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Retail therapy Work with digitization and the threat of product obsolescence can be beaten, write John Bovill and Ian Turner

Clare awakes to the sound of her favourite tracks streaming from her Amazon Echo. She slips on her smart-top and brushes her teeth while the garment calibrates and measures her vital indicators. She is in good shape and ready to start her day. She asks Alexa, the personification of Echo, about any messages that may have arrived overnight. Good news: one of her favourite clothes brands has just launched a new range! As a loyal customer she was given a virtual tour of the range ahead of time – she ordered her selection on her smartphone and Alexa just confirmed that Amazon will deliver it by drone in 30 minutes. Since Amazon and Facebook merged, Clare finds most of her needs are now met within the digital platform. Of course, she likes to develop her own distinctive style and will happily support cool startups outside the system that resonate with her, such as Eckhaus Latta, another cool clothing brand. All this capability exists today. Of course, some innovations will be more successful than others. Technology that makes our lives easier – like Amazon Echo, Airbnb and Uber – that extends choice and helps us navigate our lives efficiently, will spread rapidly. Markets where consumers are tech-savvy and open to experiment will be in the forefront of the digital challenge, which will sooner or later engulf all our industries. The retail industry, which has in recent years experienced unparalleled pressure through consolidation and the growth of online retail, will be revolutionized. Let’s start by looking at the fundamental challenge facing the sector.

MANAGEMENT OF OBSOLESCENCE

Once users attach their bank cards to WeChat’s wallet, they end up indulging in more transactions per month than Americans do on their credit cards

Retailers strive to match customers’ needs with the right product in the right amount and at the right time. As the diagram shows, too much product leads to high inventory costs, discounting and margin erosion. Too little product means foregone revenue, high per-item costs and consumer frustration. By producing faster and more accurate information, technology can help retailers make better business decisions, which means that: • customers get the products they want when and where they want them at a price they are willing to pay • retailers maximize sales, retain good margins, minimize inventory costs and discounting Unlike this neat diagram, optimizing supply and demand in the real world is challenging.

Dialogue Q3 2017

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Dialogue Q3 2017