The Future of Retail: 4 Ways to Design for What’s Next

Disruption still impacts every corner of the retail space. Business leaders and industry experts weigh in on the most compelling trends in retail, including leveraging AI for financial planning and multichannel experiences, new approaches to talent retention, and doubling down on data analytics.

In the never-ending quest for consumer engagement and spend, forward-thinking retailers are rolling out increasingly seamless omnichannel shopping experiences, using artificial intelligence (AI) and machine learning (ML) to expertly optimize every touchpoint from discovery to fulfillment. 

As multichannel retail experiences become the norm, executives will need to ensure their back-office operations are up for the task of supporting them—whether it’s shoring up human capital management (HCM), harnessing AI and ML to strengthen financial forecasts in a time of economic volatility, or leaving disparate legacy systems behind for cloud-based platforms that deliver data-driven insights. 

While the retail industry proved its mettle with an agile and innovative response to the pandemic, leaders will need to double down on data insights to weather future disruptions.

“A lot of leading retail companies are building very detailed scenario plans to understand how to react to different market conditions, figure out what levers to pull, and what initiatives to drive, depending upon how the market plays out over the next six months, 12 months, couple of years,” said Scott Rankin, advisory industry leader for consumer and retail, KPMG, at Workday Rising. “So from a macro perspective, businesses need to be flexible and nimble.” 

To get a sense of what that future might mean for retail, industry leaders and executives weighed in on key imperatives that will have the greatest impact on the retail sector and how these organizations can prepare their operations for long-term success. 

1. Getting Serious About the Employee Experience for Frontline Workers

The retail industry is no stranger to high turnover, but the pandemic exacerbated already-high attrition rates. In fact, 60% of retailers are facing higher-than-normal rates of turnover, according to a Workday study, and that’s one of the highest of any industry. What’s frequently pushing frontline retail workers toward the exit is a desire for better pay, training, flexibility, and visibility—a wish list that makes up the backbone of employee engagement. 

To stem the turnover tide, retail organizations will need to offer employees as much flexibility and control as possible and focus on building a skills-based organization. The small cohort who are getting it right and reporting lower than historical average turnover rates are those who are much more likely to use employee-first scheduling tools with their frontline workers (42% to 27% overall), according to Workday’s survey.

“You can’t turn fragmented data into decision-ready insights, at least not at the speed and ease that retailers need right now.”

Keith Pickens Head of Retail Industry Workday

“Up until the onset of COVID, many employers had become increasingly aggressive in scheduling frontline workers to suit their forecast demand. But people cannot be living on a 48-hour cycle of change,” says Mark Cohen, director of retail studies at Columbia Business School. “Now employers are doing everything they can possibly do to make it convenient for their workers to remain employed.” 

Cloud-based solutions can help retail organizations make the necessary inroads to employee engagement endeavors. Among 17 industries, retail lagged the most in the autonomy (15th), reward (15th), and accomplishment (16th) engagement drivers, according to Workday’s State of Engagement 2022 report. 

Investments in employee satisfaction are quickly becoming a top priority for many executives, and that will only accelerate in the future—58% of organizations that employ frontline workers have invested in improving their employee experience in the past year, according to Gartner. Of those who haven’t, one-third intend to do so in the next 12 months. 

“Now is the time for retailers that want to succeed—once we’re through these crises—to get their act together and recognize that the same old bad behavior is going to put them at risk when the next crisis occurs,” Cohen says.

2. Doubling Down on Analytics for Greater Agility

Be it QR codes, supply chain, or consumer surveys, retail is awash with data. But with many back offices still utilizing clunky legacy systems or battling data silos, organizations often struggle to leverage data for insights and planning. More than 1 in 3 retail executives (35%) cite access to high-quality usable data as one of the biggest barriers to achieving their transformation goals, according to a Workday report.

“The breadth and complexity of retailers’ data is only increasing—and often exponentially,” says Keith Pickens, managing director, retail industry, Workday. “But you can’t turn fragmented data into decision-ready insights, at least not at the speed and ease that retailers need right now.”

Making the leap from fragmented data to usable insights will require access to an agile, single source of truth in which real-time information is not only easily accessible, but speaks across functions.

“Recent events and widespread uncertainty in the industry highlight that retailers must be poised to pivot as their default state,” says Jennifer Johnson, senior industry director of retail and hospitality solution marketing at Workday.

“It’s really important to use technology and data to create those seamless experiences to deliver what consumers expect in today’s market because they’ve got lots of choices.”

Scott Rankin Advisory Industry Leader for Consumer and Retail KPMG

When Team Car Care made the shift from spreadsheets to fully automated financial planning, it was able to quickly harness its system’s AI and ML capabilities to forecast how many customers would stop by individual Jiffy Lube stores at various times during the day. That AI- and ML-generated forecast is seamlessly synced to the company’s sales and workforce plans, helping everything from labor to product inventory stay in lock step with customer demand. 

And those faster, better insights don’t actually require more resources. In fact, replacing a manual task, which once involved passing 50-plus spreadsheets among district managers, into something easily tackled by AI and ML reduced the forecast scenario cycle from a months-long process to mere days. 

“We’ve got 250,000 SKU-item combinations,” says Matt Castonguay, senior vice president of finance, analytics, and supply chain at Team Car Care. “Now we can feed our operational and financial data into our system so we can have instant access to a single source of truth for everything that’s going on in the business.”

3. A Seamless Consumer Environment Across the Omnichannel Ecosystem  

Gone are the days when consumers drew a clear line between online and in-person shopping. These days, consumers rely on multiple channels along their buying journey. In fact, since the pandemic, one-third of Americans have made buying online and picking up in-store a regular part of their shopping routine, according to McKinsey research. Nonlinear buying behavior means retailers need to deliver a seamless experience across an expanding omnichannel ecosystem.

“Consumers don’t care if it’s retail, online, or something else; they think about interacting with their favorite stores and hospitality partners from start to finish and they don’t bifurcate between channels,” Rankin said at Workday Rising. “And it’s really, really important to use technology and data to create those seamless experiences to deliver what consumers expect in today’s market because they’ve got lots of choices.”

And while e-commerce through social media channels is expected to more than double from 2021 to 2025, according to McKinsey, retailers can’t lose focus on delivering a best-in-class brick-and-mortar service. Indeed, 84% of retail executives report that consumers are seeking experiences outside the home, per Deloitte.

Savvy leaders will invest in cloud-based solutions to align these multiple revenue streams. Fulfillment is a natural focal point to capture consumer buying trends. A handful of the industry’s biggest names (think Walmart and Albertsons) are transforming their stockrooms into micro-fulfillment centers that ship merchandise directly to online customers, as well as offering curbside pickup.

“Retailers are trying to provide better options to their customers to enable better fulfillment,” says Sam Ganga, partner and national consulting leader at KPMG, in a Workday Podcast episode. “That takes the shape of buy online, pick up in store, direct store delivery. You really want to take advantage of the fact that you’ve got two channels that are going to work together symbiotically.”

4. Focusing on the Retail Manager Experience to Boost Retention and the Bottom Line

While retaining frontline workers must remain a top concern for retail organizations, they can’t afford to overlook their managers in the process. Managers are at an even greater attrition risk than the employees who report to them—63% of managers say they’re likely to leave their jobs in the next three to six months, according to McKinsey research

“If you look at what matters most to nonmanagers, [there are] a lot of things that managers control,” says Bryan Logan, partner, McKinsey & Company. “[There are] things such as career development, inspiring leadership, and meaningful work. We have this interesting juxtaposition where the nonmanagers’ satisfaction is largely based on a group of people—the managers—who themselves aren’t very satisfied and are thinking about leaving.”

“Recent events and widespread uncertainty in the industry highlight that retailers must be poised to pivot as their default state.”

Jennifer Johnson Senior Industry Director, Retail and Hospitality Solution Marketing Workday

In the wake of the “Great Resignation” and expanding consumer and employee expectations, retail managers are shouldering additional responsibilities in recruiting, retention efforts, training, and career development, says Ben Eubanks, head researcher at Lighthouse Research and Advisory. “Managers, in general, want to do well, but we’re expecting them to do too much, or we’re not giving them the right tools in the beginning, and we’re setting them up for this no-win scenario,” he adds.

Retailers will need to lean on digital tools to ease managers’ workload, whether that means providing them with instant insights into what’s happening in their stores or making employee scheduling a less time-intensive task. Pet Supermarket is one retailer that has rethought its approach to frontline manager engagement through cloud-based technology solutions, including eliminating a clunky Excel-based scheduling template.

“It really was just not an efficient process at all and took managers, in some cases, hours to put schedules together for one week,” explains Christina Reed, senior director of regional store operations, Pet Supermarket, in a session from Workday Rising

When retail organizations free up managers to focus on more high-value tasks, including employee training and mentoring, it translates into lower frontline turnover. And stores with lower turnover beat out the sales of comparative stores by three percentage points, McKinsey reports.

To learn more about how Workday helps retail drive digital transformation, visit our website.

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