How does Retailing look in the next decade?

Apparel manufacturers of the future respond to consumer needs at the speed of light. Through the 1990s, manufacturers struggled to meet the demands of larger retailers, adding more services, and being more responsive. But it was not fun, and it was not always pretty. Much focus was placed on costs, inventory, stock outs and lead times. QR as an industry had been shoved aside by supply chain management (SCM), and everyone learned new terminology and figured out what else had to be done to be a “player.” Manufacturers, if they were still actually manufacturing, were moving more of their operations offshore, taking advantage of multiple trade agreements and favorable cost structures in Mexico, the Caribbean, Central and South America, China, and elsewhere in the Far East and Asia. Pressures continued to compress lead times, blurring roles between manufacturing, garment sourcing and retail space management.

What does the future look like?

Total connectivity

By the next decade or so, total connectivity between supplier partners will have been achieved. Costs would have been reduced to bare minimum and sourcing options would be cheap and plentiful. The implication, therefore, is that competition would be based on product (style/quality), service and convenience – all three of which would be key drivers for the consumer. The focus would be on the consumer.

The supply chain would become both circular and virtual

In the next decade, the supply chain is no longer a chain at all, evolving from a linear model – that constrains flow of information and products – to one that is both circular (centered around a consumer and market) and has fewer links (and is more virtual). By the time there is total connectivity and therefore visibility, the natural evolution will involve the elimination or merging of some chain links. Clearly, those that add little or no value will be the first to go. Others traditional will form strategic partnerships or develop new services to differentiate themselves.

Trade barriers would become obsolete

All tariffs and trade barriers would become obsolete by the end of the next decade. Free trade would prevail, at least in those countries that are worth doing business with and in. Manufacturing would still find a home based on cost, assuming adequate labor and convenient logistics. In addition to low cost, manufacturers would also take into account speed and responsiveness, especially for more basic replenishment-oriented apparel. Regardless of origin, more focus will be placed on worker conditions and labor issues – driven first from the consumer and then to retailers and manufacturers. With proliferation of satellite constellations and digital infrastructure, telecommunications will cease to be a constraint.

Technology and electronic commerce will be the key drivers

By 2008, computer-integrated manufacturing will be fully in use and will span access to key information across multiple supply chain partners. Additionally, as partners work more collaboratively within their value chains, they will depend upon tight integration and communication via GroupWare-type applications. This will apply to all areas, including product design and development, forecasting, order fulfillment, manufacturing, etc.

Mass customization through body scanning and sculptured machines will be common among progressive manufacturers and retailers. Advances in fibers and fabrics and equipment sophistication will enhance manufacturing speed, flexibility and automation. Technology will facilitate consumer customization, allowing the consumer  (via home computer or store kiosk) to review upcoming product lines, styles, and review color palettes, enter custom specifications, and order a garment for shipment to her or his home within a three- to seven-day timeframe. From a fulfillment standpoint, a manufacturers order management system would not care whether an electronic order comes from a retail customer for 200 dozen, or from a consumer for one garment.

Retail would exist in different formats and markets

Retailing as we know would be dead. Large retailers would exist, but they would exist in completely different formats and markets. Consumers would have moved away from anything associated with traffic, unsecured parking etc. Malls, on the other hand, will still exist, as consumers will continue to be attracted by new “experiences” in safe, secure environments that offer a variety of entertaining options – shopping, restaurants, theaters, theme parks, etc. Leading retailers will give consumers easy access to custom apparel at many price points with differentiated products. They will do anything to give shoppers a reason to leave their homes.

The implication for manufacturers is that, to survive, it is essential to give retailers custom products tailored for the door level – no two stores will be alike. Virtual (internet) malls will be huge, giving consumers’ access to infinite product lines and brands, without having to drive to dozens of different individual brand “stores”. Logic dictates that, at least initially, only certain uncommon, hard-to-find retailers with non commodity products win have any kind of profitable presence online.

Increasing flexibility – if it is not in the store, it will be shipped directly to the consumer within 24 hours. Channel will continue to be a myriad of options, from various store alternatives (department, chain, mass, specialty, etc.) to non store direct-to-consumer offerings. And finally, product, brand and differentiation will be more important than ever.

Consumer expectations in the next decade

Consumer needs and demands drive the value chain. What will the consumer want 10 years from now, and how will that evolve over the next decade? The answer lies in realizing what today consumer wants is:

1) Selection: Selection means the retailer has what the consumer wants when he or she wants it.

2) Value: Value is a perception of quality for price and is often a factor of brand image.

3) Convenience: Convenience says that finding a comfortably fitting branded style at the right price will not take more than one short trip if, in fact, a trip is necessary.

What does this imply? One possible hypothesis is that if the consumer knows the desired brand and style, why shop? Leading retailers will offer Direct Consumer Distribution, based on customer specifications from the consumer (particular style garment, but with pattern/color change and customer sizing).

This points to direct marketing and personal electronic services, which are already developing today.