2020 retail industry outlook - Convenience as a promise - Deloitte

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2020 retail industry outlook - Convenience as a promise - Deloitte
2020 retail industry outlook
Convenience as a promise
2020 retail industry outlook - Convenience as a promise - Deloitte
Miguel Pochat
                             Partner | Consumer Industry Leader
                             Rosario Norte 407, piso 9, Las Condes, Santiago, Chile
                             mpochat@deloitte.com | www.deloitte.cl

¿Qué le espera en 2020 a la industria de Consumo?

Los diferentes temas de innovación para el retail que hasta hace unos años eran prototipos e ideas,
hoy los vemos llevados a la práctica y cambiando la forma en que nos vamos a relacionar como
consumidores con el retail.

Este estudio de Deloitte se centra en cuáles son las nuevas expectativas de los consumidores en
referencia a la experiencia que quieren vivir al interactuar con el retail. En este sentido, lograr
entender que quieren los consumidores y llevarlo a la práctica está siendo la gran diferencia entre
los retailers que están ganando esta batalla y los que no. Vamos a ver en el futuro cercano esta
diferencia marcándose mucho más, los que lo entienden y lo lleven a la práctica correctamente, van
a liderar el mercado.

En resumen, hay 3 grandes dimensiones de expectativas de los consumidores hacia el retail:
     Precio justo: esto no quiere decir precio bajo, sino un precio justo, transparencia en la razón
       detrás del precio. Qué valor me entrega un producto por sobre otro, por que debo pagar
       más o menos por él. Esto en especial ahora con las tecnologías de inteligencia artificial
       disponible donde puede definirse un precio de manera dinámica en función de infinidad de
       variables resulta clave
     Calidad y variedad de productos: ahora que estamos en la era de combinación de producto
       con servicio, las posibilidades de productos crecen exponencialmente. La variedad surge la
       interacción y uso del producto con el consumidor y las propuestas para vivir la experiencia
       del producto de manera particular para cada uno. En esta combinación no hay espacio a
       errores de calidad: calidad en términos del producto y del servicio que se entrega para su
       consumo.
     Conveniencia: la tercera y más importante característica que buscan los consumidores es la
       conveniencia. Esto es que la experiencia con el retailer sea única, sea simple, sin fricciones,
       sin importar el canal o el momento de interacción: investigación, compra, devolución.

A su vez, en este contexto de digitalización de la industria, es importante entender que las tiendas
físicas no están muertas, no van a desaparecer. Por lo contrario, son una pieza fundamental en esta
nueva estrategia de focalizar los esfuerzos en conocer al consumidor y entregar experiencias
únicas. La digitalización del negocio es fundamental para satisfacer estas demandas de
conveniencia, esta nueva experiencia personalizada, con una alta interacción con los consumidores.
2020 retail industry outlook - Convenience as a promise - Deloitte
2020 retail industry outlook | Convenience as a promise

             For consumers, shopping in today’s environment is the
             most convenient it has ever been. Forward-thinking retailers
             are setting the expectations bar high for the rest of the pack.
             In this year’s outlook, we explore convenience, what it means
             today, and how retailers can position themselves to take
             on the challenge.

             Contents

             Convenience matters									3
             Sizing up the year ahead								3
             Rising customer expectations and its cost					                    3
             Economic outlook									4
             Convenience must be enabled through the entire organization		     4
             Marketing as a differentiator								                             4
             Connect: Digital enablement								6
             Revisiting product strategy								6
             Stores aren’t just stores anymore							7
             Deliver on the promise through supply chain					                  8
             Convenience is more than a state of mind					                     9

2
2020 retail industry outlook | Convenience as a promise

Convenience matters                                 Sizing up the year ahead                              Rising customer
Predictably, 2019 was a year in transition.         Uncertainty is the name of the game when
                                                                                                          expectations and its cost
There was stability in the positioning of           it comes to how the next 12 months will play
                                                                                                          Given the rapid pace of technological
the top five retailers, uncertainty among the       out. With a possible recession and potential
                                                                                                          advances and social transformation,
majority, and a few notable bankruptcies.           fallout from tariff tensions looming, retailers
                                                                                                          expectations for outstanding customer
The emphasis on understanding what                  should have a game plan that can handle
                                                                                                          service and experience are now being set
consumers really want continued to                  adjustments when and as needed.
                                                                                                          by those outside the business. Consumer
expand the gap between the leaders
                                                                                                          expectations are going global, while age-old
and everyone else who followed. For                 While the overall economy might be losing
                                                                                                          national and industrial divides are shrinking.
retailers, understanding how consumer               its shine in 2020, it presents retailers an
                                                                                                          To stay competitive, many retailers must
expectations are evolving has never been            opportunity to review their playbook for
                                                                                                          make a difficult choice on what to offer and
more important.                                     riding out a downturn. To strengthen their
                                                                                                          how to make sense of it, profitability-wise.
                                                    preparedness, retailers should focus on
The good news here is that there is some            four factors critical to success:2
                                                                                                          What this means is that there is a necessary
predictability when it comes to what
                                                    •• Determine why they matter                          conversation around tough tradeoffs—
consumers want. In our recent holiday study,
                                                                                                          what really matters to the consumers,
over two-thirds of US adult shoppers said           •• Build a war chest to invest in growth
                                                                                                          and what must companies have internally
they hold price, product, and convenience
                                                    •• Embrace technology and automation                  before going after the shiny new object?
above all when it comes to what they want.1
                                                       to better leverage growth                          For instance, our holiday study revealed
•• Fair price. With drastically increased                                                                 that more than 85 percent of the holiday
                                                    •• Look outside their four walls
   transparency and automated pricing                                                                     shoppers picked free over fast shipping.3
                                                       to embrace partnerships
   making it difficult for a fair price to be the                                                         While some companies have publicly
   final differentiator, price alone does not                                                             reported spending close to a billion dollars
                                                    Overall, retailers will likely have to be more
   drive consumer loyalty.                                                                                in one quarter to make free or fast shipping
                                                    judicious with investments and flexible with
                                                                                                          options available, these investments should
•• Quality and variety of products.                 their plans—ready to adapt, whether or
                                                                                                          be made with sustainability in mind and with
   Because personalized and commoditized            not a recession comes or if tariff tensions
                                                                                                          cost transparency at the core.4
   products are offered in so many formats          continue. It seems that for 2020, those
   and channels, there is an overabundance          retailers who prepare for the worst will likely
                                                                                                          Based on the shopping context, retailers
   of choice.                                       fare the best.
                                                                                                          will likely have to play a balancing act,
•• Convenience. Whether in the store or                                                                   with trade-offs between various themes
   online, consumers want a friction-free                                                                 that influence convenience―speed of
   experience, from finding ideas and                                                                     transaction, value to customer, and efforts
   inspiration to making purchases, managing                                                              for retailers (for example, breadth of
   returns, and advocating for the brand.                                                                 assortment, cost of operations).

With the convergence of supply chain,
digital technologies, and other innovations,           Figure 1. Trade-offs for meeting customer expectations around convenience
convenience is becoming a much more
important piece of the equation.
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                                                                                                 Convenience
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                                                                                              Efforts for retailers

                                                                                                                                                           3
2020 retail industry outlook | Convenience as a promise

At its very core, convenience is a                    to demographic growth. With the labor            Marketing as a
human-centered experience that provides               market strong, consumer sentiment remains
customers with a feeling of ease. There               elevated despite a bit of volatility in recent   differentiator
are many ways that consumers can                      months. Relatively low headline inflation
perceive convenience:                                 is also likely to aid consumers, even as low     In one sense, convenience is about elevating
                                                      interest rates—the Federal Reserve cut           the human experience. It is something
•• “Saves me time (same-day shipping)”                                                                 that goes beyond the four walls of the
                                                      rates three times in 2019—keep borrowing
•• “Easy access to more offerings”                    costs low.                                       organization and includes both customers
                                                                                                       and the workforce. In a recent study, we
•• “Special access to services that meet                                                               found that five key pillars contribute to
                                                      Consumers, however, face three key
   my needs”                                                                                           elevating this experience:7
                                                      challenges. First, gains in the labor market
•• “Easily see the added value I’m receiving”         have not translated to strong wage growth.       •• Being obsessed with all things human
                                                      Real average weekly earnings grew a mere
•• “Meet all my needs in one place”                                                                    •• Anticipating and proactively delivering
                                                      0.8 percent in 2018 and, by the end of 2019,
                                                      were up by just 1.2 percent. Second, as             on human needs
What many people are looking for is
                                                      the impact of the 2017 tax cuts fizzles out,     •• Executing with humanity
something that simplifies life while
                                                      disposable income is likely to slow—we
delivering a positive experience. People                                                               •• Being authentic
                                                      forecast real disposable personal income
want to “outsource” the work of getting
                                                      growth to slow to 2.3 percent in 2020 from       •• Working to change the world
products. Instead of focusing on the act
                                                      3.24 percent in 2019. Finally, consumers
of purchasing products, they want to focus
                                                      also face risks from any escalation of trade     Marketing in this age of constant disruption,
on the act of using them. That’s what
                                                      tensions, which, in turn, could dent growth      with industry ecosystems evolving and
appears to really matter.
                                                      and employment as businesses hold back           fusing together, may seem like a Herculean
                                                      on investment spending and hiring. This          task. To be successful, organizations should
Economic outlook                                      will likely hurt equity markets too, thereby     constantly define and redefine what matters
                                                      negatively affecting consumer wealth             to their customers—truly enhancing either
The retail industry should be prepared                and hence, spending.                             the human experience or the convenience
for changing economic conditions in the                                                                factor. The reality is that it is no longer
coming year. The economy slowed in                    Overall, we expect real consumer spending        enough to market product and price
2019, with real GDP growth declining to               growth to slow to 2.2 percent in 2020 from       alone. While the quality of the product is
1.9 percent in Q3 from 3.1 percent in Q1.5            2.5 percent in 2019.                             still important, the point of differentiation
Personal consumption growth has been                                                                   between brands is now often dependent on
steady, on average, but investment growth
has weakened. Business investment, for
                                                      Convenience should                               their ability to market the service, delivery,
                                                                                                       and overall convenience that they provide.
example, contracted in the second and                 be enabled through the                           Things like same-day delivery, curbside
third quarters of 2019, while residential
investment has posted just one quarter of
                                                      entire organization                              pickup, and buy online/pick up in-store
                                                                                                       have become table stakes. The competitive
growth since Q1 2018. With the outlook for                                                             advantage is derived from presenting these
                                                      Offering convenience is not an overnight
global growth dimming and the uncertainty                                                              components more effectively than the
                                                      undertaking. Because there are so
of trade tariffs unlikely to go away soon,                                                             competition does.
                                                      many moving parts involved, enabling
we expect real GDP growth to slow to 1.6
                                                      convenience touches almost every part
percent this year from 2.3 percent in 2019.6
                                                      of a retail organization, creating challenges
                                                      throughout. Convenience, then, should
Consumer spending outlook
                                                      be built into the fabric of the entire
Consumer spending is the lifeblood of the
                                                      organization; otherwise, it can become
retail industry. A key source of strength to
                                                      a follow-on marketing gimmick without
consumer spending has been a healthy
                                                      the wherewithal to make it profitable.
labor market. Unemployment is low
                                                      Convenience is also a moving target;
(3.6 percent in October) and so far, the
                                                      what was convenient yesterday is no
economy has generated, on average, about
                                                      longer convenient today, and what’s
167,000 jobs per month—lower than the
                                                      convenient today is not going to be
figure for 2018, but much higher than the
                                                      convenient tomorrow.
estimated 75,000–100,000 required due

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2020 retail industry outlook | Convenience as a promise

Transparent pricing strategies                      been building a strong following as more            entrée from another. As consumers grow
Clipping and carrying coupons has never             and more consumers are weary of the fine            to expect this level of ease and individually
been convenient, but consumers did                  print, high-low pricing, and other traps they       catered service from all providers, it is the
so for lack of choice. With the digital             inadvertently fall prey to.                         retail players who take note—the disruptors
solutions available today, consumers                                                                    and niche players ready to attend to them—
are distinguishing the options that are             Paying premium in favor of                          who are seeing growth.
most convenient to them. In Deloitte’s              more convenient options
recent holiday study, 74 percent of the             Retailers have yet to fully embrace that            Factors like new competitors, convergence,
respondents said that price discounts were          consumers are willing to pay a premium              and the blending of physical and digital
the most appealing promotional offers by            for convenience. Whether for the service,           operations are pushing businesses to
retailers.8 However, shoppers don’t want            delivery, or as tips, premium charges               find alternative revenue streams. In the
to be standing in the store searching for           are already a regular aspect of meal and            search to create value for consumers and
a coupon on a mobile device, much less              grocery delivery services. These relatively         stakeholders while still capturing value for
have to remember to bring a printed copy.           new delivery services are changing the way          themselves and investors, many retailers are
Depending upon the business context,                consumers dine, shop, and get entertained           adopting new profit models that prioritize
retailers should pick the most fitting pricing      today. Meal delivery services, for example,         consumer choice and fulfill demand:
strategy to build transparency. For example,        feature an easy-to-use app and provide              subscriptions, marketplaces, fulfillment-as-a-
mass merchant and grocery chains have               customizable meals from a multitude                 service, web and cloud services, and more.
found everyday low price (EDLP) to be               of restaurants or “dark kitchens,” even
most apt for their businesses. EDLP has             delivering an appetizer from one and an

   Figure 2. Retail models have evolved, creating a variety of profit drivers
   Retail profit models

                                                                 •• Subscription                               •• Logistics as a service
                          •• Private label credit card
                                                                 •• Third-party selling                        •• Media and entertainment
                          •• Membership or co-op model
      Core retailing                                             •• Payment platforms and financial            •• Web and cloud services
                          •• Digital/DTC
                                                                 •• Consumer services                          •• Fulfillment services
                          •• Store within a store
                                                                 •• In-house media management                  •• Internal venture funds

               Traditional

                                                                                                                          Newer to reta
                                                                                                                                       il

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2020 retail industry outlook | Convenience as a promise

In order to offer more convenient products            Connect: Digital                                   Fifth-generation network technology
and services, today’s retailers should                                                                   (5G) will likely play a key role in advancing
start by understanding the consumer’s                 enablement                                         retailers’ digital aspirations to real-world
behavior around each available option.                                                                   applications in the coming years. With its
In the past, store layouts were used as a             On Singles Day (November 11) in 2019,              ability to speed up the transfer of data by
tool to influence shopper behavior. Big-              Chinese e-commerce giant Alibaba set a             nearly three times, 5G’s true power will be
box retailers, for example, would place               new sales record of $38.4 billion in gross         in engineering the connection of millions of
perishables and groceries in the rear of the          merchandise volume in just 24 hours.               devices across the world to provide a richer
store, drawing consumers through aisles of            What’s more astounding is that that over           experience to the customer. Some estimates
other products before reaching them. Some             90 percent of sales were enabled through           predict that the improved connectivity from
could say that shoppers found this grocery            smartphones. While that rate of engagement         5G will likely add $12 billion in retail revenue
path to be a convenience, allowing them to            is unheard of in the US, smartphone use            by 2021.12
pick up other essentials despite originally           was predicted to hit an all-time high of 34
making the trip for groceries. This view does         percent for Cyber Monday sales in 2019,10          In retail specifically, 5G will directly affect
not stand today. To adapt to the change               and the smartphone as an e-commerce                digital engagements, analytics, IoT, AR/VR,
in consumer mindset around grocery                    engine is only going to grow. Deloitte’s 2019      and even drone technology by providing the
shopping, some major brands have                      holiday study also revealed that mobile has        connectivity boost that can enhance these
changed their approach.                               become the platform for holiday shopping,          capabilities exponentially. However, the
                                                      with 70 percent of mobile shoppers having          full breadth of 5G not only requires better
Today’s retailers are challenged to balance           planned to use a smartphone to make                capabilities from networks, but also higher
consumer convenience with in-store needs.             a purchase. Payment gateways, mobile               technologies in the hands of retailers and
Strategies to consider to address the                 games, and mobile livestreaming have been          customers. While these applications will
gap include:                                          noted as key areas that made smartphone            not come to life in the immediate short
                                                      e-commerce so successful on Single’s               term, forward-looking retailers should
•• Use data, but open the aperture of                 Day.11 As retailers become more digitally          begin laying the groundwork for it now
   retailer’s view. By utilizing data coupled         forward, it is imperative to keep in mind that     and continue to scan the horizon for
   with advanced analytics, retailers could           digital enablement across all aspects of the       deployable applications.
   expand their understanding of consumer             customer journey is important.
   behavior, including what shoppers are
   doing pre– and post–store visit. This can          The shift towards digital enablement               Revisiting product strategy
   allow the retailer to expand their view            is inevitable for retailers if they seek to
   beyond the traditional competition.                explore new business models or add new             Shoppers have grown accustomed to getting
                                                      revenue streams through acquisition of             their “first-choice” product with the click of a
•• Understand local trends. In a recent
                                                      digitally native companies. It is not just tools   button and having access to “endless aisles”
   Supermarketnews study 9 which polled
                                                      or applications or gadgets or enterprise           of e-commerce when what they want isn’t
   over 1,000 US adults, 76 percent said they
                                                      systems. In today’s environment, it can be         in the store. Traditional retailers have also
   would be more likely to order household
                                                      the straw that breaks a retailer’s back. A         upped the ante by building up inventory to
   items locally if they could get same-day
                                                      personalized experience, highly interactive        match the agility of e-commerce players.
   delivery, like Amazon offers in many areas.
   This implies that a hyper-emphasis on local        engagement, and convenience in all
                                                      shapes and forms require superior digital          To position themselves as flag-bearers of
   delivery could be the key to winning at the
                                                      capabilities coming to life and have become        convenience through product availability,
   convenience game.
                                                      a critical part of consumers’ expectations         retailers are moving towards creating
•• Be cognizant of data privacy. Retailers            for retail. The most mundane events, like          masses of unsold inventory in their
   should approach their data strategy                shopping for groceries, are becoming               warehouses and distribution centers. This
   cautiously. Many companies are looking             increasingly digital, and the biggest retailers    can lead to severe cost implications, such as
   into data monetization efforts as a new            are fighting it out to win every customer.         write-offs and promotional expenses to sell
   revenue stream, but digitally savvy                In grocery, for example, even the smallest         off the inventory. According to one study,
   consumers have a strong understanding              details, such as training an employee on           nongrocery retailers in the United States lost
   of what personal data is collected and             the differences between Anjou and Bartlett         $300 billion in revenues due to markdowns
   potentially shared, are wary of too many           pears, are likely to happen through highly         in 2018, equivalent to 12 percent total sales,
   or unwelcomed targeted offers.                                                                        with inventory misjudgments being one of
                                                      digital AR/VR technologies.
                                                                                                         the biggest reasons for the markdowns.13

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2020 retail industry outlook | Convenience as a promise

To address the consumers’ desire for
convenience, retailers should own the
narrative around product availability
by opting for “smart” merchandising
strategies to remain cost-effective. New
approaches are likely needed to influence
shopper demand and make that demand
more predictable and manageable. Such
interventions may include:

Configure shopper taste with
micro-brands. Retailers can work with
manufacturers to craft micro-brands
(off-shoots of major brands) that are
more aligned to the lifestyle or persona of
shoppers. With micro-brands, retailers can
utilize brand offshoots to gain more freedom
to experiment and have influence over
shopper demand volume. Express launched
a digital-focused, direct-to-consumer (DTC)
brand­—UpWest—that includes a range of
apparel and accessories, as well as products
from third-party vendors.14

Augment product availability with
resale. The resale market is growing 21
times faster than the retail apparel market
for the past three years.15 A recent Deloitte   By combining investments in AI and ML                  Irreplaceable node in order fulfillment
study showed that more than a quarter (27       technology solutions and rewriting sourcing            journey. While retailers are still
percent) of holiday shoppers plan to gift       policies, retailers can be at the forefront of         contemplating their plans for fulfillment
resale items during 2019 holiday season.16      convenience, providing real-time product               centers and last-mile delivery for convenient
The abundance of resale stocks could help       availability without having to accumulate              order fulfillment, physical stores play a
retailers address inventory availability        unsold inventory.                                      critical role in the supply chain. Retailers
requirements without having to order fresh                                                             are likely to accelerate conversion of excess
products. As consumer demand becomes                                                                   space in their stores into micro-fulfillment
increasingly volatile and uncertain, more       Stores aren’t just                                     centers, especially in densely populated
retailers (for example Neiman Marcus17 and      to store, anymore                                      areas. As retailers plan to redeploy unused
Ralph Lauren18) are turning to partnerships                                                            store space, one likely hurdle could be
with resale retailers such as consignment       Retail is not dead, and nor are the stores.            redesign limitations due to clauses in existing
and thrift stores.                              Despite all the noise about digital,                   leasing agreements, thus, pushing more
                                                undeniable domination of physical stores               redesigns to owned storefronts.
Artificial intelligence (AI)/machine            continues in the retail industry. In fact,
learning (ML)–based fulfillment                 brick-and-mortar accounted for nearly                  Data-powered experience. With many
systems. The latest AI and ML platforms         90 percent of all retail sales in the third            socially conscious shoppers using their
can help retailers accelerate their order       quarter of 2019, according to the US Census            purchasing power as a demonstration of
fulfillment process. These technologies         Bureau.19 In 2019, digital natives turned to           support, and with research showing that
allow retailers to automatically map demand     physical store pilots, and traditional retailers       shoppers still rely primarily on stores for
conditions with stock availability across       rolled out digitally powered physical stores.          product discovery and inspiration,20 having a
stores, warehouses, distribution centers,       In 2020, it seems retailers should up their            deep understanding of one’s customers is a
and even on-road fleet. For example, a          game with stores that can really pull off the          top priority. Online retailer Amazon is piloting
US-based footwear manufacturer acquired         convenience gambit. So, what is in store               stores that are stocked with products with
multiple startups with analytics and machine    for stores?                                            the most appeal at the location. Amazon
learning capabilities in the past 18 months.                                                           4-star stores are curated with a selection
These acquisitions are aimed at combining                                                              of products based on local purchase
RFID technology with predictive analytics                                                              preferences and online customer reviews.21
to accelerate inventory matching and order
fulfillment to meet consumer needs.

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2020 retail industry outlook | Convenience as a promise

Hub for empowered workforce. At the                   Deliver on the promise                            •• Inventory strategy in a competitive
end of the day, store employees are the                                                                    supply chain is built on end-to-end
face of the retailer for in-store shoppers;           through supply chain                                 visibility and capability to quickly flex
hence, empowering them will likely be key to                                                               with changing demand. Optimal quantity
delivering on the promise of convenience.             In the era of the “Amazon effect,” the supply        and timing of inventory to align with
This includes in-store automation to take             chain of brick-and-mortar retailers should           sales and production capacity are key
care of low-priority tasks and providing the          heed the title of Marshall Goldsmith’s               to enabling smart inventory capabilities
right technology tools to allow associates            famous book: What got you here won't get you         and reducing waste.
to engage consumers in a productive                   there. These traditional retailers, once touted
                                                      as pioneers in supply-chain innovations, are      •• Flexible network enables supply chains
manner. Examples:
                                                      now struggling to match new standards set            to move assets faster than ever. Physical
•• In-store concierge app to allow associates         by e-commerce and digital native players.            network needs to change and evolve to
   to actively engage with shoppers based             One of these “new” standards―effortless              cater to speed as shippers are forced to
   on their preferences and stock availability        “ship-to-door”―is not only the norm in               reevaluate their service-level expectations.
   (for example Stein Mart, a national                shopping these days, but also increasingly           Retailers with brick-and-mortar stores
   specialty off-price retailer, has enhanced         free. While not making money in retail               are leaning on their “buy online, pick up
   the shopping experience in its stores by           operations may not be a losing proposition           in-store” or “store-to-car” delivery options
   empowering store associates with                   for some cash-rich companies, many                   to provide flexibility and predictability
   Mad Mobile’s concierge solution for                retailers are charging forward by offering a         without having to transport the last mile.
   mobile POS and endless aisle)22                    slew of options keeping convenience top of        •• Data and technology adoption is
•• Real-time inventory checks with robots             mind. For these retailers, solving for a nimble      allowing retailers to transform their supply
   powered with 5G networks (for example              and smart supply network can require new             chains with unprecedented visibility
   Ahold Delhaize, an international food              thinking. There are four key trends in this          and insights from data. Technology
   retailer, is rolling out in-store robots across    area that retailers will likely adopt in the         integrations should be focused on
   500 stores to perform repeatable tasks             short term:                                          understanding the customer journey and
   such as shelf stock scanning)23                    •• Urban fulfillment will give retailers the         providing a substantive improvement.
                                                         ability to serve the connected consumer
As their role changes, whether by                        in large metropolitan areas with same-day
coincidence or by design, physical                       service. While urban warehousing comes
stores are going to be at the forefront                  with a high price tag, utilization of local,
of turning the retail industry into an                   small delivery vehicles and reduction in
avenue for convenience.                                  distribution spend can result in a net total
                                                         cost savings.

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2020 retail industry outlook | Convenience as a promise

Figure 3. Reverse logistics life cycle

                                       Traditional focus areas result in siloed policies and processes

            Supplier                Return                 Return               Logistics            Merchandise                Returns
          collaboration             policies               options              processes            disposition                analytics

            Merchandise          Time and credit       Methods offered to          Store and           Determining if          Understanding
            assortments          terms offered to       customers to make         warehouse         products should be       return drivers and
           and allowances         customers and        returns in person or    applications and     returned to stock or        costs incurred
             to address           special product        through the mail     transportation to      require liquidation       throughout the
           product returns          restrictions                               final destination                              product life cycle

               Applying smarter insights throughout the entire pipeline achieves a cohesive reverse logistics strategy

Returns, returns, returns                           Convenience is more                                •• Take stock of your organization as a
Traditional retailers are also placing big bets                                                           whole―is convenience a common thread
in the area of reverse logistics to attract         than a state of mind                                  embroidered across the fabric of the
store traffic. In July, Kohl's completed its                                                              organization? Is convenience deployed
nationwide rollout of its Amazon returns            As we think about the myriad of new                   in every department, banner, and/or line
program in the United States.24 According           and more convenient options that are                  of business?
to data published by inMarket, foot traffic         going to come our way in 2020, there is
                                                    also something to say about deliberate             •• Realize convenience is not a fad or
to Kohl's stores increased nearly 24 percent
                                                    inconvenience. Brands like Supreme have               gimmick, but the new normal. You can
in the first three weeks since the rollout.25
                                                    created a cult-like following by making it            only win on convenience if you follow
As more retailers use their physical stores
                                                    extremely difficult to access their products.         through on the promise. Invest in
to accept returns on behalf of e-commerce
                                                    Across the world, invite-only consumers line          convenience in the areas most aligned
players, cost is an important factor to keep in
                                                    up for hours, sometimes more than four                to your brand promise.
mind. Emerging retail models such as direct-
to-consumer and subscription services               hours, to get a few minutes in the store.          •• Determine your shoppers’ willingness
and rental businesses are built to consume          While this inconvenience or scarcity factor           to pay for convenience and your
high volumes of returns as a part of their          may attract some consumers, most retailers            organization’s willingness to invest.
supply chains; anticipating returns with high-      should focus making their products and                Many of the recent retail or service-based
predictability data helps with their inventory      services more convenient, not less. Here              “unicorn” startups have gained billions
strategy. For many retailers, this creates a        are a few steps to help move towards a more           of dollars in investment based on a
behavior for which the supply chain is not          convenient retail experience:                         convenience focus. What are you willing
currently designed. But to thrive in reverse        •• Remember, convenience is not just free             to invest, and how will you prioritize
logistics, retailers should move from return           or fast shipping. Convenience is related           according to your customer base?
policies into return strategies.                       to an overall consumer experience that
                                                       eases the shopper journey while providing       By focusing efforts across your organization
                                                       additional services. It is very important       and into your supply chain, new retail
                                                       to think about how you are defining             business models can evolve. Winners and
                                                       convenience and, more importantly,              losers will likely be decided on who can
                                                       what you are leaving out.                       execute these new ventures best. They
                                                                                                       ultimately shape the future of retail.

                                                                                                                                                        9
2020 retail industry outlook | Convenience as a promise

Endnotes
1.   Deloitte, “2019 Deloitte holiday retail survey,”     14. Retailwire, “Express Launches digital-first DTC
     https://www2.deloitte.com/us/en/insights/                wellness brand,” November 11, 2019,
     industry/retail-distribution/holiday-retail-sales-       https://www.retailwire.com/discussion/express-
     consumer-survey.html                                     launches-digital-first-dtc-wellness-brand

2.   Deloitte, “The next consumer recession:              15. ThredUp, “2019 Resale Report,”
     Preparing now,” https://www2.deloitte.com/us/            https://www.thredup.com/resale
     en/pages/consumer-business/articles/retail-
     recession.html                                       16. Deloitte, “Let the holiday (re)sales begin,
                                                              https://www2.deloitte.com/us/en/pages/
3.   Deloitte, “2019 Deloitte holiday retail survey”          consumer-business/articles/let-the-holiday-
                                                              resale-begin.html
4.   CNBC, “Walmart, Target shares tumble as
     Amazon announces one-day shipping for                17. RetailDive, “Neiman Marcus takes minority
     Prime members,” April 26, 2019,                          stake in resale site Fashionphile,” April 17, 2019,
     https://www.cnbc.com/2019/04/26/amazons-                 https://www.retaildive.com/news/neiman-
     free-one-day-shipping-puts-the-pressure-on-              marcus-takes-minority-stake-in-resale-site-
     walmart-target.html                                      fashionphile/552936

5.   Haver Analytics, sourced November 19, 2019. All      18. RetailDive, “Ralph Lauren turns to rental, resale
     data other than forecasts is sourced from Haver          as turnaround sticks,” November 7, 2019,
     Analytics.                                               https://www.retaildive.com/news/ralph-
                                                              lauren-turns-to-rental-resale-as-turnaround-
6.   Dr. Daniel Bachman and Dr. Rumki Majumdar,               sticks/566831
     “United States Economic Forecast: 3rd Quarter
     2019,” Deloitte Insights, September 17, 2019,        19. US Census Bureau, Quarterly Retail E-Commerce
     https://www2.deloitte.com/us/en/insights/                Sales, 3rd Quarter 2019, Nov 19, 2019,
     economy/us-economic-forecast/united-states-              https://www.census.gov/retail/mrts/www/data/
     outlook-analysis.html. All Deloitte US economic          pdf/ec_current.pdf
     forecasts for 2019 and 2020 are sourced from
     this document.                                       20. Deloitte, “2019 Deloitte retail holiday survey”

                                                          21. Amazon, “Introducing Amazon 4-star,”
7.   Deloitte, “2020 Global Marketing Trends,”
                                                              September 26, 2018, https://blog.aboutamazon.
     https://www2.deloitte.com/us/en/insights/
                                                              com/shopping/amazon-4-star
     topics/marketing-and-sales-operations/global-
     marketing-trends.html                                22. SteinMart, “Stein Mart Launches Mad Mobile’s
                                                              Concierge Solution,” August 8, 2019,
8.   Deloitte, “2019 Deloitte holiday retail survey”
                                                              https://ir.steinmart.com/news-releases/
9.   Supermarket News, “Shoppers would go local for           news-release-details/stein-mart-launches-mad-
     same-day delivery,” November 11, 2019, https://          mobiles-concierge-solution
     www.supermarketnews.com/online-retail/
     shoppers-would-go-local-same-day-delivery            23. GroceryDive, “In-store robots could get smarter
                                                              with 5G connectivity,” July 31, 2019, https://www.
10. Adobe, “2019 Holiday Shopping Trends,”                    grocerydive.com/news/in-store-robots-could-
    https://www.adobe.com/experience-cloud/                   get-smarter-with-5g-connectivity/559882
    digital-insights/holiday-shopping-report.html
                                                          24. Kohl's, “Kohl’s Now Accepts Amazon Returns at
11. Adobe, “Why China’s Popular Singles’ Day Hasn’t           All Stores,” July 7, 2019, https://corporate.kohls.
    Taken Off in the US,” November 12, 2019,                  com/news/archive-/2019/july/kohl-s-now-
    https://theblog.adobe.com/why-chinas-popular-             accepts-amazon-returns-at-all-stores-
    singles-day-hasnt-taken-off-in-the-us
                                                          25. inMarket, inSights Report: How Much Has Kohl's
12. Adobe, “2019 Holiday Shopping Trends”                     Partnership with Amazon Affected Their Foot
                                                              Traffic?, August 2019, https://cdn2.hubspot.
13. PRNewswire, “Study Finds Markdowns Cost                   net/hubfs/2750857/Reports_Whitepapers_
    U.S. Retailers $300 Billion in Revenues in 2018,”         Webinars/inMarket%20inSights%20Amazon%20
    February 6, 2019, https://www.prnewswire.                 and%20Kohls%20Partnership%20Report.pdf
    com/news-releases/study-finds-markdowns-
    cost-us-retailers-300-billion-in-revenues-
    in-2018-300790350.html

10
2020 retail industry outlook | Convenience as a promise

Local Contact- CHILE                            Authors
Miguel Pochat                                   Rod Sides                                    Nithya Swaminathan
Chile Consumer Industry Leader                  Vice chairman                                Senior manager
Deloitte LLP                                    US Retail & Wholesale Distribution leader    Deloitte Consumer Industry Center
+56 227 298 738                                 Deloitte LLP                                 Deloitte Services LP
mpochat@deloitte.com                            +1 704 887 1505                              +1 312 420 8875
                                                rsides@deloitte.com                          niswaminathan@deloitte.com

    Contributing authors and Retail leadership
    Kim Frazier                                         Daniel Bachman                                  Jamie Lawrence
    Principal                                           Senior manager                                  Managing director
    US Consulting leader                                Deloitte Services LP                            Deloitte Consulting LLP
    Retail, Wholesale & Distribution
    Deloitte Consulting LLP                             Bill Kammerer
                                                                                                        Shashi Yadavalli
                                                        Principal
                                                                                                        Principal
    Matt Marsh                                          Deloitte Consulting LLP
                                                                                                        Deloitte Consulting LLP
    Partner
    Global and US Risk &                                Robert Harrold
                                                                                                        Jeff Simpson
    Financial Advisory leader                           Senior manager
                                                                                                        Principal
    Retail, Wholesale & Distribution                    Deloitte Consulting LLP
                                                                                                        Deloitte Consulting LLP
    Deloitte & Touche LLP
                                                        Anthony Jardim
                                                                                                        Bryan Furman
    Jonathan Rothman                                    Principal
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    Partner                                             Deloitte Consulting LLP
                                                                                                        Deloitte Services LP
    US Audit & Assurance leader
    Retail, Wholesale & Distribution                    Jean-Emmanuel Biondi
                                                                                                        Kim Chook
    Deloitte & Touche LLP                               Principal
                                                                                                        Marketing specialist
                                                        Deloitte Consulting LLP
                                                                                                        Deloitte Services LP
    Clarke Norton
    Principal                                           Steven Nevill
    US Tax leader                                       Principal
    Retail, Wholesale & Distribution                    Deloitte Consulting LLP
    Deloitte Tax LLP

    Deloitte Consumer Industry Center
    Rama Krishna V. Sangadi                             Arun Tom
    Executive manager                                   Manager
    Deloitte Support Services India Pvt. Ltd.           Deloitte Support Services India Pvt. Ltd.

                                                                                                                                                        11
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