January 17, 2012

Retail experts predict 2012 and beyond

Forward view 2012+ (photo: bkingzen-Flickr.com)
Forward view: Trade gurus scan the horizon (photo: bkingzen-Flickr.com)
At the end of each year, we ask experts from the international retailing & the fmcg industry to guess what the future holds for the trade.

A dozen or so pundits from banking to design were invited to answer the question "What do you see as the most exciting development in retailing/the fmcg industry and the most important challenge for the future?"

As not even the brightest minds can reinvent the wheel, their answers logically point to known phenomena such as the growing importance of eCommerce, an increasing cost base, sustainability, the euro crisis etc.

However, their comments go beyond a mere summary of the status quo and provide the interested reader with a chance to take stock in some highly intelligent company.

As their replies are self-explanatory, they are given below without commentary and in alphabetical order:

The Shape of Things to Come

Dr Klaus Behrenbeck, senior partner and European Consumer Sector Leader, McKinsey & Company, Dusseldorf:

Leader, European Consumer & Retail Sector, McKinsey & Company (photo: McKinsey & Company)
(photo: McKinsey & Company)
"One topic with lots of near-term potential to separate the winners from the losers is how proactively companies are preparing for possible scenarios regarding the future of the euro. Those that adopt a wait-and-see strategy instead of planning ahead are running a tremendous risk of being overtaken by the events to come.

In a more consumer-specific sense, I definitely see digital excellence as one of the hottest future topics for consumer companies and retailers alike. It will be increasingly important that companies find a holistic, cross-functional, consistent way to address this wide set of opportunities, which range from digital marketing and social media across a variety of multichannel business formulas to pure e-commerce.

Advanced analytics is another field involving high potential and significant execution challenges –again, both for retailers and for consumer goods players. New strategic possibilities will open up for companies that master the analytics, personnel issues, and processes that enable them to put the unimaginable amount of data they have to use today, e.g., in pricing, promotions, assortment planning, customer life cycle management or marketing mix modeling."

David Bosshart, CEO, Gottlieb Duttweiler Institute, Zurich:

David Bosshart, GDI (photo: Reinhard Rosendahl)
(photo: Reinhard Rosendahl)
"It's becoming more expensive to be a winner."

Dagmar Bottenbruch, member of the financial services industry, Kronberg/Germany:

Dagmar Bottenbruch, angel investor & consultant (photo: Dagmar Bottenbruch)
(photo: Dagmar Bottenbruch)
"Unfortunately, this year the challenges are more obvious than the developments are exciting. Practically all industries will have to cope with increasing economic uncertainty and the resultant volatility of demand and input prices.

Customers are confused and this affects purchasing behaviour – some are becoming more risk averse as they prepare for tougher times, others seem to spend more freely displaying a 'it-could-all-be-gone-tomorrow, so-we might-as-well-enjoy-it-today' attitude.

The internet and the development of online marketing and shopping continue to be exciting developments and challenges at the same time. Growing broadband access and on-line penetration offer increasing possibilities to attract customers. However, security and compliance issues create enormous challenges and additional IT costs.

The necessity of being present off-line with physical stores and on-line with virtual stores could add significant cost in the short-term, particularly as we head towards a tougher economy.

Additionally, customers are demanding ‘sustainable’ products, and a lot of work will need to be done in order to find out what this really means and how to convince customers that the own story is more than lip service."

Dieter Brandes, author and expert on retail and complexity management, Hamburg:

Dieter Brandes (photo: private)
(photo: private)
"Again and again there remains one big challenge in international retailing: Many retailers still have huge problems in mastering the complexity of their assortment. The reason is that they forget to ask the most important question: Why should customers shop in my stores?

They forget that retail is detail. They also forget to use their own brains and those of their colleagues first instead of playing with computers, data warehouses and market research data. It‘s the assortment, stupid!"

Pete Clifford, International Business Development Director, Carolinas Matkasse, Stockholm:

Pete Clifford (photo: private)
(photo: private)
"For me the biggest challenge will be continuing to find the right balance every day between where an internationalizing retailer can standardize vs. localise.

A lot of retailers believe they have already cleverly sewn it up with ‘we localize the customer offer, but standardize the business processes and systems’, but this ignores the fact that in many areas the two things are interdependent.

As markets like India open up and it becomes easier to go international, more firms will have to ask themselves tough questions about what they decide when there is a grey-area overlap between what is defined as ‘customer-facing and what is defined as ‘business-facing’.

Also, large retailers will increasingly find themselves having to make trade-offs between the economies-of-scale of leveraging existing and incumbent IT systems from their home countries abroad vs. the sheer time-lag involved in preparing them for use internationally.

I think this is commonly referred to in the industry as choosing either the ‘strategic’ (e.g. slow, expensive but with a proven return) vs. ‘tactical’ (e.g. quick & dirty but ‘double-work’ and unproven) IT solution.

As regards Germany, if e-Food really takes off in 2012/2013 (as I suspect it will), it will almost certainly not copy the UK due to cost pressures and will choose to outsource the vans and drivers -- but to whom?

If things really take-off, there is no logistics firm with scale who have got themselves in a position where they could serve a booming e-Food industry with chilled vans, short time windows and reliable drivers."

Rodney Fitch, Professor of Retail Design, Delft University:

Professor Rodney Fitch, founder of Fitch  (photo: EHI)
(photo: EHI)
"Exciting developments and biggest future challenge are entirely different issues. So, as to the former, it has to be the economic crisis.  It's a big wake-up call, and smart retailers will not waste a good crisis.  So, Darwinian-like, the strong will find a way and the weak will lose theirs, with the likelihood that the citizen consumer will benefit.

For the future, there must be many challenges. The one I find most interesting is how the makers (the FMCG industry) will stem the transfer of their brand equity to the sellers (the retailers).  This is not just about 'own label' but about retailers getting ever closer to their customers, creating the potential to become 'own brand' – originating and developing their own stuff at the expense of proprietary brands."

Paul Foleysenior partnerCONplementation, International Retail Consulting LLC:

Paul Foley, senior partner CONplementation (photo: CONplementation)
(photo: CONplementation)
"2012's most exciting development will be how the cleverest retailers take further advantage of the internet? Excelling in e-business is not about having a web shop -- that’s not new! It’s about being able to know who that customer IS, no matter where and when they interact with you.

The customer wants it all, nice stores, great products, good service, connectivity and a fair price! The challenge will be… who in each market does it best!"

Dr. Kay Hafner, managing partner, Hafner & Cie., Corporate Advisory Services GmbH:

Dr Kay Hafner (photo: Hafner & Cie)
(photo: Hafner & Cie)
"The biggest challenge for retailers and suppliers is the rapid change in customer purchasing habits due to the internet. The development of multi-channel strategies with parallel distribution channels and the changes in sales formats are happening so quickly that traditional suppliers and retailers are struggling to keep up.

With the exception of food retailing, many retail outlets will no longer be profitable over the next few years. This will mean large numbers of empty shops and difficult rental negotiations. Producers and brand manufacturers will partly have to create new online profiles and brand identities in order to remain interesting and relevant to future younger target groups.

Many companies and managers underestimate the need to adapt and are not investing fast enough in additional resources, social media, brand rejuvenation, and alternative distribution channels.

The second major challenge is to devote more energy towards the development of quality and premium strategies. An exclusive orientation towards price and volume will not continue to be a success factor for much longer.

Measures which provide companies with value-added as well as lasting customer loyalty will be of vital importance for lasting success particularly in times of increasing online price transparency."

Ibrahim Ibrahim, Managing Director, Portland Design Associates:

Ibrahim Ibrahim, CEO Portland (photo: Portland)
(photo: Portland)
"Retail is firstly about STORIES not detail...new stories…changing stories…different stories…engaging stories…stories told with multi-sensory engagement in a digital and physical environment...

'Think digital, deliver analogue!' ...And the only sustainable competitive advantage are IDEAS!"

Michael Sansolo, industry consultant and contributing editor to www.morningnewsbeat.com:

Michael Sansolo (photo: private)
(photo: private)
"It's impossible to consider any challenge or opportunity to food retailing without mentioning the global economy. It’s the top issue worldwide and continues to impact everything from government to household budgets, the latter of which impacts everything in the supermarket.

Yet the industry needs to take a hard look at the growing use and influence of social networking. From the streets of the Arab world to the aisles of stores, social networking is linking people like no force has done before and in the process threatens the status quo with unmatched force. The opportunity facing business is unimaginable, as is the price for missing this trend.

The truth is that most businesses lack a full understanding of Facebook and friends and do not have plans for how to listen, interact, contribute and influence shopper behavior in this new space.

That lack of knowledge won’t be acceptable for long. And that’s why social networking, like the economy, will be a priority issue throughout 2012 and far beyond."

Pedro Pereira da Silva, COO Jerónimo Martins Group & CEO Biedronka:

Pedro Pereira da Silva (photo: Biedronka)
(photo: Biedronka)
"Higher dynamics and complexity inherent in a changing world, an unstable economic environment, volatility in resources prices, mobile technology developments, social media, sustainability concerns, uncertainty in the decision-making process, and an increasing lack of trust are the main factors influencing customer expenditure, buying patterns and ?preferred store format.

The convergence of these variables is putting high pressure on the entire retail competitive environment. These factors and the overall economic atmosphere will necessitate increased collaboration across the industry. They will also encourage using and? looking for different and differentiating opportunities where uniqueness is ?becoming a critical success driver.

Efficiency, proximity, convenience and trust are more than ever the key to this ?new environment and will often require the redefinition of basic strategic assumptions. I strongly believe that the keys to future retail success belong to those business models which better adapt to these challenging times of change."

Hans Eysink Smeets, Managing Partner, Eysink Smeets Business Consultants bv:

Hans Eysink Smeets (photo: LinkedIn)
(photo: LinkedIn)
"The most exciting development: the Information Retail Revolution. Everything that can go digital, will go digital. Stores are imploding as result.

Don’t put your head in the sand: this revolution will not by-pass the FMCG sector. Look what’s happening in other retail sectors, like porn, music, books, travel, mail.

These sectors are on the same time-path on which the FMCG sector is traveling. Learn from these other sectors, and see a) what devastating effects the revolution have on old business models, and b) where the new opportunities are.

The biggest future challenge: change of corporate culture. What I experience everywhere is that companies have huge difficulties in adapting to this new environment. And, no, don’t get your hopes up: the crisis is not causing the revolution, just accelerating it.

Ideas are not the real hurdle; it’s making sure they don’t get stuck in old thinking. Fundamental change of corporate culture, yes, guys, that’s the real challenge. More about this in my latest book, www.pfb-thebook.com."

Dr. Alan Treadgold, Head of Retail Strategy, Leo Burnett:

Dr. Alan Treadgold (photo: Alan Treadgold)
(photo: Alan Treadgold)
"Biggest challenge? Really, truly, and effectively engaging with recession-savaged, value-driven multi-channel shoppers. Most exciting opportunity? See previous answer. The rewards will be immense for retailers and FMCG brands that can crack it."

Julian Wild, partner, corporate finance, Rollits LLP:

Julian Wild, Partner, Corporate Finance, for Rollits LLP (photo: Julian Wild)
(photo: Rollits)
"The answer to both questions is probably the same -- eCommerce. The buying and selling of products and services over the internet is revolutionising the way we all do business and that can only grow dramatically in the years to come.

Manufacturers and retailers alike must address this sea change in the supply chain from new product development at one end, through sales and marketing, to logistics and payment at the other.

We are heading towards an age of cashless transactions with massive implications for the banks. Only the fittest and leanest manufacturers and retailers will survive, underpinned by a robust and dynamic eCommerce offering."

Clive Woodger, Chairman, SCG London:

Clive Woodger, Chairman, SCG International (photo: SCG International)
(photo: SCG International)
"Everyone talks about the impact and challenges of riding the social media tiger – great when you are in control, but deadly when you fall off! It emphasises the need to constantly strive to do what you say you do.

A starting point is achieving an engaged motivated staff culture that differentiates you from the crowd, leveraging and promoting staff-centric policies and practices to match traditional customer centricity.

A distinctive positive brand culture is an increasingly important USP which can’t be copied overnight – a rare quality in a complex real and virtual world of competing media and experiences."

Statements introduced and collated by Mike Dawson, international editor, Lebensmittel Zeitung

German Retail Blog

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