Is long-term profitability possible for retailers?
In the tech revolution of commerce, retail is an industry sector where lower prices, increased costs and the requisite associated investments to stay up-to-date in the technology create pressure on margins. New retail operators who have different business models and base costs are taking to the already crowded field. And at this stage, there is no end of this trend on the horizon. So the deeper question is, are retailers changing quickly enough to implement the necessary modifications in their operations and infrastructure in order to survive in the market’s future?
1. Consumer behavior evolves
Consumers online shopping is growing, especially on smartphones.
A recent Deloitte survey found that in the previous quarter more people bought online than in actual stores, affecting a wide swath of non-food items. For more data, read the recent Deloitte Consumer Review.
2. New competitors
New competition in the retail space are using different business models and underlying costs. A large number are entirely online businesses or they operate only a very limited number of retail shops. This lets them avoid or at the very least minimize cost pressures from the rising cost of property and upkeep.
3. Increased cost pressures
Increased cost pressures force retailers to completely reevaluate what they must do to stay profitable for the long-term.
Opportunities for evolving traditional retail
There are a few practical ways retail businesses may choose to take advantage of their new retail profitability opportunities. A balanced change is important and necessary for success.
1. Genuine customer engagement
Understanding your customers’ concerns and guiding them positively through the customer journey is more important than ever. For instance, your customers increasingly define your brand, so encourage them to do so regularly and adopt their best input where possible.
2. Differentiators – Retail’s next evolutionary step
To industry professionals, it seems clear that today’s retailer must specialize and differentiate themselves or else they will not easily produce sufficient margins if they try to be the one retailer to rule them all. It seems self-evident that six main forms of retailer are establishing themselves as the dominant prototypes for the foreseeable future: Innovators, Creators, Entertainers, Curators, Deliverers and Discounters.
3. Innovators – Build greater returns
Innovators needs to work on the industry’s actual pain points for retailers to stay relevant in the quickly changing retail space. These are:
- Lower physical location costs and overhead expenses
- Automate systems and processes and augment staff skills
- Create a more engaging and unique customer experience
These vital components must all be evaluated within the framework of delivering continuous shareholder value.
Available Retail Performance Optimization Tools
Personali is perceived by many top retailers as a leader in future retail promotion optimization online solutions. Consider being able to offer online customers real time optimal incentives. Maximizing revenue through an AI powered platform that utilizes promotion budgets, and gives the right inventive at the right time.
Markdown optimization lets retailers control their end of season discounts (timing, markdown frequency and of course, price). This requires keeping margins and sales synchronized in order to maximize profitability of the product price markdowns. Contact Personali for more information.