How can retailers fund strategic priorities as challenges abound?
More than two years into the novel coronavirus pandemic and retailers are still searching for answers.
“It’s been difficult to plan inventory flow with much precision,” said Nordstrom CEO Erik Nordstrom, last August. “We do not expect those conditions to change anytime soon, so it’s really on us to find ways of mitigating that.”
Mr. Nordstrom’s words, as reported by Sourcing Journal, encapsulate the ongoing planning and execution challenges facing all retailers today.
As COVID and lockdowns emerged in early 2020, panic buying overtook consumers, making it almost impossible to get an accurate read on demand. This was followed by a shift in consumer preferences for zero touch shopping and e-commerce, leaving many unable to pivot.
Since then, no retailer has been spared challenges. Activist investors have promoted the strategy of traditional retailers spinning off e-commerce operations in the spirit of higher valuations. Ongoing supply disruptions combined with the high cost of shipping has put a damper on retailers’ growth and margin objectives.
Prioritization is challenging, especially when lacking resources to compete toe-to-toe with market leaders. Many retailers, defined as “laggards” in Deloitte’s 2022 retail industry outlook survey, are unable to competitively fund the following priorities:
- Resetting physical stores for omnichannel;
- Modernizing the supply chain;
- Tapping alternative higher-margin revenue streams;
- Enhancing data privacy and security;
- Making the workforce future-ready;
- Incorporating ESG practices;
- Engaging in mergers and acquisitions.
Market leaders on the other hand, are shown to have the experience, expertise and resources to advance on all these fronts.
Many retailers are forced to make tradeoffs they can ill afford, even as all face immediate opportunities to improve outcomes with advanced analytics applied at scale (up to 20 percent revenue and margin improvement depending on the use case, according to McKinsey & Company in October 2021).
The question is how to proceed given the skills and experience of a retailer’s analysts, data scientists and data-driven managers — essentially, a retailer’s analytics maturity.
Data reported by Consumer Goods Technology as part of an annual survey demonstrates that most retailers are not yet applying predictive or prescriptive analytic methods like artificial intelligence to use cases such as demand forecasting, assortment planning and inventory management.
This makes sense considering Deloitte’s concern “that nearly half of executives expect a shortage in skilled workers for IT and analytics positions — needed roles that require greater investment and will likely be the foundation of digitally enabled retail.”
- Nordstrom CEO: ‘It’s Been Difficult to Plan Inventory Flow With Much Precision’ – Sourcing Journal
- 2022 retail industry outlook – Deloitte
- Jumpstarting value creation with data and analytics in fashion and luxury – McKinsey & Company
- Meeting Adversity With Data – Consumer Goods Technology
DISCUSSION QUESTIONS: What can retailers do to competitively fund the initiatives captured in Deloitte’s survey? How can retailers realize the benefits of analytics, like artificial intelligence, given the challenges of hiring skilled workers?