Industry View: The Cost of Doing Nothing

2019 is set to be one of the most challenging years retailers have ever faced. The market is flooded with uncertainty – and many retailers appear paralysed by indecision. Should the priority remain cost cutting or are there any opportunities for growth? Retailers that continue to innovate, listen to their customers and invest in technology will reap the rewards; but, asks Craig Summers, UK Managing Director, Manhattan Associates, what is the cost of doing nothing?

How much longer can UK businesses use uncertainty as an excuse to delay investment? Low consumer confidence has become a given over the past decade – and while economists can point to the positives of wage growth and high employment, these figures are clear indicators of the inherent under-investment: companies are opting to throw bodies at the problem rather than embrace radical and essential technology-led change.

In recent times it is manufacturing that has borne the brunt of negative headlines regarding the UK’s (lack of) productivity and (under) performance. Retailers have escaped much of the opprobrium by hiding behind the admittedly huge challenges created by the fundamentally different dynamics of the online retail model online. But the issues are the same: while a recent survey revealed that 81% of manufacturers are now ready to invest in new digital technologies to boost productivity, translating that readiness into a willingness to make the investment is likely to remain the major stumbling block, if the UK retail market is any indicator.

Just like manufacturers, retailers know that change is essential. Most admit the need for end to end supply chain visibility, for better operational control and an enhanced customer experience. The problem is strategic paralysis, delaying essential change and opting, at best, to tinker at the edges of flawed retail models.

Where is the innovation? Where is the proactive response to a disrupted retail model? While many companies have made ‘as good as Amazon one day’ pledges, the reality is that the majority are postponing investment, relying on cost cutting to save the day. Slashing high street stores is a short term panacea at best. At worst, it fundamentally misses the implications of the technology-driven change in retail models that disruptors such as Amazon will continue to achieve year on year.

Winners Exploit Opportunity
In any market, any business cycle, there will be winners as well as losers – and in today’s turbulent retail environment, the winners are those companies with a willingness to invest and embrace change. From small independents spotting a gap in the market to deliver highly curated, original content to companies opting to rapidly scale by taking advantage of low high street rents and failing competition, it is the agile and innovative that are gaining marketing share and generating profits.

These winners are expanding – they are adding stores, extending the range, reaching out to new customer bases, expanding internationally. They are exploring technology in a bid to reconsider existing retail models – leveraging real time, end to end stock visibility to redefine the store estate as mini distribution hubs, for example, to transform the customer promise. They are embracing the flexibility and agility of cloud based software to embed scale within the business model, driving down capex whilst also creating a business poised to rapidly explore any new opportunity – from trialling new international markets to swooping in when a competitor fails.

In contrast, the rest of the retail market appears to be accepting a gentle yet inexorable decline.

Conclusion
To be fair, ten years ago who would have predicted the current state of the UK retail market? Retail has always been cyclical, and every downturn creates both winners and losers; but the sheer scale of change this time has been unprecedented. The combination of the disruption created by the online revolution and lack of consumer confidence has driven many traditional names to the brink – and beyond.

But an unwillingness to make the big investment decisions has become the default setting for too many UK businesses. Retail is no exception. It requires innovation, imagination and positivity – and there are many successful and growing companies proving that point. But retailing is fundamentally different – disruption is technology-led and technology driven. The success stories of 2019 will be those retailers that embrace change and actively explore and exploit technology innovation to reach new markets, deliver new experiences and reimagine the product mix.