10 Imperatives for Reshaping Retail

The dynamics of retailing have changed. Retailers who apply old-school strategies to the new realities of a dramatically altered marketplace are placing their companies at risk.

To succeed in 2010 and beyond, retailers must turn trade-down customers into loyal customers. They must embrace next-generation marketing and promotion techniques. They must devise pricing strategies that maximize cross-sell and up-sell opportunities. They must merchandise to a new consumer dynamic, including a focus on value and localization. And, finally, they must leverage insight from shopper analytics to deliver a new store experience for the new shopper.

To help provide a roadmap, we identify 10 imperatives retailers should focus on as they make their plans for the coming economic rebound.

Imperative # 1: Cross-Channel Retailing: Leveraging All Channels to Turn Trade-Down Customers into Loyal Customers

Retailers seeking to attract and retain customers must throw out old-school thinking and adapt their business models and processes to a new mindset. Many consumers are searching for sales, discounts and bargains more intently than ever before. During the heart of the recession Kohl's Department Stores successfully attracted young fashionistas trading down from luxury department stores. JCPenney is another example of recession-driven reinvention.

Imperative #2: Embracing Next-Generation Marketing and Promotion

The fragmenting of the mass media audience and rise of new media technologies has forever changed the art of retail marketing and promotion. New approaches involve digital technology, including the Web, mobile apps and text messaging. A new channel that is emerging as a critical focus for marketers is social media and social networks.

Imperative #3: Pricing Strategies that Maximize Cross-Sell and Up-sell Opportunities

Retailers need to leverage price modeling tools that allow them to set initial, promotional, markdown and end-of-life prices. They need to do this during the forecasting process to ensure the plan will generate the maximum revenue possible. And to do this effectively, they need to use much more data than past history. They need to do this during the forecasting process to ensure the plan will generate the maximum revenue possible. And to do this effectively, they need to use much more data than past history.

Imperative # 4: Merchandising to a New Consumer Dynamic: Value and Localization

Price is an important component of perceived value. But it's not the only element. Quality, uniqueness, satisfaction, durability and value can be equally, or even more, important. In addition to determining accurate anticipated revenue through lifecycle price optimization, retailers must work more collaboratively with suppliers to create and source key products that best represent their brand image.

Imperative #5: Using Analytics to Align the Store Experience

Using tools to help retailers improve their aggregation of customer data is a critical step before turning it into actionable information. Today, retailers are deploying an array of in-store touchpoints that that both deliver and gather important information including digital displays, in-store video cameras, interactive kiosks, self-service POS, and cell phone-based communications to name a few.

Imperative #6: Optimizing Real Estate Opportunities for the Rebound

This is a prime opportunity for those with healthy balance sheets to re-examine their store portfolios, optimize the store base for highest bottom line impact, renegotiate and improve leasing deals, and rethink the spaces and locations they occupy. Variables to consider include analysis of the competitive landscape, local demographics, proximities to key roadways, adjacencies to key businesses, distribution network, saturation, growth potential, cost and lease terms, nearby vacancies, cost of loans, and local employment pools.

Imperative #7: Retail Darwinism – Survival of the Fittest

Financially sound retailers must stomp on the gas to more quickly separate themselves from the pack, further weakening vulnerable competitors while they grow market share and profits. A convergence of economic conditions is making this a ripe time for stronger retailers to acquire new markets, new channels, new lines of business and build dominant positions through strategic acquisition.

Imperative #8 Leveraging Comprehensive Customer Analytics to Stabilize and Grow the Top Line

Retailers have got to leverage every data source they can access, and bring all of that data together in one place, to maximize their chances at making choices that resonate with of-the-moment consumer trends. Cutting-edge retailers are building massive databases that bring together POS data, loyalty data, survey data, syndicated data and detailed market intelligence into one place, enabling these companies to understand and merchandise to customers in brand new ways.

Imperative #9: Optimizing the Talent Pool: Aligning the Best Workforce with the New Shopper

Workforce optimization, particularly execution management, has been an essential tool to help retailers make the most of their staffing strategies. Retailers must rethink the skills and attributes of the people they employ, and set a policy to attract the best possible workforce. Shoppers expect a higher level of associate knowledge – at least matching what customers can get themselves at home on the Web. As a result, more than ever front-line sales associates have the potential to make or break individual store performance.

Imperative # 10: Capitalizing on a Strong Private Label Strategy

Private label is a booming trend in retail thanks to its ability to offer differentiation, plus lower cost of goods sold, plus margins at least 15% better than for branded product, all in one package. Private label is also allowing retailers to compete head to head with national brands that are increasingly going direct to consumer. To succeed in private label, retailers must develop new skill sets in market research, product innovation, consumer testing, collaboration/sourcing, nimble allocation and assortment, brand development, marketing and supply chain.