The large retail department stores must be repurposed into an omni channel center in order to support consumer demands and improve the overall consumer shopping and delivery experience. This is a major change to the large retailer store strategy to expand inventory storage areas and reduce the sales floor square footage. Consumers are viewing the retail environment as a true omni channel marketplace and it is time that retailers change their strategy to align with these demands. This change in retail strategy requires an equally major change in the retailer inventory planning and forecasting strategies as well to take into account the additional demands of increased sales and fulfillment support of eCommerce orders from the stores.
Retailers are starting to change their interaction with consumers and their store strategy to reduce the number of stores as a result of the store sales decreases. These actions to reduction the number of stores will lead to a liquidation loss for the retailer along with a reduction in workforce caused by the store closures. These actions with constrict the store profits and lead to additional rounds of cost cuts to try to address the liquidation costs while at the same time reducing the amount of disposable income consumers could spend in purchasing from the store. This is a recipe for failure and simply feeds on the downward spiral without an incentive to break the cycle.
Rather than the ‘normal’ negative reactions to this shift in sales I believe the retailers should re-invent their stores into omni channel centers that provide a hub for shoppers to see, try on and try out products in addition to supporting eCommerce fulfillment from the stores. This strategy will bring many benefits and positive growth to the retailers and the communities where the stores are located such as:
- Malls and retail outlets remaining open to provide a place for families and consumers to gather for entertainment and shopping. This benefit presumes that anchor retailers will work with malls to develop an entertainment center include food services to lure consumers to the mall.
- Increase employment to support the multi-purpose activities in the store for eCommerce fulfillment.
- Reduce overall transportation costs while improving direct-to-consumer delivery service time because shipping from retail outlets will allow parcel zone 1 delivery to most households.
- Potential improvements in inventory management through multi-echelon management which could lead to reductions in overstock costs.
These are important benefits to the retailer and should be taken into account when evaluating methods to address the shift in sales. The retailer could direct the funds that would have been lost due to store eliminations towards investments in repurposing to an omni channel center. The retailer should start with a pilot of a few regional stores to provide the data for validation of course prior to a full roll out. My belief though is that retailers will discover this to be a much more beneficial and lucrative strategy than one of shrinking in the marketplace.
And now for the audience participation portion of the show…
ECommerce will have wide ranging impacts on both the retail and manufacturing sectors. How can you focus these abilities to improve the consumer's experience? Improving the consumer’s experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes. In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas. How can you support these continuously changing requirements?