It is an irrefutable fact that the COVID-19 pandemic has changed the ways most industries operate forever – especially retail.
With brick-and-mortar locations forced to shut down at the beginning of the crisis – with some closing their doors forever – the explosive boom in ecommerce has created a landscape where customers expect that their demands are quickly met.
This acceleration in changes in customers’ expectations begs a question that many retailers now must answer: should they continue with a traditional retail model or shift to digital?
It makes sense, then, that more retailers are turning to agile methodologies to help them keep up with new shopping behaviors and trends. How can retailers efficiently go agile? Let’s take a closer look.
What is Agile Retail?
While the agile methodology originally got its start in the worlds of manufacturing and software development, this approach to project management has evolved to encompass a set of principles known as “enterprise agility.” Broadly speaking, agility across an entire enterprise allows for both speed and stability; improves role clarity, innovation, and operational discipline; and can produce positive outcomes for organizational health and performance.
Today, enough retailers have started adopting agile methodologies that “agile retail” has emerged. This direct-to-consumer model leverages data to predict trends, manage highly efficient production cycles, and achieve fast turnaround on emerging styles. This kind of approach is especially relevant for “fact fashion” companies, which can produce 10,000 to 15,000 new styles annually and sell them at their hundreds of locations across the globe.
The main focus of agile retailers like Amazon is to respond faster to customer needs by utilizing Agile and Lean concepts. This concept transforms ecommerce retailers into on-demand platforms that identify stock and deliver desired products directly to the consumer. So, agile retailers must continuously identify trends that are popular with consumers and deliver the products they want using agile production concepts. At the same time, they emphasize iteration over perfection, which gives them the ability to move quickly and to constantly test and learn and adapt.
The Need for an Agile Transformation in Retail
According to a recent report from McKinsey, there are several trends driving retailers to adopt enterprise agility.
These trends include:
1. Omnichannel is the new norm – Traditional retail is built upon a multichannel strategy that prioritizes assortment and merchandising. However, retailers have historically siloed these channels, which frustrated customers. For instance, under a traditional retail model, customers were not able to buy a product online and return it to physical stores. The pandemic forced stores to close for extended periods of time, which exposed a crucial need for omnichannel strategies. By focusing on the customer rather than internal, siloed objectives, agile retailers can create a single customer experience across their brands.
2. Traditional retail no longer offers enough competitive advantages – Traditional retail environments are built on the backs of great brands, quality footprints, and streamlined operations. However, these characteristics are no longer enough for retailers competing in the new market environment. In a data-driven digital world that derives success from solving customers’ problems, the traditional model for retail supply-chain excellence must transform to take these types of insights into account. At the same time, retailers need to find new ways to support customer convenience across all touchpoints.
3. Logistical excellence takes priority – we mentioned Amazon above as an example of an agile retailer. One of the ways Amazon has been able to maintain its significant competitive edge has to do with meeting customer demands for fast delivery. Indeed, it seems that all retailers today are competing for who has the quickest time between “customer order” and “your package has been delivered.” With most consumers now expecting same-day and next-day delivery, it only follows that retailers who can’t deliver on this trend will lose business.
4. Changing customer expectations and channels – According to McKinsey, 46 percent of U.S. consumers have switched brands or retailers recently. The pandemic caused a complete overhaul of which digital channels and ecommerce activities consumers preferred – and these changes are not going anywhere. For instance, the first ninety days of the pandemic saw ten years’ worth of growth in U.S. ecommerce penetration. The majority of growth can be attributed to new entrants that had the best digital offers and retailers that provided an integrated customer experience. Now that consumers expect these types of provisions when shopping, incumbent retailers are feeling the pressure in terms of keeping up with profitability and customer service.
5. Technology advancements are now necessary – Tools that were once “nice-to-have,” such as mobile payments and apps, have become crucial for all retailers (not just online retailers) hoping to survive and thrive in the age of omnichannel retail. Now, having access to conveniences that make the shopping process easier can make or break where customers choose to make purchases.
Further, adaptability is another necessity born of the omnichannel era thanks to the rapid pace of technology advancements, the development of new ways of interacting with customers, and the rate at which customer-driven demands will continue to accelerate. Technologies like the Internet of Things, artificial intelligence, augmented reality, and new social platforms for customers are forcing retailers to react based on how customers use and interact with them. Therefore, having a proactive strategy backed by adaptive technology backbone in crucial for retailers looking to maintain a competitive edge.
Best Practices for Agile Retail Companies
How can traditional retailers pivot to agile approaches? Focusing on making changes in the following areas are key:
1. Focus on the customer – This point seems obvious, yet it is still being overlooked by some retailers. Rather than trying to obtain growth solely through traditional channels and inducements, retailers should examine their customer data to identify opportunities that increase “share of wallet.” This means that retailers should focus on identifying the amount an existing customer spends regularly on their brand rather than buying from competitors. For this shift to work, retailers must find customer insights that build a more holistic and customer-focused perspective.
2. Employ cross-functional teams – Break down siloes and employ cross-functional teams that are responsible for delivering specific customer outcomes from end to end. This approach involves connecting resources that traditionally would be stuck in different functions and gives the team a more comprehensive overview of the task at hand. Retailers can build agile teams that focus on the omnichannel customer journey, delivery, and more – it all depends on the retail business’ goals.
3. Maintain a proactive approach – Don’t rely on the traditional yearly budget cycle to capture market opportunities. This approach bogs down processes and ensures that traditional retailers are unable to enact quick changes. Instead, try having a quarterly business review (QBR), something that allows agile retailers to set priorities and reallocate resources on a more frequent basis. These reviews can help retailers proactively define reasons for problems like poor customer satisfaction scores and create a fast and flexible plan that addresses issues before they become unmanageable – or damage a brand’s reputation.
4. Hire diverse, high–potential talent – A 2017 industry-wide study found that the retail industry is the fastest-declining sector among millennials as measured by talent attraction. In this area, a mindset change around finding and nurturing talent is crucial. For instance, most agile transformations emphasize being customer-centric and improved customer experience, Therefore, a strategically agile retailer could direct frontline retail employees to assist customers in bridging the gap between digital and physical channels. This approach would help create a seamless omnichannel experience that could play a key role in increasing the number of customers who use a brand’s digital functionalities.
Further, enterprise agility is proven to increase employee engagement and attract top talent, with one Australian retailer increasing employee satisfaction by 15 percentage points less than six months after completing its transformation. These new agile company cultures have changed their working environments, empowered team members and individuals by giving them the authority to make decisions, redefined organizational and team purposes, and provided broader varieties of career options – improving their standing in rankings of best places to work in the process.
5. Make digital technology part of the business – To meet consumer demands for seamless shopping experiences, retailers need to ensure smooth transitions between channels. For this to work, incumbent retailers must use digital technologies to reinvent their operations and rapidly create and stabilize any new channels, services, and experience tools. Agile retailers often adjust their IT and digital operating models to encompass new technologies, allowing support resources such as engineers and architects to become part of their business teams.
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Our Agile Solution Squads have experience working with clients in the manufacturing space and will organize skills, assets, and provide cross-functional collaboration to effectively execute an end-to-end digital transformation.
Our Solution Squads have proven results in getting products to market faster, reducing your product backlog, increasing active user engagement, cost effectively deploying skills, and more. We’ve deployed agile squads in almost every industry, including retail, automotive, and finance.