

Consumers are becoming increasingly comfortable with using digital technology in the shopping environment and presumably will more frequently measure a retailer on how well it supports this change.

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.