Retail refers to selling goods or services directly to consumers or end-users. Some retailers may sell to business customers, which is termed non-retail activity. In some jurisdictions or regions, legal definitions of retail specify that at least 80 percent of sales activity must be to end-users.
Retailing often occurs in retail stores or service establishments but may also occur through direct selling, vending machines, door-to-door sales, or electronic channels. Although retail is often associated with purchasing goods, the term may be applied to service providers that sell to consumers. Retail service providers include retail banking, tourism, insurance, private healthcare, private education, private security firms, legal firms, publishers, public transport, and others. For example, a tourism provider might have a retail division that books travel and accommodation for consumers and a wholesale division that purchases accommodation, hospitality, transport, and sightseeing blocks that are subsequently packaged into a holiday tour for sale to retail travel agents.
Some retailers badge their stores as “wholesale outlets” offering “wholesale prices.” In contrast, this practice may encourage consumers to imagine that they have access to lower prices. In contrast, being prepared to trade off reduced costs for cramped in-store environments, in a strictly legal sense, a store that sells the majority of its merchandise direct to consumers is defined as a retailer rather than a wholesaler. Different jurisdictions set parameters for the ratio of consumer to business sales that represent a retail business.
This article will break down the significant considerations about the retail business: its challenges and direction.
Challenges in Retail
Technological advancements such as facial recognition, AI and robotics, cashier-less stores, chatbots, AR/VR, voice commerce, and more are advancing quickly, and the most successful retailers are the ones who are taking bold leaps to maximize technologies associated with their primary infrastructure. Other success stories have come from retailers who have adopted an omnichannel approach to ensure all available options are integrated, to enhance customer experience and elevate brand profile.
However, adopting new technologies and ways of working is often far from seamless.
Top 10 Challenges in Retail
Here is a look at the Top Ten Challenges many retailers face while navigating a digital transformation journey.
1. Tackling eCommerce
By 2040, it’s estimated that 95% of purchases will be made online (Nasdaq.com), so the need to move commerce online is vital. However, retailers must get this right and create interactive platforms that are fast, secure, functionally optimized, and customer friendly.
2. Digitizing customer experience
As mentioned above, the retailers are making the most significant growth leaps, focusing on omnichannel strategies, and enhancing customer experience by utilizing the latest customer-facing technologies. Consumers demand a seamless shopping experience, whether in-store or on websites, apps, and social media channels. This is where an omnichannel strategy must be slick and offer aligned touch points to ensure consistency in the customer shopping experience. One of the difficulties here is wherever or however customers interact with a retailer, the business must always be able to analyze who they are and what they want.
3. Lack of customer data and poor data management
Businesses may be capturing more data than ever. Still, the critical skill is accurately analyzing the good bits. Unfortunately for some retailers, they’re amassing vast amounts of data that is either unclear, inaccurate, or unused. Therefore, the challenge is to work out how to structure, analyze and monitor the correct data from every customer interaction for deeper insights and practical trend analysis.
4. Cyber security / Data security
Regarding expanding digital infrastructures for eCommerce, retailers’ biggest challenge is safeguarding against security breaches (phishing, malware, data theft). As technologies such as the IoT, AI, and ML evolve, hackers continually find new ways to infiltrate organizations.
5. Effective supply chain management
The global pandemic caused many supply chain issues that had (and are still having) a significant impact on retailers. As online buying continues to skyrocket, capacity handling is an ever-increasing challenge. As Paul Noble recently stated on Forbes.com, it’s time to apply 21st-century technology to today’s supply chain challenges! Easier said than done?
6. Change management
As humans, we’re hardwired to resist change. Digital transformation in organizations can result in resistance to change from individuals or teams who are used to specific technologies or ways of working. Unfortunately, for some organizations, the mindset of questioning change or not changing until the last moment can be disastrous.
7. Financial constraints
For many retail businesses, digital transformation will end with an eCommerce website and perhaps an app. But to truly capitalize on the benefits of digital transformation, retailers have a multitude of options to explore and implement, from AI-powered bots, AR/VR shopping experiences, mobile POS, cashier-less shops, chatbots… the list goes on. However, to keep up with the competition, the race is challenging and costly, and some businesses have deeper pockets than others.
8. Poor strategy
An incomplete strategy (or total lack thereof) can be a fast-approaching pitfall on any digital transformation journey. A well-defined strategy with a clear vision and objectives requires input from several touchpoints, not just the IT team. Why? Because it’s not just about technology, it’s an amalgamation of cross-business processes and requires input from all corners, external and internal.
9. Identifying the right technologies
Many tech providers are vying in today’s market. Many are digital in the customer journey and ensure maximum business efficiency; it’s imperative to identify and implement the right technologies. Failure to get this right the first time can be catastrophic.
10. Lack of human talent
As many organizations experience the ‘Great Resignation,’ one of the critical challenges facing retail organizations is sourcing the best talent. High-quality Tech and Digital candidates are in increasing demand, and many businesses are facing tough competition for the right people to help them on their digital transformation journey.
Where Retail is Heading
The retail industry is rethinking the shopping experience, from redefining how we shop and sell to evaluating the giant independent retailers’ impact on the competition. Here are the biggest trends in the retail industry:
1. Selling online is non-negotiable—no matter what your customers sell.
Online shopping is essential for consumers and table stakes for retailers. Today’s shoppers make much of their monthly retail purchases online. And for online retailers, over half of their revenue comes from internet sales.
2. Omnichannel tools create more meaningful shopping experiences—but education is vital.
Everyone’s moving to e-commerce (which is why our customers need an “omnichannel strategy”). Still, many retailers say not knowing their options stops them from selling items through newer online and social marketplaces. While others claim keeping shopping experiences consistent across online and physical channels is challenging.
Even though retailers are going digital, it’s not an all-or-nothing situation. Shopping habits are evolving, so an integrated solution that ties together multiple channels from the front- to back-of-house operations can help retailers find success.
3. Automated technology helps retailers get a handle on the labor shortage.
Many retailers are worried about being able to attract and retain staff. To help pick up the slack, many executive teams use (or plan to use) auto-use to decrease their time spent doing hands-on.
Streamlining order tracking, managing customer loyalty programs, and communicating with customers are the top three areas where retailers say automated technology will help fill staffing gaps.
4. With supply-chain issues continuing, same-day delivery gives retailers a clear advantage.
Most shoppers prefer delivery over pickup when shopping online. However, less than half of retailers currently offer same-day delivery. And with shipping delays and supply-chain issues holding other online purchases hostage, same-day delivery allows local businesses to get products out faster than big e-commerce players.
5. Social commerce is one of the most prominent digital trends in the retail industry—and it’s booming.
From selling on Instagram to launching an online store, retailers are experimenting with multiple ways to meet customers’ evolving needs customers evolving needs on social media.
Social selling, driven by e-commerce tools, helps retailers reach more customers at a time when people may be even more glued to their devices.
6. Interactive retail experiences bridge the gap between a store’s online and offline parts.
As customers get more comfortable buying products through social media, it opens up a whole new way to interact through those platforms. Enter virtual experiences. More than 1 in 3 retailers plan to invest in live-stream shopping in 2022, while 30% also intend to implement virtual reality (VR) shopping.
Through live streaming and VR, online shoppers get to know a product before they commit to it.
7. The borders between retail and other industries continue to blur.
The pandemic sparked business pivots and fast-tracked industry mashups that were already taking place. As a result, mixed-use concepts, like restaurants selling branded merchandise and retailers offering digital services, are becoming increasingly regular.
More than 1 in 4 shoppers say they’ve bought retail items from a salon or spa during the pandemic, while 44% have purchased services such as meal and cocktail kits or online cooking classes from restaurants.
8. Community investments from retailers may be here to stay.
Retailers are ready to take the next step with their communities, with many who plan to participate in more community initiatives —and around 1 in 3 say they’re going to partner with local businesses, provide supplies for local events, and donate supplies to community organizations.