Within retail, there is a constant buzz of forward-thinkers, new technology and internal competition between digital and in-store sales, particularly in the fashion apparel, luxury and beauty sectors. To stay ahead, many of the world’s top brands and retailers engage in relationships with management consulting firms, gaining access to an extraordinary depth of consumer insight, proprietary data, and critical perspective in developing strategy.
It’s a recipe that has become invaluable in navigating today’s uncertain economic climate. Fashion and beauty retailers know the value of data and prescribed trend strategies — especially as sustainability is shaping company and brand strategies. And in this technology-enabled era, retailers are poised in a “forever forward” mentality.
Here, WWD asked the thought leaders and experts from the industry’s top managing consulting firms to share their retail predictions and prescriptions for success.
“This is a transformative moment in fashion and beauty with more challenges and opportunities than ever before. Beyond the near-term recessionary pressure ceo’s face today, the greatest challenges include:
• Building true capabilities in data, advanced analytics, and artificial intelligence: The challenge is to develop a clear vision, attract the right talent and implement the systems and processes for relevant use cases in AA [advanced analytics] and AI (e.g., precision marketing, demand planning and clienteling).
• Unlocking the power of physical stores and store associates in a digital world: Physical stores are still involved in 80 percent of purchase journeys. Retailers must enable clienteling with more contextual data and ensure the right talent is in stores.
• Progressing real sustainability: To achieve long-term prosperity financially, socially and environmentally will require collaboration and commitment by industry leaders to prioritize a responsible long-term strategy, despite the pressure of quarterly results.
The greatest challenge of all will be to attract, develop and maintain top talent to overcome the aforementioned challenges (data, AA and AI, Digital, innovation, sustainability, store experience). The fashion and beauty industry is competing for the same talent as Google, Facebook, LinkedIn and a myriad of start-ups. Never before has the race for talent been greater.”
Jill Standish, senior managing director and head of global retail practice at Accenture
“The fashion industry in its current form is not sustainable; raw material consumption, pollution and waste contribute to the accelerating environmental footprint. Thus, the urgent need for a transition toward a more circular system. However, one of the main barriers that brands and retailers face is a lack of understanding of how circular models can be financially viable.
We have entered the era of ‘responsible retail,’ where consumers are becoming more environmentally and socially conscious and will increasingly turn to brands that not only talk about responsibility, but demonstrate it through their business practices. It is critical that fashion and beauty brands take action to create a more sustainable industry.”
Rod Sides, vice chairman and U.S. leader in retail, wholesale and distribution at Deloitte Consulting LLP
“The nonstop disruption taking place in the retail and beauty environments is challenging many of the norms, making transformation an imperative for incumbents.
Today, retailers are competing with both digitally native businesses offering advanced product features and online-only retailers and marketplaces with convenient fulfillment options. Not to mention, price is still key for many consumers, so retailers, both fashion and beauty, are constantly mindful of discount players and off-price companies with vastly different business models that allow for market-leading prices.
Overall, retailers’ ROA is declining because profitability is being compressed across the entire value chain, as they attempt to figure out how to win battles on multiple fronts.”
Jennifer Schmidt, senior partner at McKinsey & Co.
“The top challenges facing fashion and beauty brands today are centered on three areas. First, creating greater pull at a lower cost to acquire new customers who have become fragmented and expensive to recruit. The rate of saturation in established platforms is causing brands to chase new sources of demand, which makes measurement difficult and a tendency to ‘hedge’ versus ‘focus.’
Second, driving enriched brand discovery and interaction by using smart technology with enhanced content and visualization that encourage conversion. The cost of technology is decreasing but the options have exploded, making it tricky to install, track and measure what is really creating incrementality in shoppers.
Third, securing new sources of distribution in a consolidating and overstored retail environment. Several categories have seen growth on the back of new players entering established specialty or online channels.”
Antony Karabus, chief executive officer, and Farla Efros, president, HRC Retail Advisory
“We believe that that there will be an increasing divide between the winners and the losers in these sectors and that the major elements that will differentiate winners from losers will include several factors such as inclusivity (recognizing and valuing customers equally irrespective of their size) and personalization (marketing to customers based on their buying patterns and what you know about them).
Excellent management of inventory and margins is also key, which requires using analytics and the right processes and systems. You also need a disciplined product development strategy, which means having the right combination of long and short lead times. Retailers also need to create a greater sense of urgency by generating a need for customers to ‘buy now’ to avoid losing out on the item. Winners will also have a clear understanding of their core customer, and for in-store shoppers, creating a service model and experience that matches the core customer demographics.
Localization will also be a defining factor of winners, which means having inventory that is reflective of the demands of the local customer. There also needs to be frictionless integration between in-store and digital channels so that customers can engage (order, pick up and return) in whichever way they desire. Lastly, but not least, ensuring disciplined capital allocation on the most important initiatives that support the above differentiators will define tomorrow’s winners.”
Steve Barr, consumer markets leader at PwC
“For a while, a lot of people in the industry have focused on online versus in-store retail, and many predicted e-commerce would dominate the brick-and-mortar space. However, here at PwC, we’ve long believed that’s not the case. Stores — especially those that leverage data, new technologies, and in-store events and experiences — help retailers build strong, emotional brand loyalty with their consumers.
Now more than ever, the most successful retailers will move beyond thinking about online and physical retail as two separate things and work to marry the two channels together to create a holistic, cohesive retail experience for their customers. By blending in-store and online, and harnessing the power of data and analytics, retailers will be able to better meet their customers wherever they are in their shopping journey.”
David Bassuk and Joel Bines, global co-leaders of the retail practice at AlixPartners
“Retail stands at a precipice, with winners and losers being separated faster than ever before. The industry, including fashion and beauty retailers, is facing disruptions that threaten its very identity. Retailers must invert a decades-old dynamic and address today’s top challenges head-on: putting the self-centric customer at the center of everything, increasing speed and agility, and accelerating data-driven insights that reflect the right metrics for today.
Each of these ideas can help make incremental improvements. Embraced together, the three principles are game-changers. There is growth and success ahead for those who break today’s ‘retail rules’ and are truly willing to make the consumer the center of their universe, develop an agile operating model and use data-driven insights to drive decisions.”
Deborah Weinswig, founder and ceo at Coresight Research
“A handful of key challenges float to the top. Consumer expectations are evolving and every day, they expect more. So, retailers will need to better anticipate their shoppers’ needs and desires — those who do will win. Technology is a tool that can facilitate that level of understanding of the consumer.
At Coresight we talk about Spectacular Retail, with technology as the backbone integrating supply chain, marketing, shopping formats and logistics that are foundational to creating an in-store environment for fun. Fun drives store visits. Coresight’s CORE, a proprietary framework we’ve developed, helps address these four key challenges retailers face: communication, optimized pricing, rationalized inventory and experiential retail, pointing the way for retailers to use AI to be more relevant with today’s digital consumer. Finally, hiring the right people is pivotal.”
Marcie Merriman, cultural insights and customer strategy leader at Ernst & Young LLP
“There’s a major, under-the-radar challenge coming to the beauty and fashion industries via 5G connectivity. The effects are currently gradual, but there will be a tipping point that drastically changes the landscape as we know it. Today’s points-of-sale, including both brick-and-mortar and digitally based options, will be radically transformed as the promises of AI, VR and 3-D technologies come to fruition thanks to 5G.
The changes over the next decade, as 5G becomes a reality, will blow away the past 50 years. Retailers should view this as an opportunity. Consumer expectations will continue to escalate and 5G will turbo-charge the technologies that can help retailers succeed in an increasingly competitive environment by anticipating consumer needs and delivering on them before the customer has even recognized the need themselves.”
Marjolein Jonker, manager of consumer and retail practice at A.T. Kearney
“Consumers increasingly expect their retail shopping experience to be personalized and complement digital channels. As a result, beauty and fashion retailers must evolve to elevate the shopping experience, create novel store formats and concepts, and fully understand consumer needs at each step of their journey. In today’s retail landscape, we can point to several leading players staying ahead.
Aritzia, for example, equips style advisers with unique personalization tools, including an app. With it, advisers receive real-time data about their customers — giving them an informational edge, for example, when recommending products. Meanwhile, Lululemon’s newest concept store creates a multipurpose, immersive space: consumers are able not only to buy products, but also to take gym classes, meditate, or drink juice in a café.
There is a clear need for consumer data in order to provide a tailored shopping experience. Front-runners in retail understand digital and retail channels must work together to capture valuable consumer information. In beauty, we observe an increasing trend of brands introducing direct retail formats with the objective to get closer to their consumer and gain a better understanding of their needs. These insights shape innovation and help curate product assortments.”
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