To be future ready in the retail sector, businesses will need to have “an air traffic control” capability to have visibility on what’s happening in and around their business While it has been tough navigating the past couple of years on survival mode, ‘What got you here, won’t get you to your next goal.’
Many retailers still around, have pivoted successfully to adapt to ongoing challenges like COVID, and we know some made it through better than others.
The bad news is that it’s not getting any easier. For example, we’ve been working with a client who has an award-winning online site they set-up in the height of the pandemic. While the company showed how quickly they can get work done and the functionality of the online shopping experience is great, the site lacks the ‘feel’ that their brand stands for. For this client, the next opportunity is about ensuring the online experience aligns with the brand and the physical store experience.
In another example, a client of ours has several initiatives, across different teams, essentially competing for who is addressing the most important customer requirements. The danger is that those in the business the longest, trust their gut versus having customer data to base their decisions.
These cases were less of a concern during the pandemic, but we are now likely looking at tough years ahead for some and these issues could be the difference between those that thrive and those that struggle.
Challenges facing retailers in Australia and New Zealand
Prior to the pandemic, the Australian retail industry was on a growth trajectory with approximately AUD $329.6 billion turned over in 2019, that’s AUD $9 billion more than the value it recorded in the previous year. But a possible drop in consumer confidence, which leads to a decline in discretionary spending, has retailers worried.
On top of this, retailers are up against numerous other challenges, namely increasing inflation, supply chain shortages, shipping costs and rising fuel prices, the ongoing COVID situation as well as the difficulty of staffing and skills shortages.
The sector is in desperate need for structural change. Retail businesses need to now focus on the ‘people side’ of organisational transformation by navigating, developing, and executing a strategy that is clear and practical in uncertain times and identifying the opportunity to work differently for better outcomes.
Here are some important tips to follow to find comfort in uncertainty across five areas.
- Be future-ready
The characteristics we see in future-ready retail organisations is that they have a deep understanding of their supply chains. A practical exercise is to have your CFO, buyer or store manager tasked with reviewing what stakeholders require from your supply chain and where there are gaps in expectations.
2. Sharpen your customer focus
If we are serious, we need to have the ability to engage with, listen and collate evidence from customers and link that to internal decision-making.
One option is to start with customer journey mapping’—what are customers valuing vs what is causing them friction or pain, and ensure you can line up internal initiatives to address their top needs.
Manual work is expensive. When it comes to customers, careful design and delivery of automated solutions are critical to balance cost optimisation and customer satisfaction. e.g. Automation/machine learning driven next best offer for complementary products, such as ads for milk after someone has purchased coffee, is a common shopping trend used by most retailers in their digital offerings, but when done poorly can be annoying for customers.
A simple exercise to understand the potential of automation in your business is to look across the organisation and review the activities of each team to assess against potential benefit and complexity, then explore one or two options to prove the value.
4. Employee value proposition
This describes the environment that makes it attractive to new talent out there in the wider world and helps keep current employees positively engaged. It is about maintaining a healthy culture and well-being of your teams. This isn’t just a HR thing; it comes down to the capability of your managers and team leaders.
Target your people managers to deliver focused development plans that supports their teams. At Q5 we offer a range of development courses, including ‘leading in a hybrid world’ or ‘change leadership’ that are tailored to leadership in this fast evolving space.
5. Business agility/nimbleness
This entails building in flexibility through small, regular changes in how you operate your business. This requires visibility of customer feedback and the empowerment of teams to adjust and make improvements.
Start with a specific area (channel, customer segment) and identify how to track performance regularly. Set-up a pilot team to explore how to improve performance and develop new ways of workings.
In addition, across each of these areas you need to be able to answer two specific questions.
How will the initiative drive future value and how does this initiative or change support our strategy? The latter part is what we refer to as the ‘narrative of the strategy’ – this tells the story of where the business has come from, what opportunities or challenges it faces and why the current portfolio of initiatives will lead us to our goals.
Those elements help you identify ‘what to focus on’…however when it comes to ‘how to deliver it’ consider these practices to make sure change is sustainable:
- Adopt an approach of piloting and experimentation
- Empower a cross-functional team of SME’s to champion change
- Clear pathways for individuals and team to make recommendations to the Executive
- Create capacity to act strategically by ruthlessly saying ‘no’ or stopping low value initiatives
- Develop a consistent method to how change happens and have clear governance to provide ‘air traffic control’ for what’s going on in the business
Vickesh Kambaran is associate partner and global head of organisation design at Q5.