Is The Future of Retail Really About Logistics?
Just a few days ago I read this article with the intriguing title “Why retail success is all about logistics”. In his article, Amaury Gariel perfectly recognizes the changing panorama in retail and the challenges that these businesses face with the new Omni-powerful and demanding customer. See here a nice info-graphic that visualizes this. Rather than challenging this article, I would like to state that the title does not really cover the content of it.
You’ll not see in the infographic more than a few words about inventory and logistics, but it surely starts with it. Why would that be? Surely, a well-oiled logistics operation is a must today and no-one would deny that. But instead of being a success factor, I see it more as a pitfall for failure: Retail will not be able to satisfy customers by having good logistics, but for sure it will lose customers if they don´t deliver on promises. In other words, in the eye of the customer ‘logistics’ is an expected commodity rather than a differentiator. As Eliyahu Goldratt said, it’s Necessary, but not sufficient.
The Omni-channel capability and organizational agility are however differentiators. A complete customer-focused and technology-infused environment is also. The fact is that the Omni-powerful customer has provoked a Copernican Revolution in management, inverting the sidereal relations between customer and firm, and retail is being challenged to adapt quickly. Moreover, retail is being challenged to be agile and respond quickly to continuously changing expectations.
Product life cycles get shorter every day, creating a huge challenge for logistics and the supply chain -obviously- but also for preserving the consistent and updated product information that the customer demands. The Fast-Fashion phenomenon, an excellent example of this, aims to produce a new collection every week… And despite the higher production and supply chain related costs, this has proven to be a more profitable business than traditional fashion retail.
The Omni-powerful customer seeks convenience. Mobile technology, which is key and gaining presence, facilitates showrooming. Physical shops that embrace technology to enhance the customer experience have an edge since not all product variants will be in stock but are replaced by Click-and-Collect or Order-and-Deliver possibilities. On top of these changes in consumer habits, demographic tendencies are expected to accelerate this.
It seems like the offline/online battle has a clear winner. However, the advanced physical shops could soon get unexpected neighbors if and when the big online retailers add offline presence. It will be interesting to see how this plays out in 2015. For now it looks as if both are converging towards a mixedmodel, and with that the need for Omni-channel capabilities and agile retailers is confirmed.
So, can a retailer survive without proper logistics? Obviously not! Inventory management, supply chain and logistics can break the retail business if not executed well. But it cannot be considered a success factor! The future success of retail is in its capability to rapidly adapt to continuously changing expectations. It requires an open organization that is equipped with tools that are agile and Omni-channel ready.