AlixPartners on Disruption, Agility and What Needs to Change – WWD
Disruption is the new normal and the only way to deal with it is through agility and acting quickly.
These ideas were at the heart of David Bassuk and Sonia Lapinsky’s presentation, respectively. retail Practice Leader and Managing Partner at AlixPartners.
“One in four shopping centers are expected to close in the next five years,” Bassuk predicted. “It really is a difficult situation for all parties involved. So where are we going? We all know that competition with traditional business models no longer works. We have to find new business models to survive and be competitive.
“Brands are bypassing retailers, trying to gain more direct access to consumers. They go into the markets and find many different ways. Retailers are embracing things like reselling and leasing. They are trying to change the game. Amazon launched the pharmacy. Google is going into banking. It’s kind of an endless mix of evolving business models. The need for agility is even more intense.
Successful retailing balancing art and science is a decades-old topic, Bassuk suggested. “Let’s be honest, we’ve never really embraced the science part of it. The only thing the pandemic has forced us to do, however, is to truly understand that we can work in a different way and benefit not only from digital, but also from solid analytics. We find that retailers and brands really engage in analytics in every aspect of their business, from design and production to planning and inventory management and everything in between. Things are being reshaped and it’s time to really change the way we think and our business model.
“We’ve worked with hundreds of retailers during disruptions and in good times, and by helping to improve them and studying their behavior, we’re starting to understand what it really means to operate with agility,” said Lapinsky.
She said that AlixPartners has developed an index, called Agility EQ, providing a methodology to “define, measure and improve your ability to respond to the changing needs of your consumers, with agility and speed”.
A first step towards achieving agility is to “wipe out” the silos, she said. “There are silos everywhere. There are functional silos, channel silos, geographic silos. Whatever form they take, you need to break them down. Four elements are needed: aligned incentives, an integrated team, harmonized plans and expedited decisions. “
For more agility, fashion retailers must also forgo the old ways of planning seasons and lines, using hindsight and with very little ability to react in real time or make changes. “Looking back doesn’t work anymore. Relying on historical data can barely tell you what your consumer wanted yesterday, let alone how they want to be treated tomorrow. You have to focus on the future. Digital tools are a key element that everyone should deploy.
The AlixPartners team learned from retail customers who 77% deployed digital tools during COVID-19 that they had not previously used, and 30% are developing 75% of their range using digital tools. “When we asked them the same question eight months ago, 10% were only developing 5% of the line. They barely dipped their toe in, ”said Lapinsky.
Stressing the importance of expedited decision-making and quick action, Lapinsky observed that Target fulfills 95% of its online orders in stores. A year ago, only 50% of orders were fulfilled in stores.
“Before COVID-19, Target saw it coming. They have seen the consumer change. They acted quickly. They transformed their stores into an optimized fulfillment fleet. Not only that, they bought Shipt for same day delivery. This clearly helped Target get through tough times and accelerate sales beyond expectations. They got into gear before COVID-19. You have to do it now. You can’t wait for the next disruption. It’s too late.”
She praised Bed, Bath & Beyond CEO Mark Tritton, who joined the chain about 14 months ago, for embracing speed for the first time. “From the first investor day, he communicated and launched the transformation program. He immediately focused on finances to build resilience and flexibility. It also reduced debt, improved liquidity and quickly turned around the financial performance of Bed, Bath & Beyond, Lapinsky said.
Second, “He realized he needed to break down all the silos. Starting at the top level, he made rapid leadership changes across the organization. He called on real agents of change, to break down the silos between failing digital, merchandising and marketing. This allowed the teams to work collaboratively to create a cohesive experience for the Bed, Bath customer. “
Third, “Mark realized he had to leverage customer insights from data and act on it. Mark created a new set of experiences and services that the consumer demanded. It streamlined the portfolio, unleashed value, reinvested in technology and digital capabilities, streamlined the supply chain, invested in same-day shipping, and launched a plan for new private labels to meet prices. and product deviations in the assortment.
“All together, this has created a comprehensive program to meet the changing needs of Bed, Bath consumers. Mark acted with agility and understood his consumer. It kicked off the transformation long before COVID-19, and Bed, Bath & Beyond is a very different place today, ”Lapinsky said.
Discussing innovations from other retailers, she praised Lululemon for purchasing The Mirror, which you hang on your wall and which displays cardio and yoga classes and other exercise classes and workouts, and offers a new way to interact with clients and understand how they want to work. outside. She also cited Nike’s deployment of automation and robotics, allowing the brand to cut ordering time by more than 50%.
“This is the first time that we have seen remarkable changes in the retail industry,” said Lapinsky. A variety of retailers, including some department stores and specialty stores, have made dramatic changes, she said. “Can we continue this in 2021 beyond the pandemic?” It will be the real test of time to see if they win.
“A great leader will use the pandemic to drive change in his business. The question is whether they can keep it going, ”Bassuk said. “There are a lot of risks here. What’s the risk of going back to the old ways, bringing everyone back and going back to those same silos, the same old ways, compared to a leader who really embraces working differently and incorporates that into the culture?
“It’s no longer about having super tech savvy people. The answer is to have great retailers, traders, and smart planners who really understand what the data can tell you.