With U.S. e-commerce sales totaling $105.7 billion in the first quarter of this year — driven by double-digit growth quarter to quarter — retailers and fashion apparel brands have been scurrying to improve the online sales experience. But it’s been challenging as Amazon Inc. garners more than 43 percent of those sales — as it continues to grow and take market share.
In the physical retail world, an over-stored environment is forcing companies to rethink their brick-and-mortar strategies, which includes creating engaging environments that surprise and delight shoppers. But other challenges remain. The convergence of digital and physical retail is straining supply chains as shoppers expect items to be in stock and shipped now.
As a result, McKinsey & Co. has teamed with WWD to survey industry executives on the topic of speed to market, technology and the supply chain. The results of the survey will be released later this fall. In the meantime, WWD offers some of the insights culled from industry executives who participated in the survey.
Larry Grischow, senior vice president of supply chain and procurement at Abercrombie & Fitch, said the fashion apparel space has been transformed rapidly by changes in consumer behavior. And the entire supply chain process is a lot more complex. He noted that the shift from bricks to clicks has accelerated as the “proliferation of the various omnichannel tactics, whether it be ship from store, order in store, and click and collect” has increased.
“Getting customers, delivering an experience and product to customers the way they want it, where they want it certainly has elevated the game, and has made it more complex,” Grischow said. “The way we’re battling that complexity is with continuous innovation, and a focus on tuning our omni capabilities, understanding our customers in a greater way, and then ensuring that we adjust our supply chain to deliver on whatever those customer needs and wants are.”
Grischow said there’s been a lot of press around fast fashion, “so we have the physical and visual capabilities to ‘fast react,’ and in certain categories [that means] investing in speed based on the feedback that we’re getting from our customer base.”
Leveraging data is also key to surface insights about the customer base, and its needs. But wanton investments in data and technology may not translate to overnight, robust gains in conversion rates. Ari Hoffman, U.S. chief executive officer at Scotch & Soda, said data and technology should be deployed strategically while always prioritizing products.
“There’s so much talk about big data and about all kinds of tools. And sometimes I think it gets a little bit too tricky,” Hoffman said. “Sometimes people put too much emphasis to some parts of technology and they forget about actually what you’re trying to sell. Is technology important? Absolutely. Product is first, though.”
Asked if investments in technology is a top priority, Hoffman said it was important, but the highest priority is on products and customer service. “Do we use web analytics? Absolutely. In store analytics? Absolutely,” he said. “E-mail targeting? Yes, we target. Are we investing in AI or robotics, and things that are beyond our usability today? No, we are not. So, I would say technologies that enhance the customer experience, and technologies that assist us to understand our customer, that make the whole thing flow better and service better, absolutely. We do that. But there’s a clear distinction between investment and over-investment.”
How consumer connect to a brand is also key along with product and service. Neil Tenzer, head of strategic planning at Abercrombie & Fitch, said there are retailers and brands in the market have become adept at speed — getting products to consumers quickly, cheaply and efficiently. “[But] we don’t see a whole lot of players out there who can create a really rich brand experience. So there’s an opportunity for us to play a role there.”
Tenzer acknowledged that creating that brand experience, in today’s environment, adds to the complexity of doing business. With data, though, the process becomes easier — especially when it informs product development and merchandising.
“We’re always looking at buying patterns, and the data that we’re getting from that, as well as using qualitative research, which includes traditional methods such as focus groups as well as sophisticated analytics where we’re actually testing products, and seeing velocity, and trying to predict trends,” Tenzer said, adding that technology can also help gain an understanding of the shopper’s journey — online and in stores.
Grischow it requires investment and capabilities, “and talent to be able to format data, and turn it into actionable intel, and do it in a way where it helps us focus our investment.”
“In the supply chain, one of our highest priorities is to balance service and cost, and the more we can inform the investment decisions with rich customer data, whether it’s through feedback, through contact centers, post order, during order, or whether it’s through some of the other insights and analytics that [Tenzer] spoke to, we’re going to be better, we’re going to serve our customers better,” Grischow said. “We put our customers at the center of everything we do.”
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