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RSR’s Latest Benchmark: The New Importance Of Location Intelligence

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One of the questions we’ve been getting a lot lately is about whether retailers are curtailing or accelerating their investments in new technologies because of the dramatic changes in the marketplace triggered by the coronavirus pandemic. Like everything in retail, there is no one “right” answer, but here’s what we can say with certainty: the pandemic has accelerated whatever direction each retailer was already going in. For example, big department stores were already in trouble- now they’re in crisis. Fashion retailers were already being rocked by soft demand resulting from rapidly changing consumer lifestyles- now they are disappearing at a shocking rate.

For some retailers – particularly those that had come to the realization that their stores have a new and important role to play in a digitally enabled omnichannel selling environment – the pandemic has acted as an accelerant to the changes they already knew they needed to make. The favorite example is grocery stores: our benchmark data from the last couple of years clearly shows that FMCG retailers knew that they needed to reposition their stores to be able to efficiently fulfill “buy-online-pickup-instore” customer orders. But as long as the volume of orders was below 10% of total sales, those retailers thought that they had more time to redesign and optimize their operational processes. Now, with volumes approaching 40% of all sales, they have to move much faster to make instore fulfillment of digital orders a profitable activity. But the challenge goes well beyond that; changing from a store-centric selling model to a “buy-anywhere-get-anywhere” one challenges virtually every operational process, from planning all the way through to accepting payments for goods and services.

To be successful in today’s fast changing world, retailers need to be able to “see” what’s happening in and around their businesses in real time, so that they can react very quickly to changes that affect their business outcomes. And the only way to really “see” across the breadth of the enterprise is by analyzing digital representations of real things in real time, just like commuters can “see” traffic flows on digital roadmaps in the dashboards of their cars.

Previous benchmarks by RSR in the last few years have uncovered how over-performing “Retail Winners” were using geo-location data to manage their operations at a hyper-local level. Using the dashboard analogy again, the systems of old might have reported how many cars traveled from point A to point B, and how long average trip was yesterday compared to other days. That’s not too useful for a driver trying to avoid congestion right now. The same applies in retail; last week’s sales results don’t necessarily do much for operators who want to know what’s going on across the enterprise right now.

This brings me to our latest benchmark study, Business Continuity And Recovery In The Age Of COVID-19: The Role Of Location Intelligence. The study, sponsored by esri, sought to find the answer to a new question that is on retailers’ minds now, How do we run retail operations in the midst of a pandemic that can flare up in unexpected places, die down, and then flare up again? Retail Winners believe that developing “location intelligence” is essential to being able to answer that question. We wanted to understand the most significant challenges retailers face while it rages on, the opportunities they see, and the technologies they can infuse with location intelligence to get the right answers to questions like:

  • What does retail business continuity look like in the age of COVID-19?
  • Does COVID present an opportunity to shed unprofitable stores?
  • Where are the best locations that retailers can draw both employees and customers from?
  • Given the likely continued rise in contactless sales (or eCommerce, or buy online, pick up at curbside or in-store to use the classic terms), should retailers follow the lead of companies like Home Depot and add distribution centers close to the point of demand?
  • What will retailers do when other inevitable disasters strike, such as hurricanes, blizzards, influenza, wildfires and things we haven’t even imagined yet?

The new study reveals that retailers believe that the virus will have a significant impact on our world well into 2021. Here’s some more of what the study revealed:

  • Retailers selling fast moving consumer goods (FMCG) seek alternative sources in the event of large manufacturer disruptions (47% vs. only 27% of retailers selling fashion merchandise).
  • Unsurprisingly, with their sudden emergence as Omnichannel players, FMCG retailers are also concerned about optimizing profitability of order fulfillment. This is not a new concern; making those revenue dollars profitable has been a persistent challenge. There just didn’t seem to be enough margin in each item to make it work. Walmart has certainly cracked the code; consistent investments in technology and its spectacularly efficient supply chain has given it an enormous boon on both the top- and bottom-lines.
  • Safety – both of customers and employees – is a far more significant concern to all other verticals. Almost half of retailers selling General Merchandise cite health and safety of frontline teams and employees atop their list of concerns. Retailers selling fashion or specialty goods worry far more about customer safety and associated liabilities (46% cite this as a top-three business challenge). RSR believes that retailers selling fast moving consumer goods have had six months of effort to keep employees and customers safe. Other verticals have only recently re-opened, and the notion of social distancing in malls and clothing stores just doesn’t seem so simple.
  • Retailers selling general merchandise and those selling apparel are faced with an interesting dilemma. While they are quite experienced in the world of BOPIS (buy online, pick up in store), they have little to no experience with buying online, picking up curbside. In fact, most malls have no native facilities for this at all. For 35% of those retailers, “determining the best pickup locations” as a top three concern.

COVID-19 is undoubtedly a disaster of epic and global proportions, but there are opportunities hidden in the disaster. There is general concurrence among all respondents on some opportunities: those that imply using location-specific data to support safety, optimized inventory investment and faster response time as outbreaks occur. But there are some fascinating differences identified in the report, based on retail vertical:

  • FMCG retailers know that having the right product in the right place will drive customer loyalty and provide optimized return on their inventory investment.
  • Fashion and specialty retailers were locked down far longer, being considered non-essential, and still tend to hope for the more classical location analytics opportunity: localized assortments driving enhanced loyalty.
  • Retailers selling general merchandise have discovered just how fleeting customer loyalty really is. The events of recent months have only accelerated a trend long in progress: if the retailer of choice doesn’t have what a consumer wants, she’ll just go elsewhere. After all, the merchandise being sold by the majority of these retailers is not particularly unique and can be bought elsewhere. General merchants now hold no illusions on this matter. Hence, they, more than any other segment see that they can take advantage of new selling opportunities if they have the product in hand and can get it to the customer quickly.

We are all living through a time of unprecedented change. For retailers, sudden and massive disruptions in both supply and demand as a result of the COVID-19 pandemic have created an environment of great uncertainty. But in some important ways, the coronavirus has acted as an accelerant to changes that many retailers were already at least considering, and over-performing “Retail Winners” were already acting upon. For example, when it comes to using location data, Retail Winners are improving their capabilities to respond to sudden changes at a hyper-local level as they track the impact of the pandemic through their communities.

To find out more about how retailers are responding to the challenges and opportunities that COVID-19 has created by using insights created by location analytics, be sure to check out RSR’s latest benchmark study, Business Continuity And Recovery In The Age Of COVID-19: The Role Of Location Intelligence. As always, the report is free to all!

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Newsletter Articles September 1, 2020
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