The Three Pillars of Retail Success
We all know by now that 2016 was the Year of Promotions for retailers, which drastically impacted their bottom line. As we found in DynamicAction’s Retail Index: Year in Review and 2017 Outlook, 44% of all online purchases in 2016 were bought using a promotion in North America alone.
Retailers and brands cannot afford another year like 2016.
In a brilliant piece penned by Greg Petro, “Amazon vs. Walmart: Clash Of The Titans”, he laid out three pillars that will determine who win between the “undisputed heavyweight champion of online retailing” and “the biggest brick-and-mortar retailer in the world.” While many are looking on as these retail powerhouses battle it out through intelligent acquisitions or leading unmatchable supply chain strategies, the industry as a whole should take steps to implement these basic truths in order to avoid another year of racing to the bottom with costly promotions and unnecessary lost profits.
Retail Success Pillar One: Understand your customer data
So often the cycle decisions driven by gut and fear lead retailers down the path of missed profits and costly overstocks with incorrect inventory assumptions, such as stocking too many winter coats in your Atlanta store location in April, based off weather data pulled at your headquarters in Chicago.
Through connecting the data across your business, you’ll gain a holistic picture of how your customer engages with your brand and what products can drive increased profitability. Retailers can learn their consumer’s path to products on their shopping journey. By understanding this path, you’ll be able to more profitably cross promote products and understand opportunities to insightfully combine full-priced products and promotions lifting revenue and profits while reducing misappropriated marketing spend.
Retail Success Pillar Two: Master your supply chain
The way consumers shop has dramatically shifted in recent years, as they no longer compartmentalize their shopping online vs. in-store. They are now constantly connected to their shopping journey and want complete flexibility when it comes to making purchase decisions. Consumers now order products on their mobile and expect to pick it up in-store, or order a product in-store and expect their items to be delivered to their home in two days — a feat that was unattainable a mere five years ago.
Retailers need to be able to offer flexibility in order to extend their value proposition beyond low prices. In order to do so, retailers and brands must use their connected customer data to stay ahead of purchases and profitably manage their inventory. Connected consumer data provides insights into where and how consumers shop, allowing industry players to accurately predict how inventory should be managed across warehouses or stores.
Retail Success Pillar Three: Innovate continuously… within reason
Retail is at an impressive tipping point where those who don’t look to the future will swiftly get left behind. But innovation is a bit of a double-edged sword. Retailers must be strategic in their approach to innovation with a set goal to improve the customer experience coupled with their bottom line. Adopting technology for technology’s sake is not the answer here; new implementations should move the needle on a retailer’s profit line at the end of the day.
Retailers and brands whose strategies feature a balanced prioritization of both customer experience and profit target will be the ones who truly succeed — obtaining loyal, happy customers on the way.
Essentially different from the reliance on promotions, the edification of these three pillars won’t be immediate. That said, focusing on these pillars to the detriment of promotions is an essential measure to keep you from eroding your profit margins. Retailers and brands that actively take steps towards making use of relevant technology to enhance their customer data analysis and supply chain operations will be the true winners in retail – increasing both profits and customer loyalty.