For as long as I have been in the business of retail, there has always been some sort of narrative of how the retail sector “is standing at the edge of a precipice, facing an unprecedented period of global disruption and change.” It can be the doom and gloom of a global financial crisis, bird-flu, the rise of the world-wide-web and the demise of the physical retailer experience, in more recent times a pandemic, nut-bar egocentric dictator world-leaders, increased crime and the rise of AI. If I had more time I could sit and explore the archives for what the “unprecedented disruptor was” on a year-by-year basis back 50 years and I am sure I would find a similar headline (maybe #squadgoals for later in the year).
One truth remains that there is always new challenges for retail leaders. What is more apparent in this moment is that every leader of today and tomorrow needs to be skilled to have the ability to handle and navigate through a complex labyrinth of economic, geopolitical, and social uncertainties and (1) at pace, (2) in a collaborative way and (3) with the ability to handle the yet unknown - with a style that can take people of a journey but having the humility to be able to adjust in the moment.
The pandemic was one of the first universal incidents that brought the unique skills of a fit-for-future leader to rise to the top. Pace. Uncertainty. Collaboration.
This article delves into the key issues confronting retail leadership, the changing dynamics of stakeholder relationships, and the need for a radical retail reset in these extraordinary times.
The perfect storm: Disruption in the retail sector
The retail industry has been caught in a perfect storm of disruption. The relentless rise of ecommerce, the unforeseen consequences of the Covid-19 pandemic, supply chain bottlenecks, and the "great resignation" employment crisis have all contributed to this upheaval.
Throughout this period, retail leaders have had to steer their businesses forward, serving customers, investors, stakeholders, and employees without missing a beat. The challenge is to build resilience while adapting to changing conditions and uncertainties. As we emerged from the cloud-cover of the pandemic and businesses tick-over a full cycle of their new normal, the demands for near-term returns vs long-term growth have resurfaced. You need to look no further than across the ditch and you will see the retailer leadership changes which seem a combination of “musical chairs crossed with The Hunger Games” for the past 12 months.
Distilling the key issues
The World Retail Congress undertook a process of distilling research and extensive conversations with retail leaders from around the world, with six key questions emerging that are challenging the leadership:
Facing uncertainty
Business leaders are grappling with the question, "When can I be certain that the uncertainty is over?" In these unpredictable times, scenario planning for a range of eventualities in a disruptive marketplace has become the order of the day.
In NZ uncertainty can re-emerge with 24 hours of rain. Or an unexpected tornado. Or a stabbing in a store. I know it’s not retail but who would have expected an allegedly disgruntled ex-employee return to the workplace and kill their co-workers.
Defining focus
With challenges coming from all directions, leaders are faced with the task of defining where they should focus their time and resources. Building resilience, delivering value, and accelerating change are key areas of focus.
Embracing sustainability
Retail leaders understand the importance of sustainability, but the immediate challenges often take precedence. However, starting on a sustainability journey is now an expectation from consumers, legislators, stakeholders, and the media.
Understanding the new consumer
Retail leaders are struggling to understand the changing consumer behaviour, especially that of the younger, digitally native generation. Data and personalisation are key to understanding and meeting the demands of today's consumers.
Yet this requires an investment in infrastructure, an ethical and structured approach to personalisation and data use and utilisation of media channels that some leaders may never see (or understand).
Planning for the future of ecommerce
With the growth of ecommerce resettling, retailers are questioning where to place their bets for the future. Investing in an omnichannel future with tech and experiential solutions that follow the customer journey is crucial. But how to do that profitably.
Building the right team
The "great resignation" has left a void in the workforce. For us in NZ the allure of moving across the pond, or even further afield is leaving a gap. Retail leaders are challenged with attracting and retaining a diverse range of skills and experiences to grow the industry. We also have the rise of a generation who see the potential in gaining more experience by moving every two years (remember when we were told NOT to do that!)
Do retail leaders need a new playbook for success?
The retail sector has undergone more disruption in the past five years than in the previous 25. Consider this…..perhaps never before in the history of the industry has every single one of retail’s primary stakeholder groups; customers, suppliers, employees, and investors—dramatically changed their behaviour and expectations, all at the same time. Becoming a winner isn’t easy; staying a winner is even harder. So does this call for a radical rethinking of long-held beliefs and practices? A retail reset. We think yes but we don’t have all the answers. We have, however, observed some of the challenges.
The emergence of the 'Zero Consumer'
Consumers are increasingly shopping across channels, showing little loyalty, demanding fast shipping and sustainable products. This new breed of consumers, referred to as "zero consumers," are challenging the retail norms.
A recent McKinsey report detailed (from a US perspective), the attitudes and behaviour of these “Zero customers.”
Zero boundaries: Browsing in stores used to be one of the primary ways that shoppers came across new products. But the purchase journey is now more fragmented. Nearly half of consumers—and approximately 70 percent of millennials and Gen Zers—say they rely on social media, celebrities, and articles or blogs for purchase inspiration. And they’re shopping fluidly across channels.
Zero in the middle. Consumers are moving away from the middle of the market—they’re either scrimping or splurging. Total consumer share of wallet spent on mid-priced goods and services has declined to lower-priced options. At the same time, around the world and in our own backyard we see customers splurging on luxury brands, travel, and apparel.
Zero loyalty. About half of consumers reported switching brands in 2022, compared with only one-third in 2020. What’s more, about 90 percent said they’ll keep switching. Without truly differentiated, exclusive, unique and compelling offerings, the retailer will soon just be a means of distribution.
Zero patience. Consumers are much less willing to wait. Free standard shipping, unfortunately, is fast becoming table stakes. With the rise of “click and collect” and “same day delivery” have raised consumers’ expectations. Customers today state that three-day shipping is the slowest they’ll tolerate before looking to other retailers.
Net zero as a buying factor. Consumers are no longer just saying they care about sustainability and social responsibility; they’re now voting with their wallets.
Supplier, workforce and investor expectations
Retail ecosystems are evolving (beyond traditional co-op and rebate models) and suppliers are becoming more sophisticated customers. Think third-party marketplaces and retail media networks (RMNs).
In addition, we now have employees who are seeking workplace flexibility, which traditional retail jobs haven't offered.
Finally, shareholders expect profitable growth amid all this disruption. There has also been a reset of expectations. “You said this would take 18 months to do but you made xyz changes in literally weeks within the pandemic.” I think we all have a story of someone who built a fully functional website in weeks not months.
Reinventing Retail: Priorities for the leaders of today and tomorrow
To navigate this complex landscape, retail leaders need to focus on three key areas:
Owning the consumer relationship: Retailers need to cultivate a massive—and massively loyal—set of consumers. They need to measure "share of life," instead of just share of wallet, by introducing more ways to become indispensable in consumers' lives.
Setting a vision for the retail ecosystem: Retailers need to define an aspiration for their ecosystem. This includes determining what new businesses and assets they will build, what their revenue and profit pools will look like, and how they will leverage and nurture supplier partnerships to scale their customer base.
Overhauling the employee value proposition: Retailers must find creative ways to offer flexibility and make frontline work more engaging. In the support/head office, they need to build a community of practitioners (art and science – not just project movers) and develop analytical talent to be collaborative leaders. Businesses aren’t black and white; they are many shades of grey.
I did meet a CEO who shared that he wondered if his business/industry
competitiveness was just expertise and excellence in supply chain. Have no doubt
that these aspects of “winning” are critically important at different points in
time….cutting the cloth, resizing the business, etc, etc, but that is defined within your
focus.
Becoming a winner isn’t easy; staying a winner is even harder.
The retail sector is at the beginning of an exciting new chapter (okay maybe I do say
that every year). The uncertainty and challenges will not diminish, but the old playbook
needs to be rewritten in soft copy ready for focusing on these key areas where retail
executives can lead their businesses to growth and prosperity.
Case study
Countdown rebrands to Woolworths – retail leadership or retail blunder?
In the last week it was announced that as part of an ongoing transformation programme of the Countdown operation it would revert to the Woolworths brand. That the business will start changing individual store signage in the coming months, with plans to effect the change on its entire network in the next couple of years.
I personally think the announcement timing was tone-deaf with poor timing and the wrong messages amplified, but there could be countless reasons which will unfold over the coming months. Outside of this, we have a major NZ retailer announcing significant and necessary investment for them to continue to be a significant competitor in the retail landscape.
Becoming a winner isn’t easy; staying a winner is even harder.
Emotions aside from the headlines of the identity change (which will be a small component of the spend), this is a business with many legacy stores outside of the metro areas who are investing to improve the offer, value and experience for kiwi shoppers.
Perhaps they need a new person in PR and communications, but let’s read the detail:
Invest more than NZ$400m in the next three years to modernise its store network, with a focus on older stores across Aotearoa
They will launch Everyday Rewards (Woolworths AU program) for New Zealand by early next year to bring more value to its customers
Woolworths will offer more convenient eCommerce shopping options (eg. Milkrun)
As well as top-quality fruit and vegetables with an advanced Christchurch Fresh Distribution Centre set to open in 2024.
Countdown has been losing to Foodstuffs of late, largely due to a seismic consumer shift to a primary value focus.
I have no doubt when you report to AU (which I did for years), you need to stroke the hand that feeds you and, “the rebranding of our stores to Woolworths Supermarkets New Zealand means we are doubling down on our trans-Tasman connection to bring the very best to our Kiwi customers. That includes a refreshed loyalty programme focused on providing more value and a materially improved fresh offer.”
But all in all, this is a demonstration of investment and leadership. Have no doubt this was well considered for the long-term benefit of all stakeholders; especially customers.
PS. this was in no way influenced by anyone associated at WWNZ. It is Juanita's personal opinion but I do recognise I have had a relationship with this business that has spanned decades. One might say a loyal customer to the end. But at the end of the day I would call it if it was poor leadership.