The industry target of achieving over US$ 50 billion revenue from modern retail by 2015 still seems to be realistic which means modern retail is here to grow. However, I definitely expect a change in consumer buying behavior to emerge very soon, and every consumer will be much smarter with their wallet and look for higher value for money spent. In my view, consumer traffic in modern retail is irreversible and consumers will continue to explore destinations to extract the best value for their shopping spend.
Large players which have invested in their core infrastructure including supply chain network will be looking at revised growth strategies. I see this as a phase in which some exciting opportunities have emerged for retailers. Since the panic has been triggered by an anticipated drop in consumer spend, this can be a great opportunity to take another look at the business strategy with the consumer firmly at the centre this time.
Retailers must now begin to start giving importance to in-store service as the first step in this direction. If retailers are able to develop a clear visibility of what exactly consumers expect from their brand, it will help them to design and implement effective customer-service programs for the store staff. They will also be able to put in place an effective system to deliver consistent and measurable service.
Consumers are likely to choose shopping destinations with pleasant memories and avoid those where they have had not very good experiences. The financial effect of a poor consumer experience can be very damaging even though it may not be visible in a short span of time. Consumers are typically likely to visit a department store only once in 3 or 4 months and it would take a few months before the bad experiences are reflected in lagging sales. By then it would most likely be irreversible, and would certainly require a great deal of effort and expense to address.
To prevent such consumer erosion, retailers must put a complaint management system in place. This would provide a listening post for issues at the store, city and regional levels. To be truly effective, such a system must promptly route complaints to the appropriate business role and ensure timely response and management accountability.
The next step retailers must take is more critical. They must set up a sensitive measurement system which is alert to unwritten complaints that occur when the promise of a great shopping experience is not met. While a complaint management system picks up only routine failures (such as non-availability, staff service etc.) failures in providing excellent service during each and every consumer transaction creates silent complaints. As these complaints accumulate they can become potentially very damaging for the business.
Having covered in-store service aspects and related practices, retailers will need to now focus on making efforts towards consumer-oriented merchandise-planning, merchandise allocation and pricing and promotions practices.
During this time when every consumer is actually counting the basket value while shopping, we expect that consumers would not indulge much in impulse buying, and most of the money they spend in a store will be as per their planned shopping lists. This in my opinion can be a great opportunity to enhance basket value by delivering a great consumer shopping experience. Using historic shopping data of different consumer groups and profiles, retailers can drive accurate merchandise planning and allocation models to ensure that merchandise available in the store will lead to a near match of the planned shopping list each consumer carries. This will not only enhance the consumer shopping experience but also help to make inventory and supply-chain cycles more efficient.
This deeper insight into consumer needs will also help retailers design targeted pricing and promotions for each group and profile of consumers. Today consumers are used to shopping as per general pricing, or on promotions intended for all consumers visiting the store. Many of these promotions are not popular since they meet consumer expectations or align with the shopping list. Once the promotions are designed based on consumer needs they will not just be more effective but also enhance trust between the consumer and the retailer.
Finally, this deeper understanding of consumer buying habits will also build sufficient knowledge at the retailer end to develop a consumer-specific private label for each category, and this can help retailers to broaden their private-label portfolio. This will not only lead to meeting consumer demands competitively but also create new opportunities for increased profitability.