Oracle :: Why 2018 will be a year of re ection and rejuvenation for retailers

Times are tough for retailers. The cost of running their business is rising, margins are shrinking as they compete with online players, and new technologies have lowered the barriers to entry for challenger brands that are disrupting sales models across virtually every product category.

Meanwhile, customers now have so much choice and information at their fingertips that they know more about products than the average salesperson. This shift in dynamic has flipped the buying journey on its head and redefined the role that retailers play in driving a purchase.

From new in-shop technologies to a better mobile experience, through to modernising supply chain and training employees, brands are transforming the way they work from the inside out to succeed in a customer-driven market. In our latest Retail Trends Report, we asked leading retail brands and influencers what 2018 has in store for one of the world's most exciting but challenging industries.

Rethinking the physical shop to build brand equity

Traditional bricks and mortar shops continue to shut their doors, yet we're also seeing a wave of new shops opening. Even online-only retailers are setting up physical locations to establish themselves as more than just an ecommerce platform and build a physical presence in consumers' lives.

The shop is no longer just a place to make sales, it has become a playground for shoppers to interact and feel products they're interested in. It also gives them access to services that aren't available online; a place where new technologies such as Virtual Reality make it possible to excite customers and build loyalty, as long as retailers can deliver a worthwhile experience.

We're seeing retail take cues from the restaurant industry, which realised that providing a shareworthy and Instagram-able experience is as important as the product itself. In the same way, stores need to deliver more than just products on shelf. You need to provide an experience that gets people excited.

Graham Soult

Retail analyst and founder, CannyInsights.com

Virtual reality can't just be a gimmick. The novelty will wear off quickly if you don't have a clear idea of how it will improve your customer experience. The technology has enormous potential, but no VR is still better than a clunky experience that turns people off.

Jerome Simonpietri

Co-founder, Virtuose Reality

Outmanoeuvring Goliath

There's no escaping the shadow cast by the Goliaths of online retail. With deep pockets and a sky's-the-limit approach to distribution, they've made it nearly impossible for retailers to compete on logistics or supply chain excellence.

But these companies are merely platforms. Many people will continue to vote with their wallets and buy from online marketplaces, but an equally large proportion of shoppers want more from the retail experience. They want to feel valued, which is why instead of competing with Amazon and Alibaba directly, brands will increasingly revert to what they're good at: a personalised service and genuine human interaction.

Look at Amazon's Christmas advert from 2017. There were no people in it. They don't even pretend to be a people-business. Their differentiators are ruthless efficiency and space-age logistics, and nobody can compete on these fronts. The real opportunity for retailers lies in delivering a human touch.

Caroline Baldwin

Editor, Essential Retail

Retailers have accepted that the playing field isn't level in terms of speed and fulfilment, which is why they're investing in new ways to bring categories to life in store through a bit of theatre and helpful human connections.

Bryan Roberts

Global insights director, TCC Global

Building a more connected and transparent supply chain

The easiest way to lose a customer is to promise that a product is available only to disappoint them after they've made a purchase to find out it's sold out. Retailers in the UK alone lost £3.9 billion due to late deliveries over the 2016 winter holiday period.

It is increasingly difficult to predict and deliver on consumer demand at a time when today's hot product can be tomorrow's inventory nightmare, and this pressure is only compounded by demand for monthly reports from stakeholders. Retailers need a modern supply chain that makes the unpredictable more predictable and that caters to every channel used by today's customers, and they need to take a closer look at their operational data to achieve this.

£3.9bn

Lost to late deliveries in 2016

Retailers can't just manage their operations as a pure cost-driven economy, especially with customers now judging them on fulfilment choice and service as much as on their purchase itself. If companies changed their objective from cost reduction to being voted the best consumer-oriented brand, their KPIs and approach would change dramatically, from the warehouse through to the shop.

Ruediger Hagedorn

Director, end-to-end value chain, The Consumer Goods Forum

The only way to beat Goliath is to understand how he operates. Leading online marketplaces excel at fulfilment, but focus on speed and convenience over choice. Last minute holiday shopping aside, consumers value flexibility as much as speed. That's where retailers can differentiate themselves, as long as they have a flexible distribution system to match.

Dominic Regan

Senior director logistics applications, Oracle EMEA

Dubai Duty Free has doubled in size since we built our automated distribution centre in 2008, and become much more fragmented as we expanded into three new concourses. Despite this tremendous growth, our automated processes have allowed us to maintain the same headcount in our distribution centre as we had ten years ago, even as the number of picks we handle annually has doubled to 2.5 million.

Ramesh Cidambi

Chief operating officer, Dubai Duty Free

Empowering employees to put service first

The people that retailers put on the front lines do as much to define how customers view their brand as their website, shop design, or the products themselves. Shoppers choose where to buy from based on the quality of service they receive, and retail employees need the tools and training to deliver on people's rising expectations.

After years of focussing on cost-reduction and efficiency to compete on price, the pendulum is swinging back to service. Retailers are re-investing profits in their people, and in the technologies they need to make the in-store experience as seamless as online purchasing.

Retailers can either differentiate themselves on price or service. Once a customer is in your store, service becomes your trump card, and you better make sure your employees are ready to deliver.

Andy Campbell

HCM strategy director, Oracle UK

Chatbots and AI are changing the way we serve customers, but people are inherently social and many still prefer to speak with a real human being. That’s why it’s crucial for retailers to empower their employees, putting relevant information at their fingertips to they can gain the insight and headspace they need to deliver better customer experiences.

Clare Bailey

Retail expert and managing director, Mobaro Retail

Weighing disruption against customer needs

Disruption is a constant in the retail industry. The latest wave of challengers is taking the burden of choice away from customers, instead offering them curated subscription services that align with their needs and lifestyle.

Companies such as Dollar Shave Club, Birch Box, and Hello Fresh have proven that subscription-based retail is a viable business model, and established retailers are rightfully exploring ways to compete. In addition to rethinking their distribution chain, this requires brands to gain a better understanding of what consumers want even before they want it, which is why they are investing more than ever in the analysis of customer data.

Our children's children are not going to believe the way we used to shop for groceries. They'll say: "Wait, you used to drive to an actual shop, push a trolley around trying to find what you needed, then load all the food into your car and drive back home to unload it all over again? You wasted your precious time on the planet doing that?!!!"

William Grimsey

Former CEO of Wickes, Iceland, and ParknShop Hong Kong

On one front, retailers are fighting new subscription-based players that are reshaping customer expectations and beginning to claw at their market share. On the other, they are seeing power shift away from them and back to manufacturers who are looking to cut out the middle man, reduce costs and develop a direct relationship with the customer.

Maria Prados

VP global retail, Worldpay

Get the full story

Find out what 2018 has in store for retail in our complete Retail Trends Report. Get tips from some of the industry's most respected influencers on what to expect in the year ahead, gain insight into how leading brands have set themselves apart from the pack, and learn how Oracle is helping retailers to rethink their approach and keep evolving at pace.

Download the report