Retail industry
is constantly changing and there are always new challenges faced by the players
in this competitive industry. Since 2017, there have been several major retail
companies that have filed for bankruptcy and this phenomenon might continue
through this year. Though it does seem kind of frightening, this is not the end
of days for retail sector, as the number of retailers has grown exponentially
in recent years. With one-third of 2019 almost over, let us take a look at the
five challenges that the retail industry is facing or would likely be facing
this year.
RETAILERS WILL NEED TO INVEST MORE IN THEIR WORKFORCE
It will be an extremely tough year for
firms that underpay and overwork their employees. Just like the tectonic shift,
the whole landscape of retail employment is shifting. Hiring of employees is on
the rise and the labor industry is extremely tight and way more competitive
than it used to be. According to the U.S. Bureau of Labor Statistics, as of 2016,
over 15 million people are employed in the US retail industry. Also, the fact
that the job of a retail associate calls for more than just achieving the sales
and being the admin of the store. With the ever-changing scenario, retail
associates these days must evolve from being just “salespeople” to “experts and
consultants”.
Despite
technology advancing at the speed of knots, retailers won’t rely on the latest
distribution models, assortment strategies or technological advancements to win
the market. The ones’ winning the market will achieve it by delivering a
meaningful human interaction that will give confidence to consumers in what to
buy. This requires an increased responsibility in hiring, training and
empowering the sales associates to always put customer interaction first. In
simpler words, a retailer intending to stay competitive in today’s market needs
to bring A-game when it comes to hiring staff and developing the staff’s
skillset. Gone are those days when training an employee on products and store
policies were enough. The need to train the staff to relate better to the
customers is indispensable. Connecting with the customers is imperative, if any
retail business is to grow.
A SILOED MARKETING INFRASTRUCTURE MAKES IT EXPENSIVE
AND UNWIELDY TO GET MESSAGE ACROSS
Engaging with
customers across many different channels is a necessity for businesses in today’s
marketing world. From e-mails, to SMS, to social media, the multi-channel
communications are extremely essential for engaging with the customers, as this
is what drives the creation of the exemplary customer experience. However, with
so many separate channels, it is not so rare for customer data to become
siloed. If all the moving parts of a marketing department are not effectively
communicating and working together, customers can become overwhelmed with
conflicting or repeat messages. This barrage of marketing communications can
easily have the opposite of the intended effect on customers and result in the shift
of customers to competitors with a far clearer message.
The only way to
tackle this problem is to ensure that one has the right technology and
communication procedures in place. All arms of a marketing team must be on the
same page and have a clear strategy on what they want to achieve. A clear
strategy will help the retailers establish all the channels working together,
rather than working against one another. This will not only ensure that the
retailer reaches the customer with a clear message but will also save money and
time.
ECONOMIC AND GEOPOLITICAL FACTORS TO KEEP RETAILERS ON
THEIR TOES
The changes in
economic conditions can have destructive impacts on the business plans of a
firm. Economic forecasters looking ahead through the next decade are likely to
find their predictions clouded by the recurrent themes of shortages, rising
costs, and up and down business cycles. These changes in economic conditions provide
marketers with new challenges and threats.
Further, no
economy is free from the tendency of variation between boom and depression,
whether it is a free economy or controlled economy. In any event, economic
swings affect marketing activities, as they impact purchasing power. Retail
marketing firms are susceptible to economic conditions, both directly and
through the medium of marketplace.
For example, in
the United States, most of the retailers are extremely worried about how the
whole US-China trade war will impact the sector. China exports fell more than
expected in December,
while exports to the US fell 3.7%, the first nonseasonal decline since October
2016, signaling more pain ahead as the trade-war fallout starts getting
measured by the markets. The IMF has also cut its forecast for the world
economy for the third time in six months due in part to trade tensions, which said
that the global growth would be 3.3% in 2019, which would be the weakest since
2009. US retail sales fell 0.2% in February 2019, according to the U.S. Census
Department. Year-over-year retail sales were up 2.2% in the reported month. A
robust economy will generate annual retail sales growth of 3% or more. The
trade war is hurting global economic growth and the damage from more than a
year of punitive tariffs may be difficult to repair. The additional fees
imposed on goods from China will likely raise the production costs for
merchants. This in turn will slow down the growth among the merchants who won’t
be able to absorb the rising production costs.
Moreover, the UK’s
vote to leave the European Union (EU) could have far-reaching impacts for the
UK retail industry. The impact of the UK’s decision to leave the EU on the
country’s retail industry has been more moderate than expected. It has come at
a time when many retailers are trading on slim profits and declining sales, as
they get to know the new breed of consumer. Sterling is some 14% below its
value pre-referendum, the possibility of tariffs, changes to customs
regulations and a shortage of labor, all threaten to raise costs further, with
a shift in VAT rules potentially also forming part of the mix.
Furthermore, the
prevailing bilateral frost between India and China is leading to a chilling
effect on local trade. Around 60 million members of the Confederation of All
India Traders (CAIT) have called for the boycott of Chinese goods. India
imports nearly $ 70 billion worth of Chinese goods and services every year.
Trade with China accounts for over 40% of the country’s total trade deficit. However,
the Government of India is unlikely to impose any ban. It can probably look at
increasing tariffs or changing policies to make Chinese goods less attractive.
For many small vendors in the country, Chinese goods are a staple. The increase
in tariffs could make it unaffordable for many of the small vendors to invest in
Chinese goods, thereby bringing their businesses to a halt altogether.
The economic and
geopolitical landscape can be incredibly complex. It is really difficult to
predict the specific effects that they will have on the retail industry. But
it’s important for businesses to keep a close eye on these events in order to
anticipate and prepare for any changes that could hit their business. It is
extremely important for retailers to start planning their paths ahead, rather
than getting stuck in a quagmire of uncertainty and indecision.
MAINTAINING CUSTOMER LOYALTY
One of the
essential factors in creating brand loyalty is to ensure a good customer
experience. A 5% increase in customer retention can increase a company’s
profitability by 70%. Retention is a direct result of impeccable customer
experience, as both are inherently linked. The most common mistakes that
retailers make are letting their existing customers go and thinking that they
can be easily replaced by the new ones. If a retail business keeps this
mindset, it will find extreme difficulty in sustaining its business growth.
While offers and promotions contribute towards helping customers feel like they
are special, the most important aspect to an overwhelming experience is
personalization.
Getting to know
customers on the basis of their interests and previous purchases can help
retailers drive loyalty. These insights can be reaped from data, or even a
simple conversation. Though most part of reaping these insights will depend on
the size of the business, no one should be too big for a quick chat with a
regular customer. A simple personalized message and offers can be delivered to
the customers on their preferred way of contact. Even a simple personalized
e-mail can make a world of difference. Anticipating what the customer wants and
needs should be the forefront of a business, as it will help the business to
usher the customers down the sales funnel towards their next purchase.
CONSUMERS MOVING TO MULTI-CHANNEL BUYING EXPERIENCES
Technology has
been a major boon to retailers and customers alike, however, they also play a
major role in propelling the challenges in retail industry. Keeping pace with
the technology beast will be one of the greatest challenges for retailers in
2019. With technology accelerating at an astronomical rate, retailers must keep
pace if they are to remain relevant. Consumers want an experience to match that
of Amazon and Alibaba – one that is powered by AI, ML and big data.
With more
e-retail experiences available and shipping times reduced drastically, it is
not that hard to think why more than 90% of Americans make use of online
shopping in some way or the other. Online retail grew 300% between 2000 and
2018, according to the U.S. Commerce Department. Department store sales dropped
almost 50% during the same period. In the first three months of 2019, 5,994
stores closed their operations, compared with 5,864 during the full year 2018. However,
these are the same Americans who still spend a major portion of their total
shopping budget on the traditional brick & mortar locations. In simple
words, even though everyone is shopping online, they still are making most of
their purchases in-store.
As consumers are
seamlessly moving between online and offline platforms for shopping, they are
becoming more open to retailers which can best facilitate these transactions.
With the explosion in mobile retailing, in-store research and showrooming are
more common than ever. On the flip side of the coin, online shipments can be
delivered to a local store, further closing the gap between offline and online
retail.
The solution
here is to emphasize on creating an unparallel experience for the customers
across all the channels. Customers are always in the lookout for retailers which
they can trust to deliver unmatchable services time and again. Only the right
customer data can help the retailers in creating an omnichannel experience for
the customers, allowing them to interact wherever and however they wish.
The rules of retailing indeed are being rewritten in
this time of transformative change. Innovation, consolidation, collaboration,
integration and automation will be required to reinvigorate commerce,
profoundly impacting the way retailers do business now, and in the future.
According to a recent report published by TechSci Research, "Saudi Arabia Retail Market By Distribution Channel (Exclusive Stores, Supermarket/Hypermarket, Specialty Retailers, Department Stores, General Merchandise Stores, Online Retail & Other Non-Store Retailers), By Product Category (FMCG, Clothing, Appliances & Others) By Region, By Company, Competition, Forecast & Opportunities, 2024", Saudi Arabia retail market is projected to grow at a CAGR of over 8% during the forecast period on account of growing culturally diversified population, presence of a highly stable market despite dependence on a falling oil economy.
According to a recent report published by TechSci Research, "Bahrain Retail Market By Distribution Channel (Exclusive Stores, Supermarket/Hypermarket, Specialty Retailers, Department Stores, General Merchandise Stores, Online Retail & Other Non-Store Retailers), Competition Forecast & Opportunities, 2014 - 2024", BAHRAIN retail market is projected to grow at a CAGR of over 5%, in value terms, during 2019-2024, owing to the rising number of infrastructure projects, increasing tourist footfall, and rising population on the account of increase in number of diversified cultural population.