RSR Research: 2010 – The Year of Transparent Retailing

Discussion
Jan 11, 2010
Nikki Baird

By Nikki Baird, Managing Partner

Through a special arrangement,
presented here for discussion is a summary of an article from Retail Paradox,
Retail Systems Research’s weekly analysis on emerging issues facing retailers.

It’s very tempting to try to declare that 2010 will be the
year of the mobile consumer. However, I think 2010 will see the real beginning
of something bigger, and that is “transparent retailing.”

By transparent, I mean retailers will have to provide consumers
with more access, at a more granular level, to more information about their
operations and how consumers fit into those operations. It might be as simple
as providing consumers with searchable, analyzable purchase history online,
or as complex as providing the carbon footprint of products or processes. It
might come from the mobile channel, through price or availability comparisons,
or from the online channel around product reviews or ratings.

There are three trends at play that will converge in 2010,
I believe, that will force retailers into more transparent retailing:

  1. The
    pursuit of green.
    Consumers want to know what retailers and manufacturers
    are doing to build more sustainable practices and products. But as soon as
    you start talking to consumers about what you’re doing, you need to be prepared
    for full disclosure, lest someone dig something up or call something out,
    and the legitimacy of your efforts is undermined. It requires an as-yet-to-be-determined
    level of transparency into operations, and, increasingly, into the operations
    of trading partners.
  2. Supply
    chain visibility.
    Speaking of trading partners, one of the highest areas
    of interest coming out of 2009, according to RSR’s research, is supply chain
    visibility. When you know where an item it is, and how much it costs to get
    it where it needs to be, retailers can make much more intelligent supply
    chain decisions. When you couple that capability with not just demand-sensing
    but demand-shaping capabilities thanks to price optimization, now you have
    a level of granularity and control that is unprecedented in retail. We won’t
    get this in 2010, but the path to it will lead to much greater product granularity
    in the next year.
  3. Greater
    use of customer data.
    Retailers have long been pursuing customer centricity
    initiatives, but in 2008-09, the importance of these initiatives came home
    with a vengeance. In an economic singularity, demand forecasts are near-useless
    – but customer insights, and advance insights into shifting customer behavior,
    became priceless. As consumers altered their purchase habits, retailers needed
    to be on top of any hint of defection behavior. In 2010, retailers are still
    struggling to understand the “new” consumer, and to convince abandoners to
    come back.

Take all three of these trends and wrap them around customer
expectations. As a consumer, I expect to have access to the same capabilities
and information in one channel that I can get from another. I expect to be
able to compare prices, products, reviews, availability, and more, not just
across channels but across retailers. I expect to be able to understand how
the products you sell impact my life and my world.

If you make your margin by exploiting some kind of information
advantage over your customers – whether that’s knowing the fair price when
your customers don’t, or product quality issues that you’re not being up front
about, or even whether you have more of an item available or not (or if your
competitors do) – I have a feeling the next year is going to be tough. And
the next decade even tougher.

Discussion Questions: In what areas
do you see transparency becoming more critical for retailers and brands
in 2010? Where will the industry be most challenged in delivering greater
transparency?

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6 Comments on "RSR Research: 2010 – The Year of Transparent Retailing"


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Christopher P. Ramey
Guest
11 years 3 months ago

The latter two are not consumer trends unless it’s an obvious deviation from their values, or a big ticket item. I would not advise retailers to spend much time discussing channel distribution or how you found them. Sustainability is a responsibility and not a differentiator.

Customers desire simplicity and their needs to be filled. Don’t confuse your responsibilities with what is important to them.

Kim Barrington
Guest
Kim Barrington
11 years 3 months ago

I think Supply Chain is an interesting way to become transparent, and feel it falls within the domain of sustainability. Here is where a retailer can control the price of things and since petroleum or transportation costs put so much strain on pricing, now may be the time to rethink these strategies, depending upon price vs value and what can be delivered to the consumer in the best possible way.

My case is that I can only import a certain type of fabric, but the product is made in the U.S.A.. I’ve had to do a cost/benefit analysis and be clear with the customer on how the product has been put together so they can appreciate the finer points. And now I’m working on making it even more visible to them through some sort of certifications.

Herb Sorensen
Guest
11 years 3 months ago

“Transparency” is for sure a growing issue, but I’m thinking of transparency in the sense that stores are basically quasi-public places, and with shoppers being wired for both sound and video, stores will soon be subject to more surveillance than the drones provide in Afghanistan. In this case, we have already spent years in building the metrics that the “drones” will be reporting to the outside world.

Don Delzell
Guest
Don Delzell
11 years 3 months ago
Demand singularity is simply not a workable concept in the retail world. Demand forecasting, adapted for limited consumer group modeling, is a necessity to achieve economies of scale in distribution, effort and marketing. Online, demand singularity can be presented, although this approach has yet to show any pervasive uptake or best practice implementation. The idea that altering what a specific consumer sees as a function of the information available about that consumer remains deeply intriguing…and the actual implementation remains a subject for enormous debate. All predictive modeling must draw on data, and the data must be weighted, interpreted, and extrapolated from; which leads to endless discussions of what weighting, how arrived at, what interpretation, and how extrapolated. As for “green,” while it is politically incorrect, I have yet to see overwhelming consumer adoption of the “green” philosophy either in supporting apparently “green” brands and products, or in the willingness to pay more for those products or brands. Yes, “green” is topical. To what extent does the consumer’s perception of that status impact intent-to-buy? I haven’t… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 3 months ago

The most important move retailers made to maximize sales success during the recent holiday selling season was an opaque one. They limited inventory while maintaining margins. What a way to kick off the age of transparency. To my recollection, most of the transparency steps made for consumers by brands and retailers over the years were forced by the government. Ingredients, country of origin, certifications, warnings, etc. They were hardly voluntary and there’s no reason to believe that will change. Just more government control. Conversely, consumers are notoriously resistant to additional intrusions into their privacy. In-store RFID applications, while essentially ready to implement, are only slowly gaining traction. When asked about more access to their personal preferences and practices, shoppers are always reluctant.

Perhaps the best we can hope for is translucency.

angiretlwire dixon
Guest
angiretlwire dixon
11 years 3 months ago

Isn’t supply chain visibility, what we used to call “landed cost” back in the day?

No matter what you call it, it’s always good to have a handle on expenses.

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