Key challenges of today's retail sector » Warehousing and Logistics Services

Retail & Distribution

Key challenges of today’s retail sector

The outlook for today’s retailers and wholesale distributors remains challenging. Many retailers find themselves confronted by unpredictable consumer spending and increasing competition. Wholesale distributors are leveraging emerging technologies and developing an integrated supply chain strategy in an effort to attain operational excellence and market differentiation.

Key issues affecting retail market.

The digital landscape: New technologies are fundamentally transforming how, when, and where consumers shop. Retailers able to leverage mobile and social tools to improve the customer experience and provide multiple buying channels can be well positioned for success. As shoppers demand more real-time, personalized information and offers, retailers will need to surround this service with strong privacy and security measures.

Store of the future: With more options for consumers to buy online or through their mobile devices, the physical ‘box’ is shifting from a transaction enabler to brand experience.

Real estate shift: As sales continue to shift out of stores to online, it will be important for retailers to reassess their space and location requirements as the purpose of the store evolves.

Global expansion: International expansion affords access to new markets, some with high-growth consumer incomes. Identifying the appropriate method of market entry will be important to ensuring sustainable results for retailers.

Regulatory pressures: The changing regulatory landscape is likely to have a significant impact on the retail sector. How retailers prepare for these changes and implement strategies to limit business disruption will likely be critical to their future success.

Innovation: After decades of growth through new store development, retailers are investing more in innovation and data analytics. Retailers must continue to challenge themselves to think differently about how technology and science are changing the nature of commerce.

The talent imperative: Having the right talent can help retailers delight customers, differentiate from the competition, and achieve profitability and growth goals. A diverse workforce serving a broadened customer base is an important success factor that can improve service outcomes and enhance financial performance.

Key issues affecting wholesale distributors

Advanced analytics: The wholesale distribution industry is one of the more complex industries driven by the high number of SKUs, customers, suppliers and transactions, and their pricing and rebate structures. Distributors are beginning to see the value in advanced analytics to solve industry pain points in areas such as pricing, rebates management, and inventory optimization.

Customer experience: The confluence of a massive generational shift at distributors and among their customers, coupled with advances in technology and technology adoption is creating an opportunity to change the nature of the distributor-customer interaction.

Margin improvement: Financial pressure from the board, shareholders, and competitors continues to be a key issue for wholesale distributors in the areas of sourcing, rebates and chargebacks, pricing, and supply chain improvement to improve margins.

Mergers and acquisitions (M&A): Industry consolidation will likely continue to be a key growth driver for wholesale distribution which remains highly fragmented. Acquisitions will likely shift from incremental acquisitions (adding customers, products, geographies, etc.) to transformational/ strategic M&A plays. Distributors will need to approach the M&A process differently than they traditionally have, moving from a focus on small or niche transactions to larger, more strategic deals that bring scale advantages and strengthen channel position.

Omni-commerce: While a few distributors have highly developed digital capabilities and are generating meaningful revenues via mobile and e-Commerce channels, most are still in the early stages of development and adoption. Regardless of the line of trade or company size, the ability to offer customers—or in many cases drive customers—to digital channels is very important.

Technology: As the wholesale distribution industry evolves, many distributors are still operating with fragmented, legacy IT systems. With inadequate technology in place, modernizing enterprise resource planning (ERP) systems might be a priority for the sector this coming year. As the industry matures, edge applications such as transportation management system/warehouse management system, mobility, and e-Commerce are expected to become more important to differentiate distributors from the competition.

Value chain disruptions: New business models can drive growth for some distributors or create a significant disruption in the value chain for others. Managing these shifts to ensure sustainable business performance is a priority for wholesale distributors, particularly as new competitors emerge and apply additional pressures.

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