The necessary transformation of Retail

The necessary transformation of Retail

In the tumult of the recent economic upheaval, prestigious names in fashion and home furnishings such as Camaïeu, Burton of London, Habitat and San Marina have been forced to close their doors. More retailers have succumbed to these troubled times than can be counted on the fingers of one hand. Their closure has resulted in the loss of over 4,000 jobs, a figure that is a grim testament to the challenges they have faced.

There are many reasons for this economic debacle, all closely linked to the aftermath of the pandemic, inflation, rising production costs, rents and salaries, and the exacerbated emergence of second-hand and fast fashion.

However, some of these brands have been able to find buyers determined to breathe new life into them, although not all of their establishments and staff have been systematically preserved. These include Minelli and Kookai.

Other brands, such as Naf-Naf, are still struggling in the midst of receivership proceedings, looking for a viable way out. Sergent Major, in a similar situation, was forced to take this route, placing its fate in the hands of the courts on 14 March, with an observation period running until 16 September.

However, other market players are trying to weather the storm by making strategic closures to cut costs. Princesse Tam Tam, Comptoir des Cotonniers and Pimkie have all announced the imminent closure of a large number of stores and jobs over the coming year. Pimkie's management has stated its fervent desire to reinvent itself and win back the hearts of 18-25 year olds.

On 5 February, the IKKS group announced its intention to reduce its workforce and close shops in response to a "complex economic situation". According to a press release sent to AFP, this job-saving plan could affect 202 out of 1,328 employees in France, and lead to the closure of 77 of the group's 604 shops and corners.

All retail sectors of retail are affected, including clothing, furniture, home decoration, leisure and all forms of commerce (e-commerce and brick-and-mortar). In order to remain competitive, the retail sector must undergo a significant change. The aim of this article is to provide some food for thought on how to thrive in an ever-changing retail landscape. 

1. Reviewing Governance and Organizational Models

Many factors contribute to failure, but the inability to adapt to fundamental shifts in consumer behavior and societal changes is a significant one. The primary challenge lies in governance and organizational structures that are characterized by sluggish responsiveness, reluctance to take risks, and reluctance to make timely investments. Governance in established companies often involves complexity and consensus-building, resulting in prolonged decision-making processes. It is therefore becoming increasingly crucial to foster agility, speed, and efficiency within organizations. Transforming organizational structures is essential to instill the capacity for decisive action and accountability in specific domains.

A tangible illustration of this transformation can be seen in Carrefour's approach, which emulates Walmart's adoption of a methodological framework (Four in the Box) to accelerate its digital initiatives. Rethinking organizational dynamics, particularly at the operational level, requires adopting a project-oriented mindset.

2. Engaging Closely with Consumers

In France and across Europe, the mass retailing model initially thrived on offering a wide range of products, with hypermarkets strategically located on the outskirts of urban areas. This model, heavily influenced by the American approach, centered around the use of automobiles and shopping as a recreational activity, assuming that consumers enjoyed traveling to retail destinations and spending leisure time there.

Since then, however, societal changes have significantly reshaped consumer behavior. Shopping centers must now evolve into destinations that seamlessly integrate entertainment, dining, and retail experiences. Consumers are increasingly looking for accelerated shopping experiences, whether online or in physical stores. A study conducted by Sensefuel - Survey of product search habits on e-commerce websites, 2023 edition revealed that 62% of consumers want personalized experiences and expect retail websites to understand their preferences and adapt product displays accordingly.

Whether through an e-commerce platform or a terminal, advancements in technology now enable hyper-personalized access to products and services. Retailers that have consistently invested in adapting to these trends have demonstrated greater resilience in times of crises. They leverage their foot traffic by effectively converting visitors and fostering loyalty through optimized experiences.

Retailers are required to create immersive and personalized experiences. Using data to understand individual needs and predict preferences is a crucial lever that cannot be overlooked. This approach is essential to rebuilding strong connections with consumers.

3. Emphasize Your Positioning

The rise of mindful consumption is another significant trend in recent years. It has led to a segmentation of mass consumption, with consumers seeking meaningful connections with distributors or brands aligned with their values. Some prioritize the lowest price, while others seek the best value for their money or value the social engagement of a brand or retailer. This fragmentation of consumer dynamics reduces the market share of mass-market brands. As a result, distinctive positioning becomes essential, exemplified by slogans such as Walmart's "Low prices every day" or Kiabi's "Fashion at low prices," or by curated product selections and a commitment to ethical supply chains.

At the heart of this trend is the importance of clarity in a retailer's positioning. It's about delivering on the brand's promise to provide the best experience for consumers.

However, the lure of expanding online leads retailers to succumb to the temptation of the marketplace, driven by the need to transform the visit. But shouldn't acquisition strategies be refined and targeted? In fact, the marketplace presents a dual risk: it can dilute a retailer's positioning by failing to meet the promise made to the inaccurately targeted visitor, or worse, result in customer attrition by muddling the value proposition. While the marketplace may offer a shortcut to immediate growth, it also fundamentally changes a company's processes and margin model. Internal competition frequently arises from conflicting objectives set by management, pitting the retailer's offerings against those of the marketplace. 

Retailers therefore need to ask themselves the following questions: What are the elements that forge a solid bond between our brand and consumers? What makes consumers choose our brand?

The answer to these questions should become the arbitration criterion, the driver of every development project, the guiding principle of any decision. It must drive day-to-day actions and be present at all sales events. It is essential to reinvest in the creation of the range, selecting products that fit our positioning and creating unique, differentiating private label products.

4. Restoring Consumer Confidence

Today's consumers are more sophisticated —they've become "consumactors." They expect their preferences to be anticipated and their motivations for engaging with a brand to be understood. We've transitioned from the era of mass marketing to one-to-one marketing. The intelligent use of data offers retailers to personalize their offers even more effectively. By understanding individual purchasing behaviors, preferences, and trends, retailers can tailor products and recommendations to resonate uniquely with each customer. Trust is unforgiving of errors, so it's imperative that confidentiality rules are strictly adhered to.

5. Invest in practical technologies

While tech-savvy retailers may be in the minority, all retailers must leverage technology to achieve their business objectives. When selecting and implementing technologies, it's essential to follow a few simple criteria that are relevant in every context and understood by everyone in the company. Believing that ownership of technology alone confers a competitive advantage is often a fallacy, given the rapid pace of the marketplace and the resources required to keep up. Often, the initial investment should be directed at identifying the problem, with the choice of solution based on pragmatic considerations such as implementation speed and cost, skill dependencies, and measurable business benefits. Reinvesting in practical technology is crucial.

In conclusion, retail transformation is not an option but a necessity to remain relevant in an ever-changing marketplace. By embracing technological advancements, prioritizing the customer experience, and investing in the supply chain, retailers can chart a path to a prosperous and dynamic future.

Photo credit: ©istock

This expert opinion has been published exclusively in LSA, the French weekly trade magazine dedicated to news and analysis of trends in the food industry, retail, mass distribution and consumer affairs.