It is increasingly clear that a “wash, rinse, repeat” business model doesn’t work anymore in retail. Both consumer demand and supply have become less predictable, and as a result, retailers seek to improve their operations to be more agile and resilient, to ensure more sustainable growth.  RSR’s latest benchmark (sponsored by ESRI), Agility, Resiliency, And Sustainability As A Strategy In Consumer-Facing Businesses, sought to uncover what retail decision makers are doing to address these challenges.

From the insights highlighted in the study, we offered a series of recommendations to assist retailers in their efforts to achieve greater agility, resilience, and sustainability.  Here they are:

It’s Not Just About Winning, It’s About Surviving

The RSR team has observed for years that a key difference between over-performing “Retail Winners” and other retailers is that Winners view their information assets as strategic weapons, whereas average and under-performers use those assets tactically, typically to control operations. In the current environment, it’s better to say that survivors use information assets strategically, while failing retailers can’t or don’t.

Achieving sustainable growth is entirely dependent on data and insights. And importantly, customer analytics are at the center of Winners’ decision-making processes.

Consumers’ Sustainability Concerns Are Vital To Achieving Sustainable Business Growth

Retailers prioritize several qualitative attributes of sustainability – ethical sourcing, environmentally conscious practices, social responsibility when it comes to factory labor – over quantitative attributes like improving energy efficiency, eliminating waste, reducing the carbon footprint, and becoming carbon neutral. They set their priorities because those are things that consumers increasingly care about. At best it’s early days before any of those priorities become real. But it’s a start.

IT Investments Are Overdue

Retailers have historically been stingy about IT spending. Before the global pandemic of 2020-22, some studies pegged retail IT spending at about 1.5% of sales, compared to a cross-industry average of 4%. Before 2020, retail was still arguably a physical business – approximately 85% of all sales happened in the stores. After 2020, a huge percentage of consumer shifted to the digital domain, even if many purchases ultimately were completed in a store. Now, the new storefront is digital. To paraphrase: “this is not your father’s IT”.

The new selling environment requires a very different IT posture than in the past – starting with big new investments in data analysis tools, techniques, and expertise. Retailers’ ability to respond quickly to changes in both supply and demand depend on it.

Eyes On The Supply Chain

Although in this study retailers prioritize the consumer side of the business even more than the supply side, the ability to “monitor the supply chain in real time and react as necessary”, use “digital twin <technologies>… to evaluate disruption scenarios and prepare supply chain to minimize financial impact”, and to enable “real time inventory management/visibility” are all top-of-mind capabilities for retailers. And, they are all IT dependent.

Scenario Planning / Predictive Modeling Is Vital

Three- quarters of Winners view their ability to use predictive modeling techniques as key to helping them to react much more quicky to supply chain disruptions and sudden shifts in demand. Less than one-half (45%) of average and under-performers view this capability as “very important”. They are wrong.

Consumers Are Talking – Pay Attention

Consumers generate a huge amount of information during their digitally enabled shopping journeys that can be used by retailers to understand how, when, where, and why shoppers make the choices they do. But shoppers aren’t feeling the love. In fact, an October 2020 consumer study conducted by RSR revealed that 54% of consumers believe that “my favorite retailers don’t know how to engage with me digitally”, and 68% thank that “brands that I love don’t know enough about my shopping habits to identify me as one of their best consumers.” That is a damning indictment.

Retailers clearly recognize that this represents a major challenge to their continued growth. Interestingly, while 80% of Winners rate “customer analytics” as very important to sustainable growth, even 70% of average and under-performers agree. Everyone needs to get on board.

Don’t Give Up On Efficiency

Retailers are focusing on top line growth, i.e., selling more, than they are on achieving and maintaining operational efficiencies. That may be necessary in the short term given the state of the selling environment. But retailers cannot lose sight of more “traditional” objectives, for example to optimize supply networks to deliver products to market at the lowest possible cost of goods. It shouldn’t be mutually exclusive to be either agile or to be profitable. Retailers need to be both.

Read The Report

Like every RSR’s benchmark, Agility, Resiliency, And Sustainability As A Strategy In Consumer-Facing Businesses is free to all.  We encourage you to download the report and recommend it to your colleagues. And of course, your feedback is always welcomed!