Expert Insight: The ‘New Next’ for Retail


In early 2020, retail was predictable. 

Clothes were neatly stacked on shelves and displayed on mannequins, shoppers browsed in search of just the right item, and online orders came into the warehouse and awaited fulfillment. Then COVID-19 hit, and a new reality emerged. 

Stores closed and workers and consumers were sheltering at home, leaving fashion and specialty retail footfall at a near standstill. Meanwhile, the demand for essential goods and services, including groceries, accelerated at an unprecedented rate that challenged the supply chain. 

The ongoing health situation has unraveled business processes and societal norms alike, leaving retail—an inherently social industry built on the exchange of physical goods—in a state of flux. We are calling it the “New Next” because let’s be honest, there is nothing normal about this unfathomed event and no clear roadmap for what lies ahead.

Customers are entirely changing the way they shop, challenging retailers to create a whole new set of KPIs that need to be monitored and a new set of business practices that have yet to be defined. As retailers work through new scenarios, they must move quickly to take advantage of opportunities as they appear. 

While it’s virtually impossible for retailers to anticipate the impact of a health crisis on their business, technology makes it possible for retailers to adapt their business models to maintain operations and reemerge to lead with strength. The main question on every retailers’ mind is, “How can I navigate the New Next?”

Taking stock 
The first point of order is to protect margins. Retailers will need to manage unknown demand and non-productive inventory in a compressed window. As the crisis abates, they must determine where and at what price to sell that inventory. What was driving demand in March may no longer be top of mind for shoppers. How do you find the most profitable ways to manage this inventory and prepare for the retail restart?

It is a constant balancing act between art and data science to deliver the right merchandising mix. Core to the recovery strategy is determining what offers will provide the most significant opportunities to recoup sales and margin. Next, the decision is on where to deploy the inventory across channels and locations. Smart pricing and optimization strategies that leverage analytics, data science, and demand forecasting technology can help retailers understand what should be done.

Physical store closures mean many retailers will have gaps in their data and potentially less accurate forecasts as a result. Along with tackling gaps in information, retailers are challenged to profitably plan for the future with limited revenue from the preceding quarter. Running “what-if” scenarios will allow them to understand the potential margin opportunities and risks before they put plans into action.

Awaken the dark store 
Modern retail is indisputably a combination of physical and digital. Nearly all of the top 50 online retailers maintain physical stores, and 84%  of U.S. retail sales occurred offline in 2019. With intermingled inventories, shared audiences, and interdependent strategies, online interactions influence physical transactions just as in-store engagements may fuel digital purchases.

We anticipate a shift in consumer behavior and believe that a new set of consumer journeys will emerge. Whether a retailer was 10% store-based or 100% in the past, their current strategy must take all assets and channels into account to power a new set of customer journeys. 

While store floors may remain empty, retailers will discover and redefine unique ways to leverage the storefronts, warehouses, inventory and their team to satisfy customer demand. Historically, a dark store referred to how commerce orders were fulfilled. Today, a dark store serves a different purpose.  

A modern dark store operationalizes your physical stores to become fulfillment centers. With a single view and transparency of real-time inventory, retailers know what product is sitting where. This insight can be used to determine the most efficient and cost-effective means to get it to the customer. In the New Next, idle in-store inventory is available for satisfying customer demand while reducing inventory carrying costs and shipping costs – all while speeding delivery to the customer.

Leading in a time of crisis
While the path ahead is unknown, it is the continuous reinvention of the landscape and how brands adapt and evolve that will define the next era of retail. These strategies can help retailers plot a steady course and find their way through uncharted territories. Just as a compass can help us orient ourselves in unfamiliar surroundings, technology can help retailers make sense of the situation and make more informed choices in the face of uncertainty. 

Mike Webster, is senior VP and GM, Oracle Retail.

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