The retail industry revamped to meet the new demands of consumers brought on by COVID-19. New research released by the Retail Industry Leaders Association (RILA), with support from its knowledge partner McKinsey & Company, offers in-depth insights shaped by leading retail CEOs into the imperatives that will be critical to retail success moving forward.
“While the fundamentals are largely unchanged, customers’ expectations are now exponentially higher and retailers are rising to the challenge,” said RILA President Brian Dodge. “Leading retailers are embracing the opportunity to win new customers by leveraging lessons learned from the past year and investing in strategies to serve customers well wherever and whenever they shop.”
The report “Retail Speaks: Seven Imperatives for the Retail Industry” was developed with the support of McKinsey & Company as a knowledge partner and identifies seven imperatives for rethinking retail.
- Consumers now demand a seamless omnichannel experience: Consumers will choose retailers based on ease and richness of end-to-end experience.
- Personalized shopping experience is now table stakes: most retailers fall short of these expectations today. While 100 percent of top-quartile retailers cited omnichannel personalization as a top five priority, only 15 percent of retailers have fully implemented personalization across all channels.
- Turbocharge e-commerce delivery: The vast majority of consumers – over 90 percent – see two to three days as the baseline, and 30 percent expect same-day delivery. Retailers are setting ambitious targets for delivery times that will require significant investments to propel their supply chain fulfillment capabilities.
- Purpose-driven approach to ESG is essential: Consumers are voting with their wallets for sustainability and broader purpose. One-third of survey respondents reported they had stopped using a brand based on its social actions, and 71 percent indicated they would lose trust in a brand forever if it placed profits over people. At the same time, consumers are willing to pay more for products that meet their values.
- Recalibrate talent strategies: Retailers typically need to augment their workforce and capabilities to thrive in the digital-dominated world. To close the skills gap, companies will need to reimagine their strategies for sourcing and deploying talent – focusing on upskilling, new recruitment models, and diverse talent pools.
- Explore the role of partnerships and ecosystems: The development of partnerships and ecosystems, especially those convened by retailers, will accelerate. That makes developing an engagement strategy an imperative for survival: even if retailers aren’t positioned to establish their own ecosystem, they will have to figure out how to compete, participate, or coexist.
- Seek transformational productivity gains: Retail as a sector has achieved outsized productivity growth over the past ten years. The next phase will involve deploying analytics and automation across P&L. Retailers will need to prioritize investments that are truly transformational.
The report is the result of a benchmarking survey conducted with executives (such as CFOs, chief marketing officers, chief digital officers, and chief supply chain officers) from 30 U.S. companies, augmented by in-depth interviews with top retail CEOs, as well as proprietary McKinsey & Company customer research.
Key statistics of the report:
- Post-COVID-19 e-commerce penetration is expected to significantly increase to 25–40% across categories.
- E-commerce volumes grew as much in the first quarter of 2020 as they did in the previous 10 years.
- Leading retailers plan to increase hiring for e-commerce/data roles by 70 percent through 2022.
- More than 75% of specialty retail supply chain leaders have made two-day delivery a priority, and 42% hope to offer same-day delivery by 2022.
- 80% of retailers plan to concentrate their 2022 supply chain spending on addressing e-commerce fulfillment.
CEO quotes from the report:
“For us, some e-commerce priorities that were previously five years out are now more of a three-year horizon. We need to more quickly understand how to satisfy that consumer and accelerate our timelines accordingly.” — Todd Vasos, CEO, Dollar General
“Both experiences and fulfillment are important uses for brick-and-mortar stores. We will continue to evolve the role of the store on our continued omnichannel strategy evolution.” — Mary Dillon, CEO, Ulta Beauty
“Our digital platform is the front door of our store. Customers are taking us down that path—purchasing online and using online platforms as the start of the shopping experience, even if it ends in the physical world.” — Craig Menear, CEO at The Home Depot
Source: Retail Industry Leaders Association