Shaping the future of global retail

World Retail CongressThis year’s World Retail Congress returned to Europe for the first time since 2015, with global retailers gathering in Madrid to discuss the latest worldwide trends. Here are former Myer CEO and Aussie retail veteran Bernie Brookes’ key takeaways.

The 2018 World Retail Congress in Spain was the best retail congress for many years. The quality of speakers, the relevance of topics combined with an ‘A list’ of attendees, ensured some valuable insights were discussed and some issues raised, which were more thought provoking than at prior events.

I have attended every congress since its inception in 2007 and been fortunate to sit on the World Retail Award’s grand jury – awarding retail’s ‘Best of the best’ during that time. I have also run the university challenge, which acknowledges the up-and-coming retail leaders of the future.

This congress was one that demonstrated a paradigm shift in retail thinking across a number of areas. Thoughts from previous congress events on of the role of bricks-and-mortar; the complexity of big data; and the rise of China as a retail powerhouse; were all ‘crystallised’ at the congress, in perhaps a template for global retail futures.

Many of the prior directions and predictions were put to rest and many beliefs quickly dissipated in a new clarity as data, technology, bricks-and-mortar plus the Amazon effect, all seem to now have come together in a much more logical and demonstrative way moving forward.

So what were the major trends in presentations, award winners and panel debates, and what are the obvious clearer directions in global retail?

China has a much bigger role to play

Prior views on China as a luxury goods domain with massive bricks-and-mortar opportunities to conquer plus a burgeoning middle class, are still relevant in retail but the real issue is the arrival of China as a world class online retailer and marketplace.

Whereas, JD.com and Alibaba were previously seen as online players catering for domestic clientele, they are now manufacturers, suppliers, exporters, importers, investors, technology providers and bankers. They are the viable alternatives to Amazon going forward and are quickly moving from a strong local player to an international powerhouse with the ability to customise by country, serving local markets better than Amazon can.

With JD alone having over 292 million customers and 95 per cent same day delivery performance, they have conquered the China market and now are venturing offshore with world best logistics and technology capabilities.

The development of Tmall, which recently had US$25 billion sales in one day, is an indication of the China powerhouse. You may say it’s about China, but it is actually about the world. Tmall has 140,000 brand merchants and sells in 225 countries.

Alibaba had 56 per cent growth last quarter with 515 million active consumers. The use of artificial intelligence, B2C with Tmall, a number of international partnerships, cloud services, digital media and entertainment, financial services expansion, innovation investments, and social media platforms – all demonstrate Alibaba will inevitably outgrow China and other southern hemisphere ventures, particularly the rest of Asia.

The congress showcased the Chinese retailers’ strength, enormity of resources and expertise they have. It’s not only these juggernauts but some of the technology submissions to the grand jury and some of the new Chinese businesses, such as Kaola that have firmly cemented the rise and rise of China as a global retail powerhouse.

Will the real RFID please stand up!

Until recently, RFID has been seen as an expensive technology, largely applicable to pallets, high value inventory and asset management. It has been part of never ending trials by retailers and manufacturers alike.

Every study of this technology has acknowledged the potential, but it has never really raised in profile to retailers. It is now a viable and option to supersede the barcode, become a rich mechanism of collecting data and will revolutionise inventory control, supply chain, and enhance product traceability while potentially eliminating counterfeiting. It arrived loud and clear at the conference in Spain.

Wearable X [fashion technology company] demonstrated by the Billie Whitehouse brand, enables yoga wear using RFID to be paired with an iPhone that allows access to support from a yoga teacher using the RFID strip and nothing more.

Adhesive manufacturing firm Avery Dennison highlighted the many benefits of RFID in driving digital transformation. The opportunities in stock visibility, brand transparency, shopper experience and customer intelligence are all being realised now with positive ROI, significant improvements in inventory accuracy, cheaper and faster omnichannel, reductions in inventory, less markdowns and enhanced sales. Not to mention a stocktake with the touch of a button.

It will provide the technology breakthrough promised by RFID over the last decade largely because it is now cheaper and requires less infrastructure.

The tag can be integrated into the label and the use of artificial intelligence can enable easier use of data collected. A store of the future will have sensors enabling RFID through mobile, through marketing and e-commerce, through supply chains, merchandising and back office operations.

Retailers are now more data hungry but are still not data driven, they work on lower costs, lower inventory, better use of capital, greater quality of customer experience and agnostic channels to the customer.

It will be RFID that unlocks the key to lower cost, higher sales and enhanced productivity. Sensors combined with wearable RFID tags in product labels will replace the security devices, barcodes and security gates in retail since the 1980s.

Out-Amazoning Amazon

Amazon provides the online to offline services needed and conquers the barriers of region and country while disrupting the models of traditional retailing. Whereas, speciality would disrupt traditional retail, off-price retail disrupts brands, and category killers kill or die, it seemed inevitable that Amazon itself would be mimicked and disrupted. It will take time, but the conference displayed the ‘disrupters’ and the ‘mimickers’.

Shopify as a marketplace now has 600,000 retailers in 175 countries and enables the retailer or the marketplace provider to control and manage the stock and/or the customer. It quickly enables any size business to go online with simple technology.

It is more a brand marketplace rather than a commodity marketplace but does beg the question about the commoditisation of brands under Amazon and the segregation of marketplace to brand and commodity environments.

Customers want ease of transaction, elaborate ranges and fully integrated channels, hence if Tmart, Shopify or even local companies such as Catch and Kogan can provide such services locally with customised content, why would they not be able to succeed?

As Jeff Bezos says “Your margin is my opportunity“ to bricks-and-mortar retailers, then it stands to reason that Amazon’s size, complexity and global approach is the opportunity for customised, personalised and local marketplaces.

You only need to examine local sites against the Australian Amazon site to see the product associations, price-competitiveness and ease of use that can be established by local players.

Whereas businesses such as Shopify, Zalando (Europe) will customise to brand, and we will see locals such as Catch (Australia) and Todoretail (Mexico) customise to locally wanted product. We will see search engines such as Spoon Guru add service and choices beyond Amazon.

As was evident from presentations at the congress and from the submissions to the grand jury, the technology, pace of change and accelerating customer demands will fracture many more business models, even the might of Amazon.

Store, process design now keeping pace with the customer

In previous years, the congress showed new technology and design in retail. Many were variations from the core-nicer fixtures, bigger screens, robotic-based service options, and the fancy mirrors, fit devices and automated checkouts.

We have seen the synergy between retail and technology now glued by a common purpose of customer ease and customisation. Specifically, technology now enables easier direct to customer while representing the brand far more logically, while making technology useful.

Guerlain launched a lipstick vending machine where you can self-select a colour while the vending machine puts your name on it. Ted Baker launched a store in Shoreditch, London that resembles a web page enabling you to try products and combine the web benefits with the look and feel of the garment.

United Colours of Benetton developed a store with no pay points, no tables or scanners adding a dynamic ease of shopping feel.

Converse have built a hotel to represent the brand in Hogs Head while Bata launched a technology-based footwear store.

Ford have launched the first car vending machine to buy full-size cars and Dolce and Gabbana have kicked off customised fridges and freezers. Finally, Apple is building a Chicago store that has a roof like one of its iMac computers..

Among the winners of this year’s design awards was Misguided at Bluewater Shopping Centre in London.

Talking about brand fit and a remarkable way to redesign store fit out in a traditional gaming and hardware technology area –  Arcelik’s experience store in Istanbul was a notable winner.

No longer are we looking at lots of mirrors, new tools for omnichannel and store interface, but logical store design technology that captures customer needs and technology in line with customer needs and wants.

Key takeaways

For Australian retailers who look very much left behind, a few common messages were echoed at the congress, which could well be accepted and adopted to help keep pace. These include many things lacking from Australian retailers such as:

  1. Test often and early, do not wait for endless results and evaluations. The initial indications are enough to say roll-out quickly or scrap the concept.
  1. Have an alternative route to market. I wonder if Mattel had a marketplace lined up when Toys ‘R’ Us went broke or do they get dragged down with the receivership?
  1. Innovation is old news; continuous innovation is a must. Use startups, innovation hubs and external support to reinvent and innovate. Many traditional retailers are using such methods of reinvention and recreation.
  1. Good retail disruption invests more in supply chain, collaboration and localisation, so do it!
  1. Exit the short-term investors for owners or stakeholders that have a vision and sign onto the journey and long-term continuous investment.
  1. Employ people that are more ‘matrix’ and have a vision of the entire business not just their disciplines.
  1. Profit is still measured in EBIT and gross profit but profit by customer will be a more logical measure.
  1. Customers want things that help and make life easier they do not need over engineered products. Look at all those unused buttons on the TV remote! Direct-to-customer from producer is simpler.  How do you position your business to protect from such a selling chain, or how do you participate in it?
  1. Retail partnering has been reborn. Not with technology suppliers or not necessary with product suppliers, but brand to brand and service to brand, how do you get in front of the trend?
  1. The allure of comfort stifles the potential to innovate, the best time to renew or reinvigorate is while you are on a run, not when you are in trouble.


Bernie Brookes, AM is an adjunct industry fellow at Swinburne University, and was previously the CEO of Myer department stores and South African retail giant Edcon.

 

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