Retailers must grasp the opportunities presented by infrastructure and supply chain disruptors in order to thrive in challenging times.

The retail industry has increasingly been disrupted in recent years. Demand for a truly omnichannel shopping experience requires far greater inventory visibility and supply chain flexibility. Infrastructure security requires greater controls and oversight from regulators, while “black swan” supply chain disruptions and sourcing risks have escalated.

Retailers are aware they need to adapt to survive in this shifting landscape. In a recent EY survey of leading retail executives, 77% of companies told us that they feel they can no longer reliably sustain profitable growth, and a striking 81% said that they need to be bolder with their operating models. While the appetite for change is there, retailers must evolve smartly and quickly to realise that change.

“It goes without saying that product is key, but what about considering personalised products and services so that the customer is fully satisfied, whether through convenient home delivery or a theatrical store experience?”

Helen Merriott

Their success in doing so depends on getting the right balance of strategic choices — of channels, growth and margin, risk and reward, and efficiency and flexibility. They will also need to have the agility to reprioritise and put the customer first, in everything from strategy to day-to-day execution.

This means knowing the customer as an individual: who they are, what they like and how they prefer to shop as well as being able to deliver a more targeted service at every touchpoint. It goes without saying that product is key, but what about considering personalised products and services so that the customer is fully satisfied, whether through convenient home delivery or a theatrical store experience?

Hurdles to jump

Our survey of global retail leaders points to some of the stumbling blocks that are holding companies back: only 7% of respondents are confident they can innovate to meet changing customer wants, a mere 9% are confident they can keep up with fast-changing technology platforms and just 9% are confident they can drive actionable insights from all sources of data. It is clear that retail companies need to make a significant step change, not only in their supply chain, but also in their approach to talent and technology.

One major retailer that is getting this right uses a customer’s order history to connect on birthdays or other milestones with reminders of previous purchases — using images of their child’s first clothes, for example. This aims to generate loyalty by connecting with the customer both rationally and emotionally. Another global retailer recently took an order online from a customer just two miles away from their closest store and had the analytics capabilities to understand it was more efficient to ship from the other side of the country, where a store had overstocked and was close to being forced to mark down significantly.

These are challenging times in our sector — the advent of omnichannel shopping is just one of the disruptive forces that has transformed the retail ecosystem. But if retailers invest in innovation to reconnect with customers, boost analytic capabilities to drive better-informed decisions and build more efficient and agile operating models, they will find that these are also times of opportunity.

Grasping the opportunities will require the DNA and capability to make bold changes fast — such as creating supply chains that function as a demand response network rather than a linear chain. Ultimately, those who remain balanced and agile will be best placed to win.

Helen Merriott is senior partner – retail at EY