This article is taken from our 2023 Retail Trends Report, Retail Store Productivity: The next generation.
Despite all the recent innovation, store productivity has been far lower in this decade than previous ones and is the biggest issue retailers need to fix.
In the long run productivity is everything, in the short and medium term it’s the only way to combat a current environment of inflation, interest rates and labor tightness.
The pandemic has hidden something. Over the last 15 years, retail has not been able to grow as productively as the 20 years before.
This comes at the same time as retail’s going through the biggest transformation in its history. Moving from exclusively within four walls (where 99% of viewing and purchasing happened) to a much more broad and complex environment. Retailers need to acquire and engage their customers across many channels and employ multiple fulfilment methods to allow them to buy how they want, where they want, when they want.
The goal for any retailer has to be to embed this more complex business operating model into more productive operations.
High inflation, high interest rates and tight job markets have put severe pressure on P&Ls. Simultaneously the higher cost of living is stopping retailers passing on these costs fully to consumers.
The only option retailers have is to increase productivity at a rate sustainably higher than any erosion they are seeing.
The last 15 years have seen a boom in technology. Retailers have more data and more potential tools at their disposal than ever before.
Yet speak to the front line in retail and they feel more overwhelmed with activities to be done and more disengaged than ever before. More processes, more data, more systems, more reports, more tasks have them running to stand still.
It’s time for retail to refocus on not just expanding, but also building a productive business.
Thankfully productivity is a simple formula to consider: a numerator and a denominator.
Our series of upcoming blog posts will explore how retailers can influence both elements of this productivity equation. We will also dive deeper into how some more forward-leaning retailers are already tackling productivity in retail’s most challenging areas.
