Planning for Obsolescence: A 2017 Outlook on Retail & Consumer Products

To keep up with the changing needs of the customer, many of the world’s leading retailers have invested in sophisticated technology, developed business processes and built stores and websites that are now considered to be obsolete. But as Heraclitus, a Greek philosopher said, “The only thing that is constant is change,” and some retailers have been able to pivot quickly to react to change – for others, the change is too costly and the degradation of their brand is too great.  Well known retailers that have served generations of consumers continue to struggle and some have lost the fight.  In 2016 alone, Sports Authority closed their 460 stores due to online competition, Walmart closed 269 stores to re-focus on supercenters and their c-commerce business, Macy’s closed 100 stores due to falling profitability and Kmart/Sears closed 78 stores due to a number of challenges from home improvement chains, fast fashion and Amazon dominating online sales in many categories.

Disruption and change will continue in 2017 and retailers must be prepared to pivot and leave some of their investments behind in order to not only survive, but thrive.  We followed the trends that brought retailers in 2016 to the difficult decisions to close stores and have some thoughts for how to embrace not just the trends, but the truth –  how to plan for it, survive and thrive.

Align and Optimize Your Online and Brick-and-Mortar Environments – Preparing for a shift in sales mix between the two channels will put retailers at a competitive advantage.  Addressing the following items and leaving behind a business process, system or metrics that are obsolete will be disruptive, but will lead the path to success.

  • In Store Shopping Experience: Physical shopping locations are not necessarily obsolete, but they are disappointing to consumers and unproductive. Coming to the realization that the customer experience and unproductive space needs to be addressed will be important and how to shift that space will provide a critical decision point. Closing a store is the easiest path, but before shuttering doors, retailers should consider the recent store openings of Amazon and the evolution of Warby Parker, Bonobos, Birchbox and Casper. Consumers value the physical connection and want a seamless shopping experience across channels. Traditional store productivity metrics (e.g. sales per square feet) will need to change as space may shift from selling to fulfillment and/or customer experience focused. Customers want more from their in store shopping experience and retailers need to be prepared to leave the traditional format behind and provide consumers with a digital experience, similar to what they find on line and an instore experience that is engaging.
  • "Parallel Technologies:" Retailers have made investments in systems that support online sales or brick and mortar, but do not support an omni-channel experience. Running parallel systems will continue to challenge employees with manual work arounds to meet customer needs and ultimately have a financial impact on the business. Retailers need to plan for replacement of these obsolete systems. A particular strain is supply chain visibility.  Consumers want to know the stock positions of the store location they will be visiting and the stock position and delivery time for the same item on line. Many retailers are not able to provide the product availability for a store, which impacts traffic,sales and the overall customer experience. Similarly, as retailers aspire to drive cross-channel experiences, such as buy online, pick up in store, the need for timely and accurate inventory is necessary to keep labor in check and to provide “guaranteed” services for the customer experience. Supply Chain systems and processes are also outdated and not meeting core customer needs.  Planning to make a change and the sunset of obsolete and in some cases parallel technologies will enable retailers to improve the customer experience and drive overall sales.

Consumer behavior will continue to challenge the retail format and key players like Amazon will continue to change the game. Retailers need to get in front of the trends and be able to pivot quickly to meet the changing needs of the consumer. Being nimble, accepting and planning for change will serve the survivors well.

Take a look at our 2017 Outlook for insight into five key trends driving business in the coming year.