In uncertain economic times, the retail sector suffers. In recent years, the United States’ (US) economic growth plods on: retail sales figures in the United Kingdom (UK) dropped. To make matters worse, retailers have little to no control over influential factors such as fiscal policy, fuel prices, interest rates and unemployment.
This economic scenario forces the retail industry to implement operational and organizational change. The retail sector must identify challenges and embrace innovative solutions to not just survive, but thrive. Challenges faced by retailers include analytics, digital transformation, the growth of e-retail, increased overhead costs, market saturation, shipping and logistics, and supply chain risk management.
Due to technological advances, information travels quickly. To stay competitive, retail operations must stay abreast of current trends. Retailers must develop and use analytics to map trends, realign strategy and accurately forecast future trends.
The increased use of smartphones and tablets issues a digital transformation imperative to retailers. Booz Allen Hamilton, an American technology consulting firm, predicts social commerce spending of 30 billion United States Dollars (USD) by 2015. To remain viable, retail businesses must embrace technology.
More consumers shop online. Forrester Research expects US online purchases of USD 327 billion in 2016. However, most retailers do not possess the resources necessary to manage significant increases in online purchases.
Increased overhead costs continue to erode profit margins. UK retailers’ petitioned the British government to implement a rate freeze on power, rental, and other overhead rates. The government deferred review from 2015 to 2017. Retailers have no option, but to absorb the increases.
Competition is fierce. A steady proliferation of brands saturates the market. Companies must create innovative strategies to maintain and gain market share.
The complexities of global delivery service strain existing distribution resources. The expanding marketplace forces retailers to reassess shipping and logistics operations. Solutions may include adding new facilities, consolidating existing facilities or outsourcing delivery services.
Increased pressure to curtail per unit cost and reduce overall costs forced retailers to construct collaborative supply chains. Some larger retailers increased risk and lowered costs by becoming suppliers themselves.