How a Responsive Supply Chain Makes Retailers Faster and More Personal

 

The following article by ThoughtWorks Customer Experience and Innovation Strategist Dianne Inniss is excerpted from Credibly Business Journal: Understanding the Needs of the New Consumer, the first in a three-part series on retail trends and innovation. Click here to download it for free.

There are two big questions that I hear retailers asking today, and the first one is, “How do we compete with Amazon?” The second major question is, “Given that customers have so much choice these days, how do I build loyalty?” — because as customers are becoming smarter and more fickle, retailers no longer have a captive audience.

If you think about what consumers are looking for today, many are saying they want personalized, unique products. They want to feel that whatever they’re buying is special and crafted for them.

The traditional retail supply chain is built on economies of scale and scope, so that you can deliver large volumes of things to large stores and do it really cost efficiently. But that means you have to manufacture large volumes of product which may or may not suit the customer, and you’re not necessarily getting the customer the thing that they most want. Your customers have to make do with buying things that many other people have.

dianne inniss thoughtworks retail supply chain

Dianne Inniss

The traditional monolith of supply chain is also being influenced by the pace of change in the consumer’s world — everybody wants everything now, faster, and on-demand. Retail organizations aren’t really built for that. They still have long manufacturing cycles, long shipment cycles, and then their customers have to go to a store, or there’s a difference in time between when you order something online and when it arrives at your home. There’s a breakdown in the ability to deliver personalization and the ability to deliver on-demand, as customers’ expectations continue to increase.

Back in the day when Blockbuster existed, if you wanted to rent a video you would get into your car and drive to a video store. And then Netflix said, “Well, that’s too much of a pain. You don’t have to leave your home at all. We will email you a DVD in two or three days.” And then even waiting the two or three days for your DVD was too long, so we got to digital downloads. That persistency of change is driven by, “Well, I want that now.”

For media like movies and books, it’s an easy transition because we’ve been moving towards digitized content. I think the next development will be, “How could we replicate that with physical goods and on-demand manufacturing, which would have both immediacy and personalization?” Or, if we can’t create certain products on-demand, then can we incorporate on-demand delivery, so that I get the thing I want at the moment I want it, rather than having to go out into the world to find it.

As Dan McClure and I wrote in our “Exploding the World of Retail Opportunity” series, “The key value proposition for stores — that there is big money to be made by acting as the middleman between production and consumption — is reaching the end of its life.” That might be a scary thought, but retailers now have the opportunity to become platforms or brokers for suppliers and consumers. So, rather than being a middleman in the traditional sense, they begin to foster conversations between the two sides.

For example, we see this with Uber in the provision of transportation services. There are people who want to ride and there are people who want to drive, and they’ve always co-existed in the world, but they didn’t always know where to find each other. Uber has created a platform for supply and demand to meet, without having to own vehicles, without having to worry about medallion costs in the way that taxi drivers do, and then just take a cut of all that’s happening.

If we think about that in the traditional store model — even something as straightforward as clothing or furniture — before, you would go to the department store where there are many, many choices of dresses or sofas, and buy one and have it sent to your home or take it home with you.

Now, there is the potential for a retailer to have multiple suppliers, who are able, because of their small-batch nature, to create something for a customer that fits their need, and then broker that relationship. The retailer knows all of the suppliers who are out there and available, and they’ve got an audience of consumers who go to their website or go to their store who might want to interact with vendors that they don’t yet know about.

Another way for retailers to think about creating new opportunities is to really understand the customer’s broader life context so that they can serve more needs within it. So, I’m not just buying a dress, I’m buying a dress for an event — therefore, what else might I need for that event? Whether it be tickets, or the beverages and refreshments that I might want to have bundled together in ways that make sense, that might be another way for retailers to do some 
interesting things.

I’ll give you a sneak preview to some work that we’re doing at ThoughtWorks with one of our clients — a retailer in partnership with a manufacturer — to show how we’re thinking about the customer’s broader life context in a new way.

We’re working with a company that’s developing smart kitchen appliances. The technology is smart enough so that the refrigerator not only knows the items that are inside of it, but also understands the composition of those things. So it’s not just that the fridge can detect that you’ve got a carton of milk and six eggs, it can detect that the milk is going to spoil in three days and the eggs are good for another two weeks.

The refrigerator can then send signals for the consumer to respond and behave in a certain way. For example, it could indicate, “You need to use this milk within the next couple of days, it’s about to spoil,” and then provide recipes that would use those items. It could also provide triggers like, “Since the milk is about to spoil and you’re using it up in three days, we’ll place an order to the store to have it replenished.” Now the store is fitting more broadly into the customer’s life beyond just a place where someone has to go and pick stuff up and come home. It’s about understanding how that might work within the context of use.

I think that we’ll be seeing that more and more with smart artificial intelligence, where the devices themselves are smart enough to know when to order. Amazon has already been in talks with some home appliance makers to create intelligence where based on the size of a laundry load and the amount of laundry detergent and fabric softener I use, they can do the algorithm to calculate that based on the number of loads of laundry I’ve done so far in the past month or two, it’s now time to automatically replenish my detergent.

That would make it a truly seamless operation with a seamless supply chain, and would allow for predictive ordering. So, a customer would no longer have to wait for the product they need; the technology would anticipate their need, and the product would arrive just in time for the need to be met.

Still, even as consumers move towards on-demand ordering and personalization, the traditional experience of shopping will still have a place in retail’s future, because human beings are social animals. Shopping is not only a transactional experience and an experience of necessity, but for many shoppers, it’s also a source of entertainment.

What I see happening with retail is what I like to call “the return 
to the agora.” If you think of the agora of Ancient Greece, it was a place where people came not only to shop but to socialize,
to learn, to engage, to be entertained. That’s the role that is more likely to emerge for what we think of as the traditional retail store.

Being in a place where you have an experience allows you to imagine yourself interacting with a product, but you don’t need a full showroom floor of the same type of item in order to have that experience.

Look at what the menswear retailer Bonobos has done, for example. Their stores feature a few items that demonstrate the range of what they have, but you don’t necessarily find all the sizes, so you’re not going in there looking to have a shirt in your size. You’re looking to see, well, does this color and this style suit you? And then your custom clothing is sent to you at home.

Similarly, if we think about 3D modeling and 3D on-demand printing, you could see the retail store becoming the showroom for people to do micro-customization based on some number of components, which allows them to put things together and create a personalized product.

There’s always going to be a human dynamic involved in the experience of shopping, but it’s not going to be at the scale 
and volume that we have been used to in the past. Some of the operational and transactional things that made that model work will have to evolve to this more experiential and engaging way of serving customers.

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Dianne Inniss is part of the ThoughtWorks Retail team, joining from Capgemini Consulting. She partners with clients to design meaningful customer experiences and deliver solutions that generate customer delight, sustainable growth and profitability. When she’s not consulting, she’s dancing to soca or salsa music. Two things she can’t do without? A good Wi-fi connection and a daily workout.

Related: Doug Stephens on How to Give Retail Customers Something Unique, Memorable, And Valuable