Kega

Retail reality

The modern retail organisation

It’s been regular headline news in recent times: nationwide retailers going out of business. The official reasons for these bankruptcies differ enormously: from investors who pulled the plug, to the upcoming competition of online players, and even a party who “thought they should just sit it out and weather the storm”.

However different the official arguments businesses have for going bankrupt, the fact remains that each and every one of these retailers failed in one specific area: being relevant in the retail landscape of 2016.

But has the change really been that big? Yes and no. Retail is still retail: there is one party who has a demand for goods and a party who supplies goods. Or, in other words, a market. Nothing new here. Only now the rules have changed entirely. The most important reason: the consumer, the demanding party, now possesses much more knowledge and information about products than in the old days. And has 24/7 access to this information.

Most markets in 2016 are a lot more transparent than they were back in the 90s, leading to declining sales prices and lower margins. Perhaps with the exception of a tiny Gallic village named “the kitchen suppliers”, pretty much every retail segment has been affected.

Next to the fact that information is always readily available, the use of laptops, tablets and smartphones now makes it possible for consumers to shop 24/7 too. And now the online retailers, the pure players, have gone ahead and taught the consumer that products can also be delivered all the time and to any location, and often free of charge to boot.

At first glance, the retailers that went bust seemed to have adapted quite well to the current market. They had an online store and the marketing message was generally the same across all channels. They also all had a Facebook page, most of them had an app as well, and the majority offered cross-channel services such as return to store, click & collect and in-store ordering via endless aisles. So where did it go wrong?

Besides the retailers who didn’t fare well, there are those who are thriving like never before in these changing times, sometimes with growth rate percentages reaching double digits each year. So what are they doing differently?

It all starts with the profile of the company. All successful retailers of today know very well who they are or who they want to be and understand how to get this message across to the consumer. Whether it’s Action (discount & surprise), Coolblue (service) or Zara/H&M (fast fashion), the consumer knows exactly what to expect.

The main difference, however, lies in the organisation itself, the core of the business. Most retailers are stuck in an organisational structure that simply isn’t suited to today’s business needs. Successful retail organisations in 2016 are more flexible and are capable of quickly responding to changes on the market. Lean & Mean and Just In Time are key terms in this success.

One thing that stands in the way of flexibility is the antiquated organisational structure of many retailers. E-commerce and other digital services are often times poorly integrated into the traditional business departments, such as purchasing, merchandise, logistics and sales. This leads to work that is duplicated, done too late or sometimes not done at all. Let’s take product information, which is often familiar to the people in the purchasing department, but is rarely as well-grounded in the e-commerce division. A blueprint for the ideal retail organisation simply doesn’t exist, but every business should be asking itself just how effective its current structure really is.

Modern retailers also purchase differently. No more bulk orders which are placed months and sometimes years in advance, but mainly smaller batches with shorter delivery times. This allows simple testing of what works and what doesn’t. Items that sell well can then be reordered quickly. By adapting the supply to better meet the demand, the whole product range becomes more relevant for the consumer and more items can therefore be sold at full retail price.

Absolutely essential in all this is a merchandise department that keeps daily track of the sales and reports on the turnaround speed and the effect that the price has on this. Dynamic pricing is not something for the future, it’s for right now.

This brings us to the next essential component: the role of data. Modern retail organisations measure everything. And we mean everything. Information on revenue, the effectiveness of marketing efforts, customer behaviour, stock levels, performance in logistics. You name it, it’s measurable. All this information has to always be readily available to help make quick and well-founded business decisions.

Whereas the gut feeling of the entrepreneur or CEO is often the leading factor in traditional retail organisations, it has far less influence on the decision-making process in modern organisations. Experience and instinct are still important, but increasingly serve merely as input for a test. This means that more business decisions are supported by data, as opposed to basing them purely on assumptions and intuition.

The speed at which decisions are made is (much) higher in successful retailers than it is with their traditional counterparts. For many of these conventional organisations it is customary to hold meetings with stakeholders, for example a commercial meeting, every three to four weeks. Many modern businesses do this on a daily basis, mostly just to quickly go through the figures and adjust where necessary. Getting everyone together in one room every day is almost impossible to do, but video conferencing is an ideal substitute.

All these changes also ask more of the staff in the way of independence, and therefore also demand clear job descriptions on which the staff can be assessed. The increased role of data, too, asks for a different type of staff at the head office. The emphasis in the stores is leaning more and more towards service and less on pure sales. This does raise the question whether that number 1 salesperson will still be the best employee in the future.

The most important condition to be a successful retailer in the second decade of the current millennium is, however, a Board of Directors that actually understands what’s happening on the market. And one that has the guts to convert the changes the company needs into policies. This means it is also necessary for the changes in direction to be clear to the entire company, both in words and action. No support means no change.

Kega

The modern retail organisation

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