Supply chain must adapt to changing face of retail sector

Retailers will remain

under pressure this

year to differentiate

themselves in an

increasingly competitive

environment where sluggish

economic growth is the order

of the day.

A recent study by PwC

found that retail in general

was struggling – not only

in South Africa but around

the world – particularly

in the grocery, household

items, clothing and footwear

segments.

The study, titled Total

Retail 2017, found that the

US, for example, the world’s

biggest consumer market in

terms of purchasing power,

was only expecting growth

of around 3% in 2017 after

growing 3.8% in 2016.

Lacklustre GDP growth

around the world, sluggish

consumer demand and an

ever-increasing number

of retailers in the fast

moving consumer goods

(FMCG) industry are factors

impacting the market.

Anton Hugo, retail and

consumer leader for PwC

Africa, says competition in

the retail sector is fiercer

than ever before.

“Focusing on cutting

costs and organic

growth alone

is not enough.

Retailers need

to be innovative

and invest in

new markets,

products and

technologies

that will

give

them the

advantage

over their

competitors and allow

them to connect with their

customers,” he said.

The growing online space

is also impacting the sector

significantly. “Online means

that new entrants into the

FMCG sector don’t require

stores or warehouses; they can

be based around the corner

or on the other side of the

planet. And pure-play

online players are

popping up in

every product

category.”

He said

added to this

the more

than

24 000

online

shoppers

surveyed

said they

were shopping more frequently

with their smartphones than

their phones meaning online

was set to increase even more

in years to come.

“The physical store is not

in danger of disappearing any

time soon,” said Hugo, but

with the digital experience

growing in importance, he

advised retailers to carefully

consider this dynamic

– which was ultimately

impacting the entire supply

chain.

“There is compelling

evidence that people want

the physical experience of

trying things, but aren’t that

happy with aspects of the

in-store customer experience.

According to this year’s

survey, 68% of consumers

want the ability to check

other store or online stock

quickly; and 59% want an

inviting ambience.”

He said this meant that

retailers needed to invest

in showrooms rather than

the entire store network.

This means less inventory

inhouse and more offsite.

“A showroom offers a

comfortable, inviting –

sometimes even luxurious

– environment to peruse

products, get advice on

sizes and styles, and place

an order. The shopper’s

products are then shipped

to the consumer’s home

from an offsite warehouse

or store,” he said. “Since

a showroom has no need

to maintain the expense

structure associated with

selling goods and shipping,

showrooms are more

economically viable for

retailers.”

According to the PwC

study, in this environment

more efficient supply chains

will be crucial for success in

the retail sector.