By Chris Petersen and Adam Simon
The transformation from sales transactions to collaborative networks
The traditional supply chain was based upon a sales transaction model of brands selling products to distributors, distributors to resellers and retailers. Once the products arrived at the retailer’s doorstep, it was their responsibility to warehouse it and sell it through to the customer. In this traditional model retailers did work with brands and distributors, but those relationships were primarily transactional negotiations based on product, price and promotions to sell products.
The traditional retail model and the economics have changed. What is driving the change are customers who have “escaped the traditional funnel”. Today’s consumers are not bound by channel, place or time. They expect unprecedented choice of products, where they shop and how they take delivery. Traditional retailers do not have the infrastructure, resources, the inventory required, or enough of their own trucks to deliver to individual customers.
To survive, retailers need more than products and “box movers”. To thrive, retailers need a collaborative network of partners who can help strategically address rising customer demands, enabling a shift from sales transactions to customer relationships.
Customer demands driving the retailer’s need for strategic collaboration
It’s a great time to be a customer. It’s a very challenging time to be a profitable retailer. The simple economic reality is that only the world’s largest retailers can attempt to offer end to end solutions that meet omnichannel customer expectations. Even a retail giant like Walmart cannot afford to carry all of the inventory required for the millions of products now online. And, the ecommerce giants Amazon and Alibaba built their business by collaborating with an ecosystem of partners for overnight delivery and customer services.
Let’s be clear. Collaboration is not “free”. Two-day shipping is not free. Home delivery is not free. Retailers cannot afford to “solve it all”. Retailers must selectively find solutions to remain competitive, and where possible, find partners who will work collaboratively to build solutions that optimize the retailer’s relationships with core customers.
There are four core customer drivers in today’s omnichannel market place where retailers must find collaborative solutions:
- Choice – Solutions to deliver on customer expectation for more product range
Almost all retailers are expanding assortments online in order to offer competitive choices. A wider range of products equates to inventory, which is one of the most costly retailer investments. Increasing assortments requires strategic relationships with distributors for both the inventory and warehousing to store it. However, it is the convenience of last mile delivery to the customer’s door which is requiring most retailers to strategically search for collaborative solutions like drop shipments from brands and distributors.
- Convenience – Solutions that let customers have it their way
It is one thing to offer the products online, it quite another to be able to offer the convenience of “real time retail”. The majority of customers expect to “see” not only what is on the store shelf, but the delivery time for products not carried in store. This requires strategic collaboration with brands and distributors to share new levels of data, and participation in joint fulfillment. Customers are increasingly purchasing from retailers where the returns process is fast and convenient, creating a growing need for cost effective reverse logistics.
- Customized – Customers demand for solutions requires partnerships
Customers are increasingly looking for more than products at a price, they want customized experiences and solutions that fit their lifestyle. Case in point, smart home and IoT products. Customers want and need services that assist in configuring and installing products. Even retailers like Best Buy with a “Geek Squad” are strategically collaborating with services and installers to increase bandwidth required to meet consumer demand for customized services.
- Connected – Customers expect communication before, during and after
Today’s purchase is a journey, not an event. Customers expect to research online, and have online follow them to the store. They also expect real time information on the status of orders, pickup and delivery. With multiple partners stocking and delivering products, this requires new levels of information that must seamlessly connect and be available to customers. The best of breed not only collaborate with customers during the sale, but connect with customers after the sale on satisfaction and future services.
Replacing the 4Ps with the 4Cs Requires Collaborative Partnerships
The traditional 4Ps of Product, Price, Promotion and Place have been transformed by todays empowered customers. To meet the rising expectations for the 4 Cs of Choice, Convenience, Customized, Connections will require competencies and resources beyond the bandwidth of most retailers. Future success will require more than product sales today. Retailers now must strategically collaborate with partners in ways that will enable them to create, and sustain relationships that transcend the sale of a product.
Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.
If you are interested in more information on this CES event, contact email@example.com.