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From ‘conforming stores’ to digital first: the changing world of retail

I was in a taxi in Hong Kong several years ago, stuck in traffic in the pouring rain. I said to my Hong Kong-based colleague how notable it seemed that all the apartment buildings looked exactly the same. “Cheaper that way isn’t it?” was his response, “Just design one then put up 50. Obvious really.”

Retailing used to feel much the same as designing apartment blocks in Hong Kong. Just design one store then roll out 20, 50, 100, 1000 of them. “Conforming stores” were very much the order of the day, especially if you were in the business of ‘big box’ retailing.

But today the world of retailing looks completely different

No-one talks about conforming stores anymore. In fact, there’s plenty of people (although I’m not one of them) who would say that the future of retailing isn’t a physical store-based activity at all. Digital natives have never lived in a world without mobiles and high speed internet access so the world they have grown up in is ‘digital first, physical stores maybe’.

Whatever the end game looks like, it’s very clear that the challenges for retail enterprises and for the people tasked with leading them look very, very different today. As recently as a generation of leaders ago, coming up through the stores and having an instinctive feel for merchandise was seen as much the most important – perhaps even the only – pre-requisite to achieving success.

Today, when leaders of most retail businesses are asked what their main pre-occupations are – over and above the previous hour’s sales, obviously – you tend to hear a lot about needing to be much more competent in engaging difficult to engage digitally literate shoppers.

Shopping trolley by Yandle. CC-BY-2.0 via Flickr

Here’s just a few of their concerns:

  • Having far more visibility on their shoppers and on where product is in much more complicated supply chains.
  • How to keep stores relevant and appealing to shoppers.
  • How to rebuild distribution networks so that they can cost effectively deliver huge numbers of small baskets of products to shoppers’ homes, workplaces and so on.

You’ll also tend to see a great deal of hand wringing about how so much more cost and complexity is being added into their business while, at the same time, shoppers simply won’t pay more because they know the price of everything and have almost infinite choice of where to get it anyway.

There’s a common thread to all of these very real and very widely held concerns…

The skills of individuals, the capabilities of the enterprise, and the organisation of the business all need to be very different today from what has been ‘fit for purpose’ and worked well in the past. Art Peck, CEO of Gap said it well when he said that: “We’ve been doing business the same way for 40 years, and there are very few 40-year-old business models that are successful forever.”

For many retail enterprises, this will almost certainly mean that skillsets need to become that much deeper and, well, that much more skilled.

Consider the marketing function as an example. Deep skills around digital campaign design and engagement through social media were simply not part of the marketing department skillset even a few years ago. Today they are mandatory.

In some areas – notably the logistics function for many – investment and focus needs to be very substantially ramped up. Other areas such as store development – traditionally regarded as being at the heart of a retail business – are being de-emphasised, if not absolutely then certainly relatively.

And this changes organisational structures.

It’s very easy now to imagine retail businesses with far flatter structures than they have had in the past, with the objective of making decision making faster and more joined up across an ever-proliferating set of touchpoints to the shopper. It’s also very possible to see a wide range of functions such as stores and marketing reporting into a Director of Shopper Engagement or some similar role.

As their shoppers and their businesses change, so too do the requirements of those tasked with leading retail businesses.

The days of the merchant prince are almost certainly over for many. So too are the days when CEOs had to have spent 20 years or more coming up through the stores before they were considered ready to lead the business. Too store-centric and too limited a world view will be how many now view such a progression. This means that it’s logical and helpful for many retailers to want to look outside the sector for their leaders.

The personal leadership attributes that look likely to define success today are very much around an ability to recruit and retain the best talent; to define and navigate paths of change that may leave the business looking very different to that which went before, and to create a culture that embraces risk, encourages innovation, and is tolerant of failure as the necessary price of change. Important also is the personal ability to lead effectively in environments that are necessarily defined above all else by uncertainty.

Sounds challenging? Well, yes it is. But the rewards are great and, even more to the point, the risks of thinking that this is an era of “business as usual” in retail-land are gone forever.

A version of this post originally appeared on Freshminds.

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