Retailers: Now Is the Time to Leverage Wisdom from the Pandemic Shakeout
May 24, 2021
Retailers: Now Is the Time to Leverage Wisdom from the Pandemic ShakeoutDownloads
Adopting digitally enabled capabilities is key to freeing up capital for long-term growth. Here’s what retailers need to know to get started — and overcome internal resistance.
A walk along Main Street tells you all you need to know about the state of brick-and-mortar commerce in the wake of the pandemic. In just 10 months, as of December 15, a total of 51 retailers filed for bankruptcy.1 That’s more than in any full year over the past decade.
One constant among all retailers throughout the pandemic has been the hyper focus on finding short-term cost savings to weather the crisis. At the same time, however, long-term industry headwinds have not subsided. Pressures from eCommerce competition, the rising emphasis on product value, and shifting customer preferences continue to keep retailers up at night.
The shakeout from the pandemic offers a fresh perspective on addressing these long-term concerns. Indeed, some best practices for freeing up capital for growth emerged.
Heading into the post-pandemic shopping world of 2021, retailers can generally be divided into two camps: those that make hasty, slash-and-burn cost-cutting decisions, and those that apply a thoughtful, strategic approach to reposition their organizations and meet customer expectations.
"Larger and larger brands are making the shift from traditional enterprise solutions to Shopify. The reason is really simple: Shopify provides considerably more options and flexibility. Marketers need to rethink the sandbox they play in. Instead of thinking about what risks there are with making change, marketers are thinking about the opportunities.”— Theresa Reed, VP of Strategic Partnerships, BVA Commerce
The latter camp looks to be “winners” in the long run. But both groups can benefit from adopting the next generation of cost-savings strategy: digitally enabled capabilities.
Do it right, do it smart, and everyone’s a winner.
The Customer Comes First
Digitally enabled capabilities add speed, agility and efficiency to select areas of operations, such as marketing, purchasing and back-office processing. They can be applied at a variety of levels, but what might appeal most to cost-conscious retailers is that they all improve performance relative to the customer experience.
When considering digital capabilities, it’s important to understand the customer’s mindset today. Price and value are still top considerations for shoppers when choosing where to spend their dollars, and the pandemic intensified those priorities. According to an FTI Consulting survey of 1,000 customers conducted in February of this year, more than 40% of respondents said “good value” and “good sale prices” were significantly more important to them when making purchase decisions than before COVID-19.
“CoreTrust has always focused on speed to savings, utilizing our leveraged buying power to help companies shift their procurement focus from tactical to strategic. The pandemic has reinforced the need for our members to have efficient access to savings and to preserve bandwidth.”— David Harvey, Senior Director, CoreTrust Commercial GPO
Not surprisingly, those shoppers will continue making their purchases with a single click: 74% of surveyed customers said they intend to increase overall eCommerce spending post-pandemic.
Keeping pace with customer behavior and expectations can squeeze budgets, especially those of small to midsize retailers. That’s where digital capabilities come in.
What Should You Digitize?
Adopting digital capabilities often requires only a one-time investment with an outside service. There’s no need to allocate for new hardware or upgrade software. One benefit includes faster integration with API plugins — a big plus for retailers trying to keep up with fast-clicking customers. You may not even need an integration partner.
Once you decide to make the leap, the next consideration is choosing which area to adopt. The following provides a glimpse of four that offer retailers a big bang for their buck.
EXAMPLES OF SaaS
(Software as a Service)
• Demand planning
• Warehouse and store replenishment
• Order and assortment optimization
• Point-of-sale/service systems
SaaS in the Cloud for Retailers
Software as a Service, or SaaS, is exactly what it sounds like: a cloud system that houses access to software applications. Using SaaS allows retailers to stay current on the latest software releases and updates without committing to purchase. For smaller players especially, the speed of SaaS can be a game changer: It opens the door to capabilities typically reserved for large enterprises with significant IT infrastructures while offering the same sophistication the big players enjoy. (See sidebar, “Examples of SaaS.”)
Like SaaS, one of the top benefits of outsourcing marketing functions, especially for small to midsize businesses, is to gain the speed and agility the larger players enjoy. Digital marketing provides constant and consistent innovation and specialization typically seen at Target, Amazon and Walmart, where full marketing departments provide an advantage. Examples of digital marketing include digital agencies, website development and hosting (like Shopify), as well as recommendation engines. Want to connect with multiple vendors the same way Target, Amazon and Walmart do without the big investment? Digital marketing is the way to go.
“An intelligent automation program focused on a functional area (e.g., Finance & Accounting) can deliver great results. However, at an enterprise level it can be truly transformative. This requires strong top-down support from one or more champions that cross functional and divisional lines. Often this sponsorship comes from the business operations, although support from IT is still essential.”— Brad Hairston, Advisory Alliance Director, Blue Prism
Robotic Processing Automation
Most business leaders are familiar with artificial intelligence and even blockchain technologies. Robotic process automation (RPA) may not get the same attention, but it is just as transformative. RPA is no-code software (often hosted in the cloud) which provides “bots” that can be trained to perform rules-based repetitive tasks across all functional areas. That in turn can free up employees to concentrate on other, more strategic and/or differentiating areas of the business. (See sidebar “Benefits of Robotic Process Automation.”)
BENEFITS OF RPA
(ROBOTIC PROCESS AUTOMATION)
- Customer service: The importance of establishing and maintaining personal relationships with the customer has skyrocketed during the digital age. RPA can help keep communications relevant and timely and incorporate upsell recommendations automatically.
- Fraud detection: RPA can monitor customer orders, ensuring legitimacy through internal and external cross-checking. Tired of the expense of unwinding suspect returns? RPA can handle these early.
- Supply chain management: Optimized demand and distribution planning, warehouse management, and reporting on supplier relationships and performance are only a few of the attributes of this function.
Group Purchasing Organizations
This levels the playing field in terms of purchasing power. Group purchasing organizations (GPOs) are entities that collectively leverage the spending of several individual companies to increase consolidated purchasing power and negotiate stronger contracts for all participating companies. This enables midsize companies to achieve rates and/or discounts that are typically only available to large enterprises with significant spend portfolios. Another plus of the GPO is the ease of implementation and the speed it offers in securing contracts. What typically takes 8-12 weeks to complete can be cut down to a matter of days.
All four of the above options come with new types of costs. For that reason, performing due diligence of third-party vendors for pricing, quality, stability and performance is a must. An experienced transition partner whom you trust and who understands the industry can be of enormous help as you consider your outsourcing options.
Getting Out of the Silos
The same trusted partner who vets vendor selection can also assist with one of the primary challenges when adopting digital capabilities: how to overcome internal resistance and reorganize to take full advantage of the refreshed operating model.
“The integration is straightforward. The challenge is in moving away from legacy thinking to trust the optimization engines that are continually learning from a vast array of data sets, to quickly adjust to meet new trends while at the same time empowering employees to make smarter, faster and more-informed decisions.”— Mark Garland, President & CEO, 4R Systems
Going digital does not require a top-to-bottom overhaul. It is a point-to-point solution-oriented strategy. While headcount can change, the emphasis is on determining first where change is needed and then aligning on skills and talents to drive the shift toward greater efficiencies, savings and accountability. Quite naturally, transparency in the planning stage is paramount here.
Culture also plays a key role. For an initiative to succeed, senior management needs to lead the charge. While the following factors alone will not guarantee success, leadership can expect to see a higher rate of success when implementing them alongside a robust change management strategy:
- Adopt the belief that the current ways are not good enough.
- Be deliberate in addressing the hard work sooner rather than later.
- Be willing to adjust the plan and expectations when new information is uncovered.
- Make decisions quickly to avoid timelines slipping away and wasted costs. Endless tweaking of a good idea to try for perfection will kill initiative.
The goal of digital enablement is to improve the quality of the organization while reducing costs. Getting there may require short-term pain, but in the long run, the gains can mean the difference between shuttering, merely surviving or welcoming 21st century customers eager to engage with your products through your Main Street doors and your website portals.
1: FTI Survey of 1,000 customers conducted in February 2021.
© Copyright 2021. The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
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The FTI Journal publication offers deep and engaging insights to contextualize the issues that matter, and explores topics that will impact the risks your business faces and its reputation.
May 24, 2021
Senior Managing Director