An introduction to Total Retail
An introduction to Total Retail
The UK retail sector has responded to the challenges of digital commerce by attempting to manage on a multi-channel retail basis. But it’s becoming increasingly clear that the costs and complexities of doing this are simply too great because: it’s a faulty formula, which is doomed to failure.
In this video Matthew Tod introduces the key themes for Total Retail.
Retailers are struggling to keep up with the demands of consumers, which began with the rise of E commerce and now takes us into the evolving role of the store. The work we’ve done at PwC surveying CEOs shows us that 62% of them wish to grow their customer base, but the CEO challenge they face is how to deliver profitable growth in the digital age.
Now as well as living in a period of very, very low growth, we’re also going through a decade of unprecedented change in consumer behaviour. We the emergence of a whole new generation of digital natives, people who’ve grown up with broadband and are connected to the internet all of the time.
Now retailers have adapted to these new consumers by adopting multi-channel strategies, but it would be fair to say that we are not convinced that a multi-channel strategy will lead to a more profitable business. There are two problems with multi-channel as we see it. The first is to do with “multi” element which is that retailers have added multiple cost centres to the business, whilst at the same time having a flat top line.
The second problem has been the establishment of a channel structure with the organisation which is completely opposite to the way that consumers actually behave. Consumers don’t shop in channels, they move seamlessly between channels as suites them - so retailers have the wrong structure. What is the solution? Well we believe a singular focussed organisation that put customers, not channels, at its centre is what is going to be successful in the future and we call that a “total retailer”.
A total retailer knows that great product and customer experience are at its core, but they will invest in technology, not to create more channels, but to deliver to consumers a connected experience regardless of how they engage with the retailer. They will organise themselves, not around channels, but around customers. They will bring together multiple groups into single groups to lower operating costs and they will make extensive use of data to really understand how customers behave and how to use that date to enhance not just the customer experience, but to reduce marketing costs, improve buying and to deliver better merchandising.
From now on it’s not about channel, it’s about the consumer. Giving them what they want, the way they want it, and organising your business to deliver that.
Some things about great retail execution will never change: brand, product, price, and delivery are as important now as they’ve ever been. What is changing, though - and changing faster than ever - is the need to develop new technology, new processes, new skills, and new organisational models. Retailers don’t need a digital strategy any more, they need a business strategy for a digital age, and that means transforming everything from the role of the store, to the management of risk, to recruitment and training.
The changing business model for retail
This is what we mean by Total Retail. The best in class are already starting to do it, but we cannot stress strongly enough that this is not a strategy for success. It is a strategy for survival. Retailers who understand this will emerge with more innovative, more efficient, and more profitable operations; those who don’t will die. It’s as stark - and as simple - as that.