Perspectives

2014 Retail Outlook

Interview with Alison Kenney Paul

"When the going gets tough, the tough get going. Amid the ongoing economic uncertainties, retailers should continue to focus on and invest in understanding the customer psyche and leverage innovation to drive loyalty and customer engagement," says Alison Kenney Paul, vice chairman and US Retail and Distribution leader, Deloitte LLP. In the following interview, Paul shares her thoughts on the trends and challenges facing the retail industry in 2014, as well as steps companies can take to grow.

What are the biggest challenges facing your industry in the coming year?

The customer is rapidly changing. They are better informed, more interactive and more selective than ever before. Our 2013 holiday shopping survey bears this out as nearly 60 percent of respondents feel they are better connected to coupons, competitive pricing, and what retailers sell than store associates themselves. What retailers are seeking are ways to deliver high-touch, personalized experiences to their customers; in other words, a truly omnichannel experience. Unfortunately, many retailers still rely heavily on the “old school” approach—mass advertising and promotions that do not speak directly to the omnichannel customer. Understanding how your customer expects to be “spoken with”—whether through an app on her smartphone as she shops in your store or via an instant chat on your website—will continue to challenge retailers well into 2014. Getting personalization right can help build loyalty and prevent the dreaded showrooming effect that puts so much pressure on margins.

A particularly important way for retailers to be successful at personalization, though, is to develop meaningful insights about the customer. The second big challenge for retailers in 2014 will continue to be mining the mountains of customer data and deriving relevant, actionable insights from them. This imperative refers not only to historical data, but also predictive data about what the customer will want in the future through the development of sophisticated modeling techniques.

A big challenge for the brick-and-mortar retailers is that the purely online players are trying to become more like the brick-and-mortars. Historically, the distinct advantage of the brick-and-mortar retailers over the purely online players has been their ability to provide product experience through touch and feel. Now, however, the online retailers are offsetting this immediate gratification by creating an emotional rush through flash sales, social shopping and near-real experience through augmented reality (AR) apps. As such, the brick- and-mortars need to leverage every opportunity they have to engage customers and build loyalty that endures. Innovative technologies—such as smart shelves, Wi-Fi hot spots, point-of-sales (POS) systems, virtual storefronts, and endless aisles—are effective tools to engage customers both in-store and elsewhere.

Finally, a big challenge for all retailers concerns the supply chain. As customers demand instant gratification, the industry is faced with myriad supply chain challenges—and opportunities. Same-day delivery and free shipping are no longer unique—they are expected. In our 2013 holiday survey, 71 percent of respondents said they would take advantage of free shipping if offered. And, a bit more than two thirds (68 percent) said they were more likely to shop online if the retailer offered free shipping. Additional customer expectations—inventory availability, free returns and “buy online /pickup in-store”—are driving retailers to test new approaches to their legacy supply chains.

What trends might disrupt “business as usual” in 2014?

Retailers are usually conservative when it comes to research and development budgeting. Amid this transformative environment where customers seek greater value, it is crucial retailers invest in innovative in-store technologies. Mobile point of sales (mPoS) is no more a “nice-to-have” but is a “must-have” technology. Our holiday survey reveals that 60 percent of customers plan to use in-store self-help technologies, such as price checkers, self-checkout payment lanes, information kiosks, digital signage, etc. during their holiday shopping this season.

Additionally, retailers should keep an eye on the rapid growth of 3D printing applications—from typical industrial prototyping to printing of consumer products. Printing customized and on-demand products in-store will revolutionize the customer experience and help retailers improve their inventory and supply chain management. At the same time, as personal 3D printers become affordable, retailers need to deliver a unique store experience, since a small, but increasing, percentage of customers will be able to print products themselves at home.

Retailers have done a great job in deploying data-capturing technologies like radio frequency identification (RFID) to get a snapshot of inventory at any given moment. What is newer—and a real potential disruptive trend for retailers—is deploying systems to get a dynamic picture of what is actually taking place in the store—how shoppers walk through a store, the effect of how items are placed on a shelf, etc. This dynamic, integrated view actually has a name—the “Internet of Things” (IoT)—and it gives retailers the opportunity to connect dots across each of the customer touch points. As IoT becomes more a more a reality (and requirement)—and less and less an abstraction—retailers will need to build the infrastructure to connect people-to-people (P2P), machine-to-people (M2P), and machine-to-machine (M2M) using the internet and cloud, and in the process, deploy advanced analytics to derive meaningful insight from these integrated systems. Some players are already savvy to IoT. Others will need to be—and soon.

What are some steps companies can take to foster innovation and/or growth?

According to our holiday survey, some 68 percent of smartphone owners and 63 percent of tablet owners plan to use their devices for holiday shopping (primarily to get store locations, compare prices and get product reviews). Amid increasing use of digital and social media, retailers find it difficult to keep pace as customers embrace new technologies and platforms. Retailers should take a step back from this rush for the “latest and greatest” technologies and focus only on the ones that help enhance their brand proposition. Retailers cannot be good at everything, so it is important to know what is critical and invest in those areas.

While domestic markets are expected to grow only moderately, international expansion provides retailers access to new markets. At the same time, the growing middle-to-upper class populations in those regions with “new” disposable income make those markets attractive for many retailers. Growth opportunities are ripe, but success in international markets depends on a number of strategic, operational, and regulatory and compliance factors, among other dynamics. Companies that can manage these hurdles either alone or with suitable partners will tread the growth path in international markets.

​“Understanding how your customer expects to be ‘spoken with’—whether through an app on her smartphone as she shops in your store or via an instant chat on your website—will continue to challenge retailers well into 2014.”

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Alison Kenney Paul

Alison Kenney Paul

Vice Chairman & US Leader | Retail & Distribution

Alison Kenney Paul is the vice chairman and US Ret...More

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Alison Kenney Paul

Vice Chairman & US Leader | Retail & Distribution