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Scenario Planning is the new Black

What does ‘new retail’ look like? We’re not sure, and neither is anyone else. But scenario planning is the new black, especially for the retail industry. The way I am thinking about it is, it's a bit like a ‘choose your own adventure’ book. The basic premise is that at a point in the story the reader chooses (like the red or blue pill Neo chooses from in The Matrix) each scenario plays out differently. More endings to explore if you’re a kid who likes reading. More scenarios to cover if you’re trying to read the tea leaves of the future at the moment. Historically, global changes like wars, pandemics and significant shifts in technology, shift our perspective and alter our behaviour. They create new normalities. My husband has been reminded of an anecdote from his grandfather; ‘Before the war, no-one did business on the telephone. After the war, they did.’ My mother has described her childhood as having two timeframes ‘before the war’ and ‘after the war’. It’s a simple way of looking at things but, it helps as a marker. Before COVID-19 and after, what is on the other side of this? What will the new normal look like? The only thing I feel confident about is that we’re not going back to things as they were. We can’t just turn it back on. What seems likely is that there will be phasing of changes in rules. What does this mean for the Retail Industry? As we see some places slowly ease restrictions, we will see a shift in how retail functions. At the moment, we're all quite concerned about health and safety and trying to keep an appropriate amount of distance between one another. Could these concern about health and safety translate into an ongoing unwillingness to being in crowded spaces? Could it mean that we refocus on our own supply chain and we want to know better where things have come from? Will this mark a shift towards more local manufacturing and have us turn our back on the global supply chain that we have been so dependent on? Health and Safety Health and Safety concerns; could turn into limits on numbers of people in stores/ restaurants. My first-hand experience at a couple of national retailers, having to line people up outside the store to wait to get in. How do we manage this in a safe way that allows for enough physical space? Some possible scenarios: we may see ‘planned’ shopping windows. Booking ahead for your local centre, virtual queuing from an app. All of this requires some co-operation from shoppers, retailers and centres as well as technology that will support it. Supply Chain Supply Chain transparency; food safety and tracking could increase as a customer priority, as we focus on health. Does the tracking and provenance of food become just as important as the price and quality – specifically for export markets? Local Manufacturing Local manufacturing; there’s no denying that it’s super helpful to be able to make, grow and package things yourself especially when the borders are closed. More likely than a pendulum swing to locally manufacturing everything, it’s possible that creating multiple supply chain options to move between, will allow retailers more flexibility in different scenarios. It’s not possible to cover all scenarios for all retailers here but consider these ideas and how they might translate to your business. If you need some help to work through the planning/scenario building part of this, we’re here – free sessions in the link below 😊 BOOK A SESSION

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Fashion on-Demand – What it means for Mass Market Apparel

Creativity and innovation have always been at the nucleus of the approximately $2.4 trillion fashion industry. Much like technology, fashion that rules is both dynamic and visionary. It’s no wonder, then, that the two are inextricably linked; that is, fashion and technology. From the very first sewing machine that paved the way for the textile revolution, to the growth of online retail that has led to massive shifts in fashion marketing and distribution, technology continues to influence the rapid transformation of fashion. Today, AI is being utilised to predict style trends and design clothes, and cutting and sewing are already automated. Moreover, virtual fitting rooms, as well as virtual alter egos (avatars) created for online fittings, are predicted to become more mainstream. In a very real sense, technology is automating fashion and shows no signs of stopping. Fashion on-demand Traditionally, the seasonal fashion groupings of spring/summer and autumn/winter practised since the Second World War have prevailed. The gradual rollout of what seasonal styles are predicted to be in demand gave brands ample time to produce the optimal number of clothes for each season. However, this is set to change. In fact, the change has already begun with the rise of fashion on-demand. This major shift sees products being “pulled” rather than “pushed” into the market by designers and buyers. Instead of relying on fashion forecasts or educated guesswork, custom-made production or personalisation is now a major trend, thanks to the help of digital technology. This has caused significant changes in the procurement, production, and distribution processes which were always based on predictions of future consumer demand. The “pull” fashion dynamic, then, implies that restocking inventory can only happen when all units are consumed. Pros and cons of on-demand production Of course, there are advantages and disadvantages to the on-demand production model. An upside of on-demand production is the lower capital outlay required, making it ideal for start-ups and small enterprises. It also means lower inventories, as well as greater adaptability and agility. Demand uncertainty is also reduced with shorter turnaround cycles, whilst also allowing for the adoption of a more sustainable small-batch production cycle. Conversely, however, smaller batch sizes can also mean higher production costs, as well as an increase in transport costs if it involves nearshore or offshore production. According to McKinsey’s State of Fashion 2019 survey report, “Sixty per cent of apparel procurement executives expect that over 20 per cent of their sourcing volume will be from nearshore by 2025.” Data analytics, automation, and the rise of microfactories Harnessing the power of automation and data analytics has allowed start-ups to easily adopt made-to-order production cycles. With major tech companies from CAD development working on digitising and partially automating production (including designing, cutting and sewing), companies can save time and manpower. As a result, producing even a batch size of one can become cost-efficient. So it certainly won’t take long for mass market players to take the cue, and follow a similar model. In fact, major players have already begun taking advantage of the power of advanced analytics to guide their planning decisions and production processes. And although apparel production automation is still at its nascent stages, the technology behind it is rapidly advancing, thereby indicating its huge potential. Examples of major companies that have begun adopting on-demand production include Adidas, Superdry, and Uniqlo. Adidas is one of a group of large brands that are showing signs of leveraging speed to shift towards on-demand. Aside from its Arkansas operation, it operates “Speedfactories” in Atlanta and Germany that together are expected to produce around a million pairs of running shoes a year by 2020, using digital design to enable mass customisation.[1] Superdry launched “Superdry Preview,” limited-edition collections that will go from design to delivery in just 6 weeks.[1] Uniqlo parent company Fast Retailing has signalled its intent to produce on-demand knitwear at scale through its partnership with Shima Seiki.119 Shima Seiki produces 3-D knitting and technology it labels “Wholegarment,” which produces seamless knitwear and requires no post-production labour, and anticipates that its tools and machines will enable “mass customisation.”[1] Microfactories also embody the revolutionary impact of on-demand production as they are capable of high-speed, agile garment production. They help speed up prototyping in design studios or on shop floors, as well as enable personalisation and waste reduction. The gradual adoption of innovation Although seemingly antithetical, what this heading means is that leading brands, unlike start-ups, are likely to embrace the principle of on-demand fashion gradually. The reason being that quickly adopting radical changes comes at a high cost, and creates disruptions in the current supply chain. What this means for retailers Automation can make nearshoring more attractive for mass-market appeal retailers and brands, but will also make onshoring more economically viable eventually – for specific products. Using the U.S. as an example, assuming that all key on-demand production technologies are available to all, Mexico would be more cost-competitive compared to going offshore to India or Bangladesh, for example. For Australia, China can remain a viable nearshore alternative whilst going onshore may become even more attractive as more advanced manufacturing technologies become more widespread. Someday, automation technology can make the production of both simple and complex garments less labour-intensive so that onshoring becomes almost inevitable. How to get started Based on the pattern of changes, mass apparel brands and retailers must begin to move toward a demand-focused value chain. To remain relevant, they need to be able to adopt automation technologies and prepare to satisfy consumers who desire personalised fashion. Strategic decision-making Company decisions on nearshoring and automation must be needs-based and must make financial sense. They must always consider the feasibility of nearshoring, as well as the commercial value of lead time reduction. They cannot blindly embrace automation. They should have a well-developed fact base to guide their strategy, and which they can refer to in planning for different product and design types. Essential skills and mindsets To successfully adapt to a demand-oriented supply chain, a consumer-focused and agile mindset is required. The challenge, then, lies in sourcing the right talent in digital or advanced manufacturing technology, and in making intelligent sourcing decisions. Key partnerships The need to have ties with global mega-suppliers to deliver massive manufacturing requirements remains. However, it would be essential for retailers and fashion brands to partner with tech companies specialising in the development of innovative automation solutions. The latter are better-placed to develop disruptive technologies that influence the fashion industry. The change starts now For apparel brands and retailers wanting to forge ahead, this is the time to make strategic changes in their business model. Nearshoring should be adopted as early as possible, even at the risk of slightly lower profits. They should also start collaborating with technology firms, as well as with manufacturers. They should already be identifying key engineering talent they can employ in-house as they prepare to lead the way in terms of nearshore manufacturing and automation. [1] Business of Fashion - The Year Ahead: Mass Market Goes On Demand

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Small data; creating a superior customer experience

The headlines and news stories are predictable: Bricks and mortar are failing. Online is the future. Here at 6R, we know that this is an oversimplification, as online and in-store, experiences merge, good retailers are using data to focus on improving convenience and experience for their customers. (Read more)

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Ecommerce is booming! (and with it packaging increases)

In 2018 alone, Australians spent a grand total of $28.6 billion ($20.3 billion USD) while shopping online. As of January of this year, this amounts to 9% of Australia's total retail sales.  All of this online shopping means that the amount of packaging is also on the rise. Further predictions by Statista show that Australia is on track for a huge leap in total revenue growth online, possibly by as much as 15.1%, which creates more and more packaging for you to deal with. While online shopping grows, so does its impact on the environment The number of packages and parcels each Australian receives per year is increasing. On average, Australian shoppers get 2.3 packages every year (and I know full well that I get more than this in books alone). This creates a unique problem that we have to deal with. How do you meet the consumer demand for "what I want, when I want it, and where I want it", without a massively detrimental impact on the environment? The overall goal is to meet this demand with minimal environmental impact, especially in terms of excess cardboard and plastic packaging and CO2 emissions. Adding to this problem is the fact that most retailers and eCommerce platforms haven't been able to master the art of packaging in a way that maximises customer convenience and sustainability. Taking, for example, China's record-setting Singles' Day sales; in the two minutes, five seconds after midnight on Singles' Day, Chinese buyers spent a collective ¥10 billion yuan ($2.07 billion AUD) through e-commerce giant Alibaba's various platforms. By the time the clock hit 1:47, sales were 10 times this amount. Alibaba closed Singles' Day with a sales total of ¥213.5 billion yuan ($42.5 billion AUD). While both Alibaba and competitor JD.com have pledged to use biodegradable packaging to cut down on waste, research conducted by Greenpeace East Asia said many plastics marked "biodegradable" and used by Chinese e-retailers could break down only under high temperatures in facilities that are limited in number across the country. Greenpeace estimated that by 2020, "biodegradable" packaging could produce roughly 721 truckloads of rubbish in China every day. As Australians are fast adopting international shopping behaviours, retailers here need to address and have a strategy in place to minimise the environmental impact. What packaging solutions are on the horizon? A key section of your product's journey is the "last mile" of the delivery process. This is the point where the package meets the buyer's doorstep; the most expensive part of the shipping process and for the customer, it is the often frustrating "out for delivery" stage that seems to go on for eternity. New technology is helping companies to explore a crowdsourcing approach to optimise the delivery process. Online retailers can partner with non-professional couriers to help them complete their deliveries. While this looks like it will speed up deliveries in urban areas, it requires refining to improve cost efficiencies. Drone tech is another exciting development that has been trialled in Canberra. It could help enhance the delivery process and potentially reducing the amount of packaging waste. However, an increase in drones will make our skies more crowded, contribute to noise pollution, and the results of the trials have raised concerns with citizens who relate that the noise has been invasive. The short clip showing the drones in action didn't look like it was reducing packaging but instead, increasing the amount of waste we're creating. Pre-cycling is another approach to packaging reduction. This involves removing a lot of the packaging waste, by selling products without any packaging, or, with a significantly reduced amount. This way, you won't have to worry about disposing of the packing correctly when you open your item. Less thinking about how to recycle it but a bit more effort in terms of remembering to take those empty containers to the store. What other ideas are there to reduce packaging whilst not compromising on the convenience of online shopping? We're thrilled to work with retailers who want to create seamless experiences for customers. 6R Retail has already had the pleasure of working with forward-thinking retailers on their omnichannel projects. This is an exciting time for both consumers and retailers, and we invite you along for the ride (drone and the driver-less car not included).

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Stores Evolution – Where are the humans in this place?

The WEF 2017 report says we will see 15% of stores close in the next decade. Last year saw the highest retail closure numbers in the USA and 2019 is tipped to follow suit. Australia has a significant amount of retail space per capita and this trend seems destined to head our way. But fear not, according to Cowan and company there’s no cause to think that stores are no longer relevant, we’re seeing a shift in focus, “retailers continue to invest in top malls in the top metro areas at the expense of lower performing malls.” As retailers focus on optimising the performance of their investment in space and inventory, in this evolution of stores, I wonder, where is the human element going to fit in? No doubt about it, stores are evolving. What are customers looking for in stores? A store is now a place where you can pick up an order that you’ve bought online, try on/check the item before taking it home, return or exchange it for something that has already been delivered. It’s a place where you can have a bit of fun, some light entertainment that has you engage with the emotional story of the brand, touch and try the products before you commit. It’s a place of immediate gratification, and maybe that’s why it remains enduring and powerful as a place to (potentially) lift the spirits. A recent trip to the gorgeous space that Mecca has in the Strand Arcade would certainly support this! [caption id="attachment_6156" align="alignnone" width="300"] Mecca Strand Arcade, beautiful in-store experience[/caption] As the store evolves further it could soon become even more It could be a place that recognises you as a customer when returning to it and surface helpful information. A place that reduces the purchase friction or assists with after sales service. It could be a place where the shopping experience is not necessarily facilitated by humans. It’s not new news that allowing customers to grab and go without queues has great appeal.  The introduction of Amazon Go, and other variations on the theme, like scan and go Apps has me wondering where the human element of shopping will end up. Will stores evolve to a point where we need no humans at all? Customers just love convenience, and they are willing to give their information away (most of the time) if it means a more convenient experience. Grocery shopping is a weekly necessity and the online version has not been as successful for me as the in-store experience (I like to select my fresh produce). Thinking about cashier-less aisles and stores, they work well when it’s a quick transaction, buying a few top-up items or a quick lunch purchase. A full trolley with the family weekly shop is not compatible with the DIY checkout.  It will be interesting to see how far the cashier-less stores like Bingo Box go and whether this type of purchase process works for more complex purchases. My favourite store interactions are still dominated by a friendly and helpful human that knows the product in their store and where to find it. I see the juggle first hand working with retailers that are constantly evolving to stay relevant, using the technology that is available to them and getting their stores to evolve. The pressure is on not only to deliver quickly but at the same time to remain, customer focused. To create a curated selection that your customer is interested in, I think will still require the input of humans to create the 'newness' and 'freshness' - have you ever noticed that machine learning just keeps giving you more of the same that you've already had? It's a very exciting and interesting time that we're living through.  I believe retailers that keep a focus on the human element (particularly for that emotional purchase) will succeed, because fundamentally stores are evolving faster than humans have.

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Use customer data for efficacy (‘experience’ not required)

Data will be the biggest driver for retailers in 2019, as stores become more astute at knowing who their consumers really are. The Future Forecast 2019 Report goes on to talk about how smart retailers who use data to provide thought-provoking cultural experiences will prosper in this future. (Read more)

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