From Retail to “Me-tail”: Tomorrow Starts Today

From Retail to “Me-tail”:
Tomorrow Starts Today
3 | From Retail to “Me-tail”: Tomorrow Starts Today
Tomorrow’s consumers will
be armed—and dangerous.
From Retail to “Me-tail”: Tomorrow Starts Today | 3
As power moves inexorably from seller to buyer and
retailing morphs into “Me-tailing”, retail organizations
will need much more than customer centricity and supply
chain optimization to achieve high performance.
Today’s consumers are demanding.
But tomorrow’s consumers will be
armed—and dangerous. Empowered
by technology for unprecedented
choice, they will demand products
and services that meet a constantly
shifting kaleidoscope of expectations,
from convenience and affordability to a
customized experience and sustainable
sourcing. They will expect to access
products and services from just about
anywhere and at pretty much any
time. And in their quest for instant
gratification they will totally transform
the retail industry.
• Stores as we know them will no longer
be relevant—many shoppers will never
even visit one
• Consumers will be able to shop
seamlessly across multiple channels—
and expect to find relevant content
on all of them
• “Fast fashion” will be the de facto
industry standard—with dramatic
consequences for store inventory
levels
• Supply chains will be optimized
across the full product lifecycle—right
through to disposal
• Consumers themselves will help form
the communities of talent required
to service a vast diversity of new and
constantly shifting demands
4 | From Retail to “Me-tail”: Tomorrow Starts Today
Stores as we know them will no
longer be relevant—many shoppers
will never even visit one
Some stores will focus
on the time-starved,
others on the “green”
consumer—and some
stores will simply be
showrooms.
In the future, the sheer diversity of both
shoppers and shopping trips will require
a multiplicity of formats, each tailored
to a specific local market. The name
of the store game will be precision
retailing. And successful stores will be
those that leverage their closeness to
customers to interpret demand signals—
and swiftly act on them.
Some stores will focus on the timestarved, others on the “green”
consumer. Some will simply be
showrooms—like, for example, Vogue
magazine’s twist on pop-up retail,
which allows visitors to try on items
from the racks of clothes on display,
receive advice from stylists and sample
products from the perfume bar or
make-up station. The store space sells
nothing—but the information that
attentive store staff can derive about
customers’ preferences could prove
invaluable to future sales prospects.
People who actually bother to visit a
physical retail space will be in search
of an enjoyable and entertaining
“experience”. They may patronize bookstores where they can meet stimulating
authors, for example, or toy stores that
let kids interact with their favorite
toys and games, while in-store experts,
both real and virtual, answer parents’
questions.
Today’s shoppers are more than
ready for the mobile and interactive
technologies that can deliver this level
of experience. Consider, for example,
that almost three quarters of Europeans
responding to a recent Accenture
survey said they would use mobile
phones in-store for product information
scanning; and more than half agreed
that being able to interact with an
online product expert while in store
would save them time.
From Retail to “Me-tail”: Tomorrow Starts Today | 5
Consumers will shop seamlessly across multiple
channels—and expect to find relevant content
on all of them
Today’s consumers already enjoy 24/7
purchasing power, as well as almost
total transparency over transactions.
And they are beginning to abandon
product “ownership” in favor of a
“leasing lifestyle”, characterized by a
footloose quest for access to fewer
items closer to the point of need.
In the future, Internet penetration
will turn this multi-channel lifestyle,
now mostly enjoyed by the so-called
Millenial generation, born since 1980,
into a global phenomenon. And this,
of course, spells huge opportunities
for start-ups, which we call “wildfire
niches” because of the speed with
which we expect them to spreadempowered by new technologies
and serving a diversity of customer
segments.
Interconnected and using a single
mobile device, do-it-yourself retail
“grazers” will be able to configure their
experiences from a variety of locations
and via a diversity of channels,
effectively “editing” their product
choices. And if a product fails to fulfill
their expectations—if that shirt they
spotted someone wearing on the street
or online turns out not to have been
manufactured according to the exact
environmental and ethical standards
of their social networking group, for
instance—they will search the product
comparison websites or consult their
networked “friends” worldwide for a
better value proposition elsewhere.
Leading retailers are already looking to
capture increasingly elusive customers
in imaginative ways. Consider the
success of Zlio, for example, an online
site that invites visitors to “create
your own store” by selecting products
from hundreds of Internet merchants,
and earning money on each sale. The
Swedish fast fashion giant H&M allows
its customers to buy products from their
camera phones. Dominos’ customers
can order pizzas from the TV, as well
as through cell phone apps and via
Facebook. Staples Canada print shop
uses experts channelled in, on-demand,
to help the customer define the print
job, mock up samples and place orders—
an innovation that has also helped
Staples expand their offering into more
locations by solving a basic challenge
in retailing—cost effectively providing
each customer with the right expertise
and personalized service at the moment
of customer need. And one high-end
apparel maker offers online buyers who
can’t find the exact item they are looking
for a close match—at a significant
discount, which is also on offer to their
networked friends.
6 | From Retail to “Me-tail”: Tomorrow Starts Today
The lifecycle of products will
be significantly shorter, making
product innovation an even
more critical differentiator
of high performance.
From Retail to “Me-tail”: Tomorrow Starts Today | 7
“Fast fashion” will be the de facto industry
standard—with dramatic consequences for
store inventory levels
In the future, the lifecycle of
products will be significantly shorter,
making product innovation an even
more critical differentiator of high
performance. “Fast fashion”, in fact,
will be the dominant business model—
not just in apparel and consumer
electronics, where it is already evident,
but also in all other retail categories.
Fast fashion will also necessitate more
supple supply chains—a challenge for
many. According to Miami-based Retail
Systems Research, forecast does not
match demand for most retailers. The
proliferation of stock keeping units
(SKUs) means that retailers are trying
to edit a constantly increasing number
of choices to stay relevant for the
consumer. And Accenture estimates
that many are making more than 80
percent of their inventory investments
in store—an untenable situation with
real estate costs steadily rising and
retail space in increasingly short supply.
In the future, the retail supply chain
will be predicated on inventory arriving
at the store shelf just as need arises.
Replenishment orders will be placed
and released on regular cycles—typically
weekly or more. Lead times for domestic
suppliers will be measured in hours or
days. And forecasting, planning and
replenishment systems will support
real-time allocations and store need
inventory management techniques—
innovations that Accenture estimates
will reduce in-store inventory by one
third or more.
The benefits of a successful fast
fashion business model are numerous.
Customers will see a visible difference
on the store floor, inducing them to
make more visits and thus boosting
revenues. And a faster response to
sales data will help boost production
efficiency, fuelling sales and reducing
markdowns. The model will help ensure
full in-stock assortment for the hottest
selling items and high in-stock rates on
basics. It will separate and streamline
the design function, encouraging
timely and accurate handoffs between
design and production. Production lead
times should drop, thanks to the high
utilization of common components. And
vendor partnerships should strengthen.
Some leading retailers are already
leveraging consumer insight to move
in the fast fashion direction. Witness
the move by Target, the US-based
general merchandise retailer, to
expand its fast fashion concept from
apparel to gardening, home decor and
kitchenware. In the future, they will
be able to combine this insight with
deep analytical capabilities to identify
the specific attributes of each product,
determine its value to individual
consumers and target assortments, thus
customizing individual offerings. What’s
more, fast-moving products will be
stocked in smaller formats like vending
machines or kiosks, which are not only
more convenient for consumers but also
more cost-effective for retailers.
8 | From Retail to “Me-tail”: Tomorrow Starts Today
Supply chains will be optimized across the full
product lifecycle—right through to disposal
Future resources will be even scarcer
than they are today, and consumers
correspondingly more valueconscious. Shoppers will take on more
responsibility for reducing packaging
and irresponsible production. But they
will not be prepared to bear the full cost
of sustainability. Retailers will need to
institute cost-effective sustainability
strategies of their own. And a supply
chain optimized across the full product
lifecycle, right through to disposal, will
be critically important to that effort.
The reusable and recyclable “bags
for life” now issued by retail grocers
including Tesco and Whole Foods
Market, for example, will eventually
evolve into refillable containers. We
are already seeing the spread of rent
and return, from high-end handbags
to children’s toys. And we envision
a time in the not too distant future
when consumers will be able to stop by
“refresh and refill” window chutes, stock
up on basics and use mobile devices to
pay for them.
Resource constraints are changing
behaviors already—and not just
in Europe and the US, where the
quest for sustainable products and
environmentally responsible services
has spawned a whole new sub-sector:
Organic grocery. In Brazil, for example,
Pão de Açúcar, the country’s biggest
food retailer, has responded to shoppers’
growing concerns with ”green” stores
that use 10 percent less water and 14
percent less energy.
Retail will also need to become a
more collaborative industry. Individual
retailers will recognize the value of
greater specialization, particularly
in logistics, and supply chain
specialization and segmentation will be
commonplace—though a proliferation of
distribution points will also necessitate
shared logistics and other forms of
collaboration. Consider the case of
Meadowhall, a large mall in the UK,
which has teamed with Clipper Logistics
to manage an on-site distribution center
that holds inventory for all stores in the
mall. The collaboration has cut in-store
inventories, shrunk the mall’s carbon
footprint—and boosted sales by up to 10
percent in some categories.
From Retail to “Me-tail”: Tomorrow Starts Today | 9
Consumers themselves will
help form communities of
service talent
In the future, consumer demands will be
so diverse and complex that no single
organization will be able to cater to all
of them. Individual retailers will need to
function more like agents. Consumers
will look to them to “broker” products
and channels. And that will spur many
retailers to join together in strategic
alliances, often with companies in
other industries, most of which also
want to “own” the consumer. Witness,
for example, how the UK retail grocer
Tesco has evolved into an aggregator
of incremental products and services
ranging from Tesco Finance (a joint
venture with Bank of Scotland), through
Tesco Mobile (with O2) to Tesco Travel,
which is powered by LastMinute.com.
The key demand will be for the sort of
specialized, knowledge-based talent that
can create value beyond distribution.
That talent, moreover, will come from
some unlikely sources—customers
among them. Companies will start
outsourcing for talent, a significant
portion of which will be mobile, moving
from retailer to retailer. And the
development of “communities of talent”
will involve employees working for
multiple companies, sometimes, thanks
to open sourcing, simultaneously.
Google and Procter & Gamble have
swapped employees on a temporary
basis so that they can learn from
each other. And Japan’s Otetsudai
Networks allows anyone to register
for employment by filling in core
skills. Employers with short-term labor
needs can enter a task description and
matching registrants near the location
who are available receive an alert
to respond.
Consumer demands will
be so diverse and complex
that no single organization
will be able to cater to
all of them.
10 | From Retail to “Me-tail”: Tomorrow Starts Today
Paths to high performance
Accenture research and experience
clearly show that Me-tailing, for all its
challenges, also heralds exciting new
opportunities for retail organizations
to achieve profitable growth and high
performance. Success will require
extraordinary collaborative skills, as well
as even clearer differentiation and much
greater flexibility. It will also require
retailers to demonstrate exceptional
customer centricity and total mastery
of rapidly emerging technologies.
Nevertheless, those that can define a
unique value proposition and adapt
their brand to changing formats and
their workforce to new skills will be able
to position themselves well ahead of
the game. To find out how Accenture
can help you prepare for the Me-tail
revolution, please contact:
Janet L. Hoffman
Global Managing Director,
Accenture Retail Group
San Francisco, California, US
janet.l.hoffman@accenture.com
Renee V. Sang
Global Director, Accenture Customer
Innovation Network; Senior Executive,
Accenture Retail and Consumer Goods
Chicago, Illinois, US
renee.v.sang@accenture.com
From Retail to “Me-tail”: Tomorrow Starts Today | 11
About Accenture
Accenture is a global management
consulting, technology services
and outsourcing company, with
more than 176,000 people serving
clients in more than 120 countries.
Combining unparalleled experience,
comprehensive capabilities across
all industries and business functions,
and extensive research on the world’s
most successful companies, Accenture
collaborates with clients to help them
become high-performance businesses
and governments. The company
generated net revenues of US$21.58
billion for the fiscal year ended
Aug. 31, 2009. Its home page is
www.accenture.com.
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