Radical transformation if retailers are to succeed in achieving 'Retailtopia'

High-street retailers must act now to transform their internal and customer facing operations if they are to remain competitive in the face of unparalleled pressure from online competitors and increasing customer expectations – that's according to an expert panel of retail and supply chain executives, who laid out a future vision for the sector at the Retail Business Technology Expo in London this week.

The 'Retailtopia' panel of experts believe many businesses could be underestimating the scale and urgency of the transformation needed to thrive in an 'omnichannel' world, where customers interact with retailers through a variety of channels and expect seamless and consistent service regardless of which is being used. The panel said the underlying supply chain model needed to support omnichannel retailing is structurally different from traditional "bricks and mortar" retailing and needs to be overhauled if businesses are to succeed.

Jim Spittle FCILT, chairman of the Retailtopia panel, said: "Two themes really sum-up the panel's thinking on the future of retail, and the first of those is 'transformation'.

"Retailers must develop a modern, connected supply chain which can cater for the modern consumer – somebody who interacts with them in-store, on the web, over the phone and through their mobile. Failure to deliver in one or more of those channels makes it hard for consumers to deal with them and risks a loss of business in an ultra-competitive world.

"The second theme the panel identified was 'urgency', because the move to omnichannel retailing is happening now.  In the omnichannel world, barriers to customer switching disappear. Consumers have a choice of product and retailer at their fingertips and competition is fiercer than ever before.  Customer loyalty is a thing of the past. The message is clear; the time for action is now."

The panel recommended that retailers re-evaluate their entire operations from customer service to supply chain and even question if they have the right skills and experience in the boardroom to succeed in an omnichannel world.

One of the major challenges highlighted by the panel was a huge growth in returns from customers. The panel estimated that retailers in some sectors can expect as much as 40 per cent of the products sent out to customers to be returned.  On this scale, the total volume of returns could dwarf the amount of brand new goods from any individual manufacturer entering a retailer's supply chain.

The panel said that new systems and advanced performance metrics are needed to fix 'reverse logistics' – the process used to handle returns - treating the consumer as an integrated part of the supply chain.  It strongly recommended that retailers do not hold returned stock at full value, as it can result in an unrealistic view of their balance sheet.  It is unlikely that returned goods will ever be sold at the original full price and this should be recognised by retailers at the point of receipt.  It also called for a change of heart by high street retailers, as many see returns as troublesome rather than a valuable opportunity to attract customer footfall to their stores.

The panel recommended that retailers should create new collaborative relationships within the supply chain and with other retailers.  The panel encouraged retailers to share distribution channels and costs – even with rivals – in order to become more efficient and successful. It also called for retailers to harness "big data" and adopt common standards to ease the flow of goods and information from one part of the supply chain to another to improve security, efficiency and traceability.

Emer Timmons, President of BT Global Services UK, said: "We encourage our retail and supply chain customers to consider these recommendations carefully. Fifty-four major retailers failed in 2012, the worst year since 2008, affecting 48,000 employees and almost 4,000 stores – so the risks of doing nothing are clear.

"But it doesn't have to be this way. By taking on board recommendations from the panel today, retailers can take a big step towards achieving the Retailtopia vision of tomorrow. For some, changes of mindset will be needed – encompassing everything from embracing the online world to welcoming customers returning goods to stores and recognising that they are not creating a problem but generating more footfall and more opportunities to sell. For some the transformation will be radical but for all, the time to act is now."

The Retailtopia panel looked at emerging technologies and trends in customer service and supply chain and identified the huge potential of "big data" to drive improved consumer experience, innovation and greater operational efficiency in supply chains.

To read more about the panel's recommendations and to see video interviews with panel members, visit bt.com/retailtopia

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