The retail supply chain has been disrupted by the changes in shopping and purchasing practices of consumers in as a result of the omni channel retail market. These changes have actually been building over the years now and the consumer purchasing practices have reached a tipping point now where the online purchasing is meeting and surpassing the store purchasing. Retailers have been struggling with this for years now in pushing back on consumer demands and attempting to redirect the consumer demands into practices that are easier to support by the retailer. Consumers have now incorporated advancing wireless and mobile technology to finally tip the scales on the omni channel purchasing activities.
While these have been building for years, the final turn over the last year, or two, caused a surprise for the retailer's from which they now must recover. In the midst of this newest disruption multi-channel retailers must also reconcile their brick and mortar strategy. Retailers have been focused on a multi-channel market and consumers have developed an omni channel market through their use of wireless and mobile technologies. All of these changes have a serious impact on the retailer’s extended supply chain and especially the delivery requirements to support an omni channel market. The delivery aspect changes the focus from the separation of channels as defined and supported by the large legacy retailers to a flattened delivery where consumers can, and will, purchase from any channel at any place and any time.
The true impact, and key challenge, to the retailers though is the delivery service levels that are demanded by consumers. In this case Amazon has poisoned the well through the two day delivery model offered through Prime membership. The standard delivery from Amazon is still better than most legacy brick and mortar retailers and the Prime service was the final straw. Legacy brick and mortar retailers must improve the delivery service and also encourage consumers to return to the store. I think that Best Buy has done a good job of creating the omni channel experience in their offerings. The omni channel market is more conducive though for electronics because of the trial factor involved. While apparel does require fit, many, if not most, consumers know their size and are comfortable with purchasing online.
Now legacy brick and mortar retailers must modify their store experience to support the omni channel market by reducing the store space for product display, increasing backstock space to support regional order fulfillment to the consumer and also create a store experience that encourages consumers to return to the mall. Retailers and real estate developers must revise the mall experience to focus on entertainment and even living proximity through conversion of store real estate to living space in condominiums and apartments to encourage consumers to return to the malls. The challenge though for retailers is to eliminate the silos of purchasing and consumer delivery, the retailer that allows purchase in the store and delivery to the home will win the holiday sales challenges in the future.
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?