Reshaping Retail: What New Models and Formats Mean for Retail Operations

Imagine having your coffee waiting on the store counter, just the way you like it, or your prescription arriving dutifully at your doorstep each month. What about unlimited access to all the content your heart desires for a flat monthly fee, or partnering with a designer across the globe to create a bespoke gift? While not long ago these scenarios may have sounded futuristic, today we expect them. New ways of doing business have reshaped our lives, adding convenience and smoothing out the friction. Retail hasn't been exempt from this shift.

Today, consumers no longer just demand the right product, they control the "how" and "when" as well. As we move beyond omnichannel, it’s no longer a matter of delivery or buy online, pick up in-store (BOPIS). From subscriptions to quick-turn delivery and services, retailers are taking on new formats to entice customers and, along the way, are adopting new models to accomplish their goals.

New Ways to Do Retail

Just as omnichannel transformed from the novel offering of a few forward-thinking retailers to ubiquitous acceptance, new retail formats may become the expectation for consumers. New retail partnerships are popping up, like Amazon.com returns at Kohl’s stores. These new setups are already gaining traction with shoppers and may soon become the norm:

• Instant Gratification: Today we cry foul when we have to wait for a movie to download or if a DoorDash delivery runs late, so it’s no shock that a consumer will crave their e-commerce purchase as soon as they've placed an online order. Quick-turn delivery goes beyond same-day shipping and brings an order ETA down from days to hours, if not minutes. To deliver on availability to promise (ATP) in this format, retailers will need to anticipate who will want what, when, and where they’ll be.
• Subscriptions: The U.S. subscription e-commerce market has grown more than 100 percent in five years. Beyond monthly subscription boxes like Play! By Sephora and BarkBox, subscriptions also offer an easy means of replacing depleteable goods (e.g., dry dog food or paper towels) at a consistent, recurring pace. For consumers, subscriptions offer convenience, but retailers reap the bigger reward: consistent, recurring revenue.
• Retail as a Service (RaaS): Today’s consumer is starved for time, and retailers like Stitch Fix have taken notice. With an online survey or an in-person consultation, retailers are learning shoppers’ styles and delivering curated assortments in the mail or in person, along with suggested shopping lists and easy means to repeat past orders. RaaS simplifies shopping for the consumer by cutting down the time spent browsing, and gives retailers the chance to build strong and enduring customer relationships, setting the stage for subsequent purchases.
• Rental as a Service: Even for customers with the time to shop, not everyone has the closet space to keep up. One way to solve this problem is through retail to rental. Delivered as a subscription rental service or per-occasion rental, like what Rent the Runway provides, this retail setup allows consumers to check out the clothes they need for the month or a special occasion, just for the time they’ll need them.
• Global Reach: International borders are no match for determined shoppers in search of the perfect product. Nearly half (47 percent) of U.S. shoppers have purchased from an international online retailer, and the share is even higher in Europe (71 percent) and Canada (83 percent). While few retailers will turn down a new and growing customer base, you must carefully consider the potential repercussions of catering to a global market for their operations and inventory.

Doing the Impossible

So, you’ve picked a new format; now comes the hard part. To keep pace with these new methods of retail, established brands are testing new and unusual operating models to keep up with demands while maintaining business as usual.

• The Skunk Works Strategy: Sometimes supporting a critical project means dedicating resources in full swing. For brands testing out new formats, that can even mean building a company within a company, Skunk Works style. As established retailers launch subscription or RaaS ventures, some prefer to stand up separate systems or even a separate business altogether. This method allows the parent business to maintain full control and uncompromising product integrity, and can help stave off internal confusion by maintaining an isolated inventory and a distinct forecast for each business.
• Getting Outside the Box: Similar to a co-packer prepping and packing products on behalf of another brand, retailers are turning to third-party partners to support new retail models. Just as a co-packer may take on work outside the brand’s core business, such as bottling a sauce for a restaurant brand, a third-party partner may take on tasks outside the retailer’s primary focus. Unlike a company within a company, a third-party partner may bring added services and resources to the table, from shipping or packaging functions to their own distribution centers. An outside partner may also work on a commission or per-order basis, meaning the cost will be an operational expenditure, not a capital investment.
• What’s Old is New: Rising customer expectations of fast delivery have given retailers a need for speed. To deliver on this, retailers need to put their inventory closer to their customers. In fact, some are repurposing dark stores and even active stores closed to customers for the night to do just that. These properties can be put to use as fulfillment centers for customer orders and quick-turn deliveries alike, and may require store associates to wear many hats, serving as part salesman, part brand ambassador and part order fulfillment staff.

Forging Ahead

For established brands as well as those just entering the market, now is a dynamic time for retailers. Consumers are indisputably in control, and retailers are finding new and innovative ways to meet them wherever and however they can. Beyond a shopper in-store, retail now encompasses elements of direct-to-consumer marketing, consulting, styling and even rentals. Whether they’re implementing new models or catering to new markets, smart merchants will think before they leap and develop a solid plan and tech stack to fuel their new ventures. With this solid foundation in place, retailers can take new models head on and get ahead of the curve as new ones evolve.

Ready to get started? Read our Reinventing Retail Inventory Strategies guidebook to learn more about the technology and strategies transforming retail.

Lara Livgard is the senior director of strategy and solution management, merchandising, analytics and enterprise at Oracle Retail, a suite of cloud solutions for retail.