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Business transformation is key to surviving the retail apocalypse

Blog
2nd July 2019

Author: Sam Phin, Solutions Consultant, Webhelp

The CX Exchange for Retail is the annual meeting place for the most senior names in the industry to connect with the biggest brands in retail and hear how they are transforming into customer-centric organisations. As our team prepare for the Exchange, Webhelp Solutions Consultant Sam Phin looks at the rapidly changing face of the market and how brands can cope with what some experts are calling the Retail Apocalypse.

A menacing shadow was cast over the sector at the end of last year as retail titans Sears entered a second high profile bankruptcy, taking the store count down by almost 300%, from 1,672 to an estimated 425.

The bells had hardly stopped ringing for the New Year when children’s clothing store Gymboree announced over 800 store closures in the US and Canada, in the second bout of financial woes for the brand. In 2017 it liquidated 300 outlets and cleared $900M in debt, but has continued to haemorrhage market share. The demise of Gymboree was swiftly followed by footwear staple Payless, closing all 2,100 of its stores in the US, in what might be the most significant retail liquidation to date.

Global Denim fashion brand Diesel filed for bankruptcy in March, following a significant sales drop, poorly performing brick and mortar sites and struggles with investment and cyber-crime.

This continuing trend dubbed the ‘Retail Apocalypse’ has claimed 6,000 US stores in 2019 so far, more than the number that shut down in the entirety of 2018, according to Business Insider.

Many factors are contributing to this ‘Apocalypse’, including the swift rise of e-commerce and the decline of physical retail. With some of the big players hit by a lack of foresight in early digital adoption and the popularity of speed delivery, plus the impact of debt inherited from the post-financial crisis.

With the emergence of new digital behemoths (like Webhelp clients Amazon and Shop Direct) brands that don’t innovate and adopt new technologies will inevitably fail to compete. Staggeringly (according to Tech Crunch) Amazon accounts for almost 50% of online sales in the US, a total 5% of the whole retail market.

Economist William Lazonick, president of the Academic Industry Research Network, believes that Amazon’s commitment to investment, research and development is behind its success:

“Amazon’s resource-allocation strategy — in particular, how it chooses to use the profits that it earns. It is one of the very few large American corporations that is choosing to retain its profits and reinvest them rather than cutting payrolls and distributing corporate cash to shareholders as dividends and buybacks.” Source New York Times

Business transformation is another route to avoid dropping behind the online curve, Bain & Co’s new study Funding the Future of Retail Through Cost Transformation concludes that:

“Executives at traditional retailers know that they have to invest on all fronts to have a shot at staying relevant (or afloat) in an Amazon-led era. They need to bankroll a reinvention of the customer experience, massive IT upgrades and scores of other improvements.”

A surprisingly large pool of funds for reinvestment can be discovered across the cost bar, aided by radical thinking, outsourcing and the right digital tools. Transformation should be linked intrinsically to a digital strategy based on customer insights and personalisation.

The days of the shopping mall could be numbered unless retailers adapt swiftly.

Picture Credit: Photo by Victor Xok on Unsplash

Revealingly the physical stores that are managing to buck these trends are doing so by using customer insights, relying on specific needs like personalisation or perceived budget benefits. For example, the company Build a Bear uses an emotional attachment to drive people to visit, expanding its physical footprint by 12% over the past five years. Sharon Price John (CEO) explains that they were pioneers in the ‘store as destination’ strategy:

“We’ve been around for 20 years now, in a space where people have a reason to go to retail for something other than transacting … Build-A-Bear was at the forefront of experiential retail. We created it, to some degree.” Source CB Insights

Seamless integration of digital and physical e-commerce will be of prime importance to future retailers. The Apple example of leveraging stores as showrooms for e-commerce and the Ikea Model for logistics will remain, but brands that utilise online channels for customer service with emotional resonance will have the best chance to deliver significant changes in the retail landscape.

Our current UK retail clients include Shop Direct, Unilever, Freeman’s Grattan’s Holdings, Brighthouse and Sainsbury’s/ Argos; who work with us because of our people, our outcome-based transformational outsourcing approach and the results we deliver.

To find out more join us at the CX Exchange on 03 – 04 July at Hilton London, Syon Park or contact: Sam.Phin@uk.webhelp.com


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