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Urgency to Innovate: Retailers Deploy New Strategies to Engage Consumers

Posted By Administration, Thursday, April 14, 2016
Updated: Wednesday, April 13, 2016


by Leela Rao-Kataria, GT Nexus

Omni-channel has long been the main topic of discussion in the retail hemisphere. In the past few years, this dialogue has extended much further into specific strategies retailers need to deploy to engage their target demographics. It's all about the customer, and retailers are going "off plan" and trying approaches that have never before been deployed. Some retailers are making huge investments into e-commerce and user-friendly front end technology, while others are focusing on fulfillment options and competing with the industry's biggest threat – Amazon. Outlined below are some of the most innovative ways retailers are going after market share and staking their claim to permanency within the retail landscape.

Personalization
It's no secret that most retailers are spending their marketing dollars appealing to millennial customers, a key demographic that seeks personalization. Footwear giant Adidas was one of the earliest companies to satisfy this need with their "mi Adidas" customizable offering, allowing consumers to choose style, color, and design options.1 Some retailers have based their business models around this type of customization, previously unavailable for the average consumer. Blank Label and Indochina both offer a variety of dress shirts and business clothes that allow personalization of fabric, size, fit and color.2 It's a brilliant consumer base to go after because men traditionally don't like to spend too much time shopping in-store and these retailers eliminate the hectic in-store element.

Expansion into e-commerce platforms allows greater personalization. Once the product is in the store, it is already made, but by partaking in the design process, consumers can be really specific and get exactly what they want, how they want it – which is a crucial component of the omni-channel process. But upfront investment into developing robust e-commerce platforms with user ease and multi-faceted capabilities requires buy-in from fashion and apparel executives, some of whom are nervous to take the plunge. Is there a payoff? Department store leader Nordstrom seems to think so. CFO Mike Koppel believes there will be a high payoff in the future. "In evolving with our customers, we've made significant investments to enable customers to shop in multiple ways," said Koppel. "This business model has a high variable cost structure, driven by fulfillment and marketing costs, in addition to ongoing technology investments."3

Other examples of new business models include curated subscriptions. Fashion company Stitch Fix focuses its brand DNA on understanding the personality, size, and preferred dressing style of its clients who are assigned their own personal "stylist."4 The stylist will evaluate the best fashion pieces per the client's requests around sizing, price, and color, and proceed to send the client a monthly box of five varied pieces that are especially curated to create a beautiful and put together look. Similar models are popping up, and will continue to trend as consumers are shying away from mass fashion and looking to express their individuality through their attire.

Fulfillment against Promise
In theory, the retailers that understand how critical innovation and the consumer experience is will be the same retailers that understand the importance of fulfillment. According to a recent global study conducted by GT Nexus, consumers are facing alarming levels of out-of-stock inventory, ranging from 63% online and 75% in-store, on an annual basis.5 Retailers are aware of this gap, where investment in front end technology doesn't necessarily translate into alignment with back end fulfillment models. Imagine taking the time to personalize a jacket, only to find out you won't receive that order for 3-4 months. That type of experience leaves a negative impression with the consumer, who will often disengage with the retailer and move on to a competitor.

There are retailers that are getting ahead of these fulfillment issues and putting strategies in place to guarantee an assurance of supply. Examples of this include denim and apparel giant, Levi Strauss & Co. Levi's has partnered with the IFC to put in place a system that enables assurance of supply with manufacturers abroad.6 Similarly, Deckers (parent company to UGG and other brands), has moved to a cloud supply chain platform to automate shipments and have better collaboration with its partners. Mark Fegley, SVP of Decker's Supply Chain comments, "One of the key things we were looking for was adding value through reducing complexity and being able to streamline some of our core processes."7

Other companies like Columbia Sportswear are gaining insight into their supply chain via technology investments, allowing better collaboration amongst n-tier trading partners. This not only gives Columbia the ability to track inventory from a consumer standpoint, it also allows them to operate with agility, adjusting the supply of colors and sizes to respond to the demand of product they are seeing in-store and online – especially crucial with the seasonality of most of their clothes. Suppliers have greater – and earlier – visibility into orders. This means better planning for materials and capacity throughout the supply chain. But that same data and collaboration allows for innovative shipping programs, such as direct shipments to the store or individual consumer. The ability to execute order fulfillment from multiple nodes in the network is a strategic differentiator in meeting omni-channel demand.

Fulfillment is one of the greatest factors determining a retailer's success. Recently Amazon revealed that it has seven new private label brands. This is in addition to the news that, since 2013, the company has forcefully expanded its investment in supply chain, creating a fully comprehensive platform that allows it to own the process from manufacturing to final mile delivery.8 If we consider what truly made Amazon a leader, it was their ability to push the envelope with delivery and fulfillment. Partnering in both their own fashion and apparel segment, along with the capability to get product into the hands of the consumer, will make Amazon an even more powerful threat to watch for in the upcoming year. The best way for retailers to compete and stay ahead of the competition is to ensure that their front end investments are matching their back end capabilities, giving consumers what they want, how they want it, and, most importantly, when they want it.

[1] http://www.adidas.com/us/customize  
[2] http://lifehacker.com/5909754/five-best-online-custom-clothing-stores  
[3] http://www.wsj.com/articles/nordstroms-high-cost-for-online-sales-1456174730?mod=djemlogistics  
[4] http://www.businessinsider.com/stitch-fix-review-2015-3  
[5] http://mktforms.gtnexus.com/rs/979-MCL-531/images/GTNexus-The-Global-Out-of-Stock-Crisis.pdf  
[6] http://www.gtnexus.com/resources/blog-posts/win-win-win-levi-strauss-co-and-ifc-team-support-sustainable-suppliers  
[7] http://mktforms.gtnexus.com/rs/979-MCL-531/images/GTNexus_Deckers_EI.pdf  
[8] http://www.therobinreport.com/planes-trains-trucks-and-ships/?utm_source=The+Robin+Report&utm_campaign=5187446811-Planes_Trains_Trucks_and_Ships_3_28_2016&utm_medium=email&utm_term=0_e90268c709-5187446811-201801229


Leela Rao-Kataria is Retail Marketing Manager for GT Nexus. She has more than 10 years of experience working with fashion brands/labels including Levi Strauss & Co., Sephora, Estee Lauder, and L'Oreal Companies focusing on global product development, international channel execution and luxury products. Leela helped integrate Sephora's loyalty program, Beauty Insider, into Sephora in JCPenney stores. She later joined Levi Strauss and Co. where she partnered with wholesale and retail partners such as Dillard's, Macy's, and Kohl's to deliver heritage programs to Levi's enthusiasts. She has also developed marketing strategies for new market entrants Yellow Brick Coffee and Amyris. Leela received an MBA in Marketing and Finance from New York University's Stern School of Business.

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Tags:  Amazon  Omni-Channel 

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