Top 3 challenges faced by retailers in 2018

Toys are Us, Maplin, and many other retailers are forced to close down stores across UK. Carpetright, M&S and few others have announced reduction in stores in 2018. What is the underlined current?

Challenge 1 – Consumer experience

Why will a consumer go back to the same retailer again and again? Combination of Product range, quality and Price points are important but are these key differentiators?

It is the Consumer Experience that is driving the loyalty and repeat business. There are two key ingredients of the customer experience; Personalisation and Convenience.

I had two personalisation experiences last month:

Recently I used IKEA’s AR app that allows consumers to visualise products in their homes. As a consumer I can place that stripy sofa in my living room before I make a purchase decision. Isn’t that brilliant?

My wife was able to use a Smart cosmetic mirror at a beauty store before deciding which make up will suite her the most. This was without actually applying a makeup. The way it works is – mirror takes a photo of the person and digitally applies the makeup. One can see easily visualise herself in a range of products before making a buying decision. How cool is that?

Coming to the convenience, I was standing in a check out queue at Waitrose for almost 10 minutes. I saw a young lad scanning the items using his mobile phone. Later I came to know that he was using ‘Quick Check’ mobile app to scan the products just before placing in his bag. This eliminates queue time. The app also removes hassles of emptying the basket at the checkout.

Retailers who are able to continuously think and execute smarter consumer experiences are winning the consumers.

 Challenge 2 – Rigid Cost Base

Traditionally, to grow the business, retailer have been opening new physical stores. It worked until consumers started flirting with digital channels. E.g. Tesco had 3,700 stores in 2008. They opened more stores and had 7,300 stores by 2014 (source: Statista 2018). However in last 4 years, instead of opening more stores, they have reduced number of stores and now in 2018, Tesco operates 6,800 stores globally. 

It is apparent that retailers are looking to put a break on their ambitions of growing physical stores. They are reviewing profitability at each store level and also ‘cost to serve’ the consumer.

Retailers are finding it difficult to rationalise the stores due to already committed lease tenures. Redeploying staff or losing the staff damages staff motivation. There is a sunk cost due to wasted investments in logistics to serve the inflated store base.

Retailers must be sensitive in the future investments so that costs can be scaled down as consumer preferences evolve every day.

Challenge 3 – Incorporating right conduct within the business

Amazon and ‘Not On The High Street’ retailers made it to the news last week. Apparently, fashion products with real fur were sold and consumers were not made aware of this. There was a wide criticism by MPs in UK and a demand for retailers to be more responsible.

2 Sisters food group’s fiddling with the expiry dates of chicken products led to their suspension by M&S, Aldi and Lidl.

Buy As You View another household goods retailer has been placed in administration by Financial Conduct of Authority (FCA).

Retailers are grappling in changing their traditional practices to cope up with new regulatory regime. The problem starts with not able to understand the core intent of the regulation in context.

Implementing fair practices, tighter process controls and seeing it through consumer lens are non-negotiable

Consumer experience, rigid cost base and right conduct are challenges for some retailers while opportunities for others. The working model is evolving and will continue to challenge the status quo.