For retailers, one thing is clear: No matter how you look at the current landscape, there’s no denying we’re in the throes of a retail revolution.
This year alone we’ve seen hundreds of store closings by some of the world’s most established retailers, and consumers’ expectations for near-instant delivery and world-class service increasing each and every day. The industry as we know it seems to be experiencing a shakeout and the conversation around retail’s future continues to evolve. Retailers are now faced with a choice that will impact how they move forward with their operations – they must decide whether they’ll interpret this uncertain environment as a glass half full or half empty opportunity.
Recently, Pitney Bowes hosted the 2017 Retail (R)evolution, a gathering of experts to discuss the challenges and issues facing the retail industry today. The overall sentiment was that although retailers are undoubtedly faced with increasing challenges in the industry, opportunities persist. Thus, we argue that the glass is still half full.
Glass Half Full
Consumers are shopping more than ever, especially online. The reality is that the perceived retail apocalypse is more of a lane change, as consumers increasingly shop from their devices. With long-term growth of over 4% in U.S. retail sales over the past five years, one-third of those sales are coming from ecommerce and 78% of consumers are shopping globally each month. It’s safe to say that opportunities to engage with consumers still abound.
That said, brick-and-mortar stores can still have a competitive advantage. Although consumers are increasingly shopping online they’re still drawn to the tangible experience of interacting with products in person before buying. Now there’s a major inventory management move to stay closer to consumers with the rise of click-and-collect programs. From that standpoint, stores are still a relevant platform for today’s experience-driven shoppers.
Based on last year’s holiday season results, we also saw record growth in both brick-and-mortar and online channels. So consumers are shopping more as they further immerse themselves in both online and store experiences, offering plenty of opportunity for retailers.
Then there’s the rise of cross-border shopping, which gives retailers a gateway to new customers around the world. With the ease of global ecommerce platforms, it’s easy for consumers to browse and buy their favorite international brands without planning a trip overseas. Today close to two-thirds of consumers shop cross border, rising as high as 85% in countries like Australia and Canada.
Glass Half Empty
While we believe there is tremendous opportunity for retailers in today’s landscape, we would be remise not to also acknowledge the mounting challenges and the threats they pose. The increasingly volatile and uneasy environment has led others to develop a more critical view.
One major challenge for retailers is the effect of Amazon and its continual innovations, which constantly raise consumers’ expectations. As a result, retailers find themselves in a constant game of catch up as look to offer experiences like two-day free shipping (even same-day free shipping). According to Piper Jaffray, 44% of the U.S. population lives within 20 miles of an Amazon fulfillment center, and on the surface that’s difficult for any retailer to match. They’re thus forced to look for new ways to optimize the customer experiences, such as using stores to get inventory closer to consumers.
Challenged balance sheets are also hurting investments and perceptions. From over-built store IT networks to store closings to tech investments that aren’t fulfilling expectations, the headlines are not helping perceptions. The good news is investments in APIs that can overlay on top of current IT structures can actually deliver on growth opportunities since there is no need to rip and replace.
The pace of change is relentless with new talent needs, new processes and new capability requirements.
So what will history write about this time of retail revolution? Retailers have no other choice but to embrace change in order to succeed. Every industry is experiencing unprecedented digital disruption and, in the process, companies are tasked with embracing transformation and transition to satisfy their customers and succeed. What separates the winners from the rest is the willingness to see the glass half full, embrace change and keep their eye on the prize, which is always growth.
Gregg Zegras is SVP of Global Ecommerce for Pitney Bowes