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Rapid Innovation will Differentiate the Future of Retail Industry

Guest Post by Bob Ferrari

Bob Ferrari is the Executive Editor of the Supply Chain Matters Blog, and a periodic guest blogger on the Infosys Supply Chain Management blog.

In an Infosys Supply Chain Management guest commentary in March, I commented on the fundamental reinvention that is underway in the retail industry, which comes with significant implications to current and future supply chain organizational, process and information technology capabilities and investments. Online sales have been growing at double-digit rates and the implications profoundly point to the reality that consumers prefer online tools and have shifted their shopping and buying preferences. The "Clicks and Bricks" business model is rapidly unfolding as retailers counter the juggernaut of online retailers such as Amazon.  Online providers are disrupting the retail industry because of innovation, in the true spirit of the Clayton M. Christensen book, The Innovators Dilemma.

On the Supply Chain Matters blog we recently commented on Amazon's efforts to turn the challenge of the ongoing pressures by U.S. state authorities to collect sales taxes into an opportunity to deploy same-day shipping capabilities in the not too distant future, allowing consumers the same convenience and gratification that they would get by purchasing goods from a physical store.  In this same context of turning challenge into opportunity, as I pen this commentary, an article published in today's Wall Street Journal highlights current Amazon efforts to quietly deploy Amazon lockers within 24 hour grocery, convenience and drugstore outlets, where consumers can retrieve their Amazon purchases in a more secure and convenient manner. The initial U.S. cities with these lockers in-place are located in states that already collect sales taxes for online purchases. This path toward innovation fuses sales, marketing, online fulfillment and physical distribution capabilities together in innovative methods to seize market opportunities.
For their part, retailers in all dimensions are also starting to innovate by leveraging and further enhancing their bricks and clicks presence. Some stores are being turned into convenient pick-up locations for online purchases while online sites offer consumers various options for larger selection along with shipping and pickup options. That in-turn raises the challenge of the ability to manage inventories across cross-channel commerce, along with the ability to position and deploy inventory to the most profitable channel and associated store outlets.
The retail industry is indeed in revolution, and the important enabler of digital commerce capabilities will be the efficient and effective deployment of advanced information technology.
In our March commentary, the takeaway was that these rapidly changing retailer business models imply that organizations can no longer assume the same organizational structures of accountability where marketing and supply chain teams supporting physical stores and online fulfillment reside in separate organizational entities with conflicting metrics. In a matter of just a few months, that conclusion is ever more apparent that end-to-end digital and physical retail commerce is the key to revenue and consumer growth. I would recommend that retailers should be addressing three specific goal areas in the upcoming period:
• A cross-functionally aligned focus for delivering a holistic cross-commerce buying experience for consumers.
• Insuring that each function, including online marketing, store operations and supply chain have common objectives, metrics and aligned rewards for the coming year.
• That information technology budgets, both short and long-term, be evaluated and focused toward supporting one contiguous "bricks and clicks" fulfillment model for consumer purchases.
As retailers approach both the back-to-school and holiday buying peak periods in the latter half of 2012, information technology, timely decision-support and responsive organization across the cross-channel shopping experience will differentiate the winners.
Is your retail organization ready for this challenge?



"Some stores are being turned into convenient pick-up locations for online purchases while online sites offer consumers various options for larger selection along with shipping and pickup options."

It's fascinating to watch the online and offline retail worlds combine. But it is indeed where the future of retail lies. Companies need to leverage both the clicks and bricks in order to stay competitive.

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