Accenture retail to_metail_tomorrow_starts_today

From Retail to “Me-tail”: Tomorrow Starts Today

3 | From Retail to “Me-tail”: Tomorrow Starts Today

Tomorrow’s consumers will be armed—and dangerous.

From Retail to “Me-tail”: Tomorrow Starts Today | 3

Today’s consumers are demanding.

But tomorrow’s consumers will be

armed—and dangerous. Empowered

by technology for unprecedented

choice, they will demand products

and services that meet a constantly

shifting kaleidoscope of expectations,

from convenience and affordability to a

customized experience and sustainable

sourcing. They will expect to access

products and services from just about

anywhere and at pretty much any

time. And in their quest for instant

gratification they will totally transform

the retail industry.

• Stores as we know them will no longer

be relevant—many shoppers will never

even visit one

• Consumers will be able to shop

seamlessly across multiple channels—

and expect to find relevant content

on all of them

• “Fast fashion” will be the de facto

industry standard—with dramatic

consequences for store inventory

levels

• Supply chains will be optimized

across the full product lifecycle—right

through to disposal

• Consumers themselves will help form

the communities of talent required

to service a vast diversity of new and

constantly shifting demands

As power moves inexorably from seller to buyer and retailing morphs into “Me-tailing”, retail organizations will need much more than customer centricity and supply chain optimization to achieve high performance.


In the future, the sheer diversity of both

shoppers and shopping trips will require

a multiplicity of formats, each tailored

to a specific local market. The name

of the store game will be precision

retailing. And successful stores will be

those that leverage their closeness to

customers to interpret demand signals—

and swiftly act on them.

Some stores will focus on the time-

starved, others on the “green”

consumer. Some will simply be

showrooms—like, for example, Vogue

magazine’s twist on pop-up retail,

which allows visitors to try on items

from the racks of clothes on display,

receive advice from stylists and sample

products from the perfume bar or

make-up station. The store space sells

nothing—but the information that

attentive store staff can derive about

customers’ preferences could prove

invaluable to future sales prospects.

People who actually bother to visit a

physical retail space will be in search

of an enjoyable and entertaining

“experience”. They may patronize book-

stores where they can meet stimulating

authors, for example, or toy stores that

let kids interact with their favorite

toys and games, while in-store experts,

both real and virtual, answer parents’

questions.

Today’s shoppers are more than

ready for the mobile and interactive

technologies that can deliver this level

of experience. Consider, for example,

that almost three quarters of Europeans

responding to a recent Accenture

survey said they would use mobile

phones in-store for product information

scanning; and more than half agreed

that being able to interact with an

online product expert while in store

would save them time.

Stores as we know them will nolonger be relevant—many shoppers will never even visit one

Some stores will focus

on the time-starved,

others on the “green”

consumer—and some

stores will simply be

showrooms.


Today’s consumers already enjoy 24/7

purchasing power, as well as almost

total transparency over transactions.

And they are beginning to abandon

product “ownership” in favor of a

“leasing lifestyle”, characterized by a

footloose quest for access to fewer

items closer to the point of need.

In the future, Internet penetration

will turn this multi-channel lifestyle,

now mostly enjoyed by the so-called

Millenial generation, born since 1980,

into a global phenomenon. And this,

of course, spells huge opportunities

for start-ups, which we call “wildfire

niches” because of the speed with

which we expect them to spread-

empowered by new technologies

and serving a diversity of customer

segments.

Interconnected and using a single

mobile device, do-it-yourself retail

“grazers” will be able to configure their

experiences from a variety of locations

and via a diversity of channels,

effectively “editing” their product

choices. And if a product fails to fulfill

their expectations—if that shirt they

spotted someone wearing on the street

or online turns out not to have been

manufactured according to the exact

environmental and ethical standards

of their social networking group, for

instance—they will search the product

comparison websites or consult their

networked “friends” worldwide for a

better value proposition elsewhere.

Leading retailers are already looking to

capture increasingly elusive customers

in imaginative ways. Consider the

success of Zlio, for example, an online

site that invites visitors to “create

your own store” by selecting products

from hundreds of Internet merchants,

and earning money on each sale. The

Swedish fast fashion giant H&M allows

its customers to buy products from their

camera phones. Dominos’ customers

can order pizzas from the TV, as well

as through cell phone apps and via

Facebook. Staples Canada print shop

uses experts channelled in, on-demand,

to help the customer define the print

job, mock up samples and place orders—

an innovation that has also helped

Staples expand their offering into more

locations by solving a basic challenge

in retailing—cost effectively providing

each customer with the right expertise

and personalized service at the moment

of customer need. And one high-end

apparel maker offers online buyers who

can’t find the exact item they are looking

for a close match—at a significant

discount, which is also on offer to their

networked friends.

Consumers will shop seamlessly across multiple channels—and expect to find relevant content on all of them


The lifecycle of products will be significantly shorter, making product innovation an even more critical differentiator of high performance.


In the future, the lifecycle of

products will be significantly shorter,

making product innovation an even

more critical differentiator of high

performance. “Fast fashion”, in fact,

will be the dominant business model—

not just in apparel and consumer

electronics, where it is already evident,

but also in all other retail categories.

Fast fashion will also necessitate more

supple supply chains—a challenge for

many. According to Miami-based Retail

Systems Research, forecast does not

match demand for most retailers. The

proliferation of stock keeping units

(SKUs) means that retailers are trying

to edit a constantly increasing number

of choices to stay relevant for the

consumer. And Accenture estimates

that many are making more than 80

percent of their inventory investments

in store—an untenable situation with

real estate costs steadily rising and

retail space in increasingly short supply.

In the future, the retail supply chain

will be predicated on inventory arriving

at the store shelf just as need arises.

Replenishment orders will be placed

and released on regular cycles—typically

weekly or more. Lead times for domestic

suppliers will be measured in hours or

days. And forecasting, planning and

replenishment systems will support

real-time allocations and store need

inventory management techniques—

innovations that Accenture estimates

will reduce in-store inventory by one

third or more.

The benefits of a successful fast

fashion business model are numerous.

Customers will see a visible difference

on the store floor, inducing them to

make more visits and thus boosting

revenues. And a faster response to

sales data will help boost production

efficiency, fuelling sales and reducing

markdowns. The model will help ensure

full in-stock assortment for the hottest

selling items and high in-stock rates on

basics. It will separate and streamline

the design function, encouraging

timely and accurate handoffs between

design and production. Production lead

times should drop, thanks to the high

utilization of common components. And

vendor partnerships should strengthen.

Some leading retailers are already

leveraging consumer insight to move

in the fast fashion direction. Witness

the move by Target, the US-based

general merchandise retailer, to

expand its fast fashion concept from

apparel to gardening, home decor and

kitchenware. In the future, they will

be able to combine this insight with

deep analytical capabilities to identify

the specific attributes of each product,

determine its value to individual

consumers and target assortments, thus

customizing individual offerings. What’s

more, fast-moving products will be

stocked in smaller formats like vending

machines or kiosks, which are not only

more convenient for consumers but also

more cost-effective for retailers.

“Fast fashion” will be the de facto industry standard—with dramatic consequences for store inventory levels


Future resources will be even scarcer

than they are today, and consumers

correspondingly more value-

conscious. Shoppers will take on more

responsibility for reducing packaging

and irresponsible production. But they

will not be prepared to bear the full cost

of sustainability. Retailers will need to

institute cost-effective sustainability

strategies of their own. And a supply

chain optimized across the full product

lifecycle, right through to disposal, will

be critically important to that effort.

The reusable and recyclable “bags

for life” now issued by retail grocers

including Tesco and Whole Foods

Market, for example, will eventually

evolve into refillable containers. We

are already seeing the spread of rent

and return, from high-end handbags

to children’s toys. And we envision

a time in the not too distant future

when consumers will be able to stop by

“refresh and refill” window chutes, stock

up on basics and use mobile devices to

pay for them.

Resource constraints are changing

behaviors already—and not just

in Europe and the US, where the

quest for sustainable products and

environmentally responsible services

has spawned a whole new sub-sector:

Organic grocery. In Brazil, for example,

Pão de Açúcar, the country’s biggest

food retailer, has responded to shoppers’

growing concerns with ”green” stores

that use 10 percent less water and 14

percent less energy.

Retail will also need to become a

more collaborative industry. Individual

retailers will recognize the value of

greater specialization, particularly

in logistics, and supply chain

specialization and segmentation will be

commonplace—though a proliferation of

distribution points will also necessitate

shared logistics and other forms of

collaboration. Consider the case of

Meadowhall, a large mall in the UK,

which has teamed with Clipper Logistics

to manage an on-site distribution center

that holds inventory for all stores in the

mall. The collaboration has cut in-store

inventories, shrunk the mall’s carbon

footprint—and boosted sales by up to 10

percent in some categories.

Supply chains will be optimized across the full product lifecycle—right through to disposal


In the future, consumer demands will be

so diverse and complex that no single

organization will be able to cater to all

of them. Individual retailers will need to

function more like agents. Consumers

will look to them to “broker” products

and channels. And that will spur many

retailers to join together in strategic

alliances, often with companies in

other industries, most of which also

want to “own” the consumer. Witness,

for example, how the UK retail grocer

Tesco has evolved into an aggregator

of incremental products and services

ranging from Tesco Finance (a joint

venture with Bank of Scotland), through

Tesco Mobile (with O2) to Tesco Travel,

which is powered by LastMinute.com.

The key demand will be for the sort of

specialized, knowledge-based talent that

can create value beyond distribution.

That talent, moreover, will come from

some unlikely sources—customers

among them. Companies will start

outsourcing for talent, a significant

portion of which will be mobile, moving

from retailer to retailer. And the

development of “communities of talent”

will involve employees working for

multiple companies, sometimes, thanks

to open sourcing, simultaneously.

Google and Procter & Gamble have

swapped employees on a temporary

basis so that they can learn from

each other. And Japan’s Otetsudai

Networks allows anyone to register

for employment by filling in core

skills. Employers with short-term labor

needs can enter a task description and

matching registrants near the location

who are available receive an alert

to respond.

Consumers themselves will help form communities of service talent

Consumer demands will be so diverse and complex that no single organization will be able to cater to all of them.


Accenture research and experience

clearly show that Me-tailing, for all its

challenges, also heralds exciting new

opportunities for retail organizations

to achieve profitable growth and high

performance. Success will require

extraordinary collaborative skills, as well

as even clearer differentiation and much

greater flexibility. It will also require

retailers to demonstrate exceptional

customer centricity and total mastery

of rapidly emerging technologies.

Nevertheless, those that can define a

unique value proposition and adapt

their brand to changing formats and

their workforce to new skills will be able

to position themselves well ahead of

the game. To find out how Accenture

can help you prepare for the Me-tail

revolution, please contact:

Janet L. HoffmanGlobal Managing Director,

Accenture Retail Group

San Francisco, California, US

[email protected]

Renee V. SangGlobal Director, Accenture Customer

Innovation Network; Senior Executive,

Accenture Retail and Consumer Goods

Chicago, Illinois, US

[email protected]

Paths to high performance

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