Blog: Cookie-Cutter Scalability Just Won’t Cut It

August 28, 2019 | ARVIN JAWA

As we look at our 2020 strategy and beyond, I get the sense that retailers will still have the same classic challenges to solve for in the coming decade that they’ve had over the last few decades:

  • Manage inventory
  • Manage real estate and technology investments
  • Manage staff
  • Meet consumer expectations

 

But if that list feels a little too “last decade” to you, with its focus on the physicality of retail, here’s the thing: When you’ve got pure-play digital leaders kicking the tires on physical locations and partnering with physical stores to strengthen supply chain operations and build brand visibility, there’s clearly life left in the traditional brick-and-mortar store—which means the problems I listed above will still be there to be solved. What has changed, though, is the paradigm.

 

For the past several decades, the prevailing paradigm was for a retailer to develop or assort great product, ensure good distribution and/or accessibility, and scale up as quickly as possible. The chain model—where consumers valued knowing exactly what to expect when they walked into a store whether it was located in Atlanta, Georgia or Paris, France—was in hyperdrive. Retailers lived in a paradigm where growth and profitability came from scale, from a repeatable formula. Malls fueled this predictable growth pattern across the country, until relatively suddenly, they didn’t.

 

That model is gone.

 

In 2019, and the coming decade, the industry will experience an awakening regarding how classic challenges should be addressed in a new paradigm.

 

Today’s consumers are smarter and more digitally capable. Mall-based traffic is no longer the predictable workhorse it once was, as ecommerce and digital channels have reset both the shopping journey and customers’ expectations. The Amazons and Alibabas of the world have driven consumers to expect relevant, personalized offers, the best pricing possible and incredible value in terms of the time spent getting the products we want.

 

The “copy/paste” model of expansion—originally driven by a desire for consistency—doesn’t work in a paradigm where localization and personalization are the new drivers of business value. Consumers are looking for locally relevant, targeted experiences and retail interactions that make them feel like an individual, not a segment.

 

Advantage is now gained by understanding how to attract the right customers and subsequently create compelling, meaningful consumer interactions through appropriate pricing, quality products, convenience, and experiences. Retailers must design, deliver and continuously iterate shopping journeys that emphasize whatever their specific customers value most, whether that’s a fair deal, respect for their time, access to or fulfillment of the product on their terms, an enriching experience through impeccable service, brand immersion … the possibilities in this new paradigm are endless—but a complete shift from the way retailers viewed growth and profitability just a few years ago. In the new paradigm, advantage is created by generating higher lifetime value with the specific customers that most desire that particular brand and experience.

 

So how do we reinvent the classics?

 

What happens to the classic problems of managing inventory, real estate, technology investments and staff (plus that small matter of not just meeting, but now exceeding customer expectations) in this strange new retail world? 

 

  • Inventory is minimized, or even eliminated. New concepts like Bonobos and Nordstrom Local offer tailoring, researching and browsing, but you don’t walk in with the expectation that you’ll walk out with a bag.
  • Real estate is customized, with service hubs, pure sales locations, pure experiential locations, even simple distribution sites driving a diversification of the traditional cookie cutter store model.
  • Technology investments can enhance the in-store experience in new ways, with self-checkout and mobile technology enabling staff to operate entirely differently than they have in the past. Customer-service oriented employees act as a lever to drive more valuable baskets at checkout.
  • Data-driven journey management will ensure retailers can exceed customers’ skyrocketing expectations by providing relevant, contextual, purpose-driven offers, promotions and pricing in personalized ways.

 

The bottom line is that retailers are going to become more agile in the next decade, and innovations should be based around empowering agility. Where the old paradigm was all about building a model and repeating it, agility is the absolute opposite: You don’t know what the next year is going to hold, what new apps are going to drive engagement and interest, what new technology is going to catch your customers’ attention. Retailers can no longer count on what’s happening today as the basis for what will happen tomorrow. But they can optimize the one of the greatest assets they have, which is their physical locations. In a connected commerce world where pure-play digital is looking less attractive than it once did, physical locations are a differentiator. 

 

Interested in getting an outside expert’s view on your retail strategy? Let’s start a conversation.

 

A version of this article originally appeared on PYMNTS.com.