Kantar report says ‘pivot points’ needed by retailers amid industry changes

No one in the retail business disagrees that massive change is underway. A new report by Kantar Retail provides some insight into the changes, noting that 2015 has been “flat and frustrating” for the much of the retail industry, and finding the right “pivot points” in the next few years will be critical for growth and survival.

Kantar research analysts examined several pivot points retailers should consider when placing their bets for the next decade.

“As we look to 2016, the overall goal of the industry is to pivot away from pure cost management to top line growth. We believe that at least five ‘Pivot Points’ will be required to help achieve this objective,” Kantar noted in the report.

The first pivot point is moving away from shareholder’s first to a shopper first focus. Wal-Mart Stores has historically placed much focus on shareholders, but has invested in growth opportunities to the tune of more than $2 billion in higher wages and $2 billion in e-commerce fulfillment this year and next. This has taken a toll on earnings projections for the next year and has hammered the stock price in recent months.

That said, most retail stock analysts say the Wal-Mart investment is imperative for future growth. They say the investments mean Wal-Mart and other retailers are now placing shoppers at the heart of their planning process. Kantar said a “shopper first” strategy understands the needs of the shopper and the opportunities to meet them, and then works the commercial success plan back from those needs.

The report also encourages retailers to pivot from brand builders to business builders. Kantar said retailers need to focus more marketing on driving business for tomorrow, rather than trying to sustain brand marketshare today.

“Too much focus on sustaining brands today without the right focus on growth tomorrow is bad business for everyone, and the role of marketing at both suppliers and retailers will need to ‘pivot’ to focus more on ideas that drive the business forward,” the report states.

A third pivot point recommended by Kantar involves catering to consumers on a personal level from serving many to serving on an individual level. The report noted that “shoppers want and retailers need more personalized and customized solutions – both are demanding one-to-one relationships given the current landscape.”

Kantar said delivering against this promise turns inflexible scale into a burden as much as an asset.

“The ‘Uber’-fication of everything means also that asset-heavy retailers like (Wal-Mart and Macy’s) are competing for investor attention with ‘asset-free’ marketplace models that create value without owning capital. The trading partners that work collaboratively on optimizing this asset base to leverage both cost and flexibility will change the future,” the report said.

Wal-Mart Stores CEO Doug McMillon boldly claimed earlier this year that Wal-Mart will be the first major mass retailer to completely transform to omni-channel, a goal that comes with a self-imposed three-year deadline. 

Some analysts say Macy’s has already done much of the heavy lifting needed to become a true omni-channel retailer by combining its online and in-store inventory and fulfillment systems. Nordstrom’s too, is deemed to be one of the more proactive in becoming a true omni-channel retailer. 

Kantar also sees retailers pivoting toward a talent development strategy and away from the talent reduction of the past two years. The report said there is concern from retailers and suppliers that too much institutional knowledge has walked out the door in recent years. Others have indicated that “the industry is changing so fast, I am not sure I even have the skills to perform at my best.”

Kantar researchers said an intense focus is needed on talent development. The report notes that winners will develop training programs to attract talent and prepare the next generation of leaders.

Kantar also gives a power ranking to retailers that includes several different metrics from supply chain, market innovations, digital platforms and store branding. Wal-Mart, Kroger and Target earned the top three spots overall this year in the Kantar Power Rankings Report. However, Target and Kroger switched ranks so Kroger rose to second and Target shifted to third.

Kantar said Wal-Mart achieved the No. 1 position for the 19th year in a row and for the 17th consecutive year earned a majority vote from more than half of the manufacturer respondents in the study.

The complete Top 10 Power Ranking Composite
1. Wal-mart – 57.3%
2. Kroger – 42.6%
3. Target – 32.7%
4. Costco – 24.7%
5. Amazon – 17.6%
6. Publix – 14.9%
7. HEB Grocery Co. – 10.9%
8. Meijer – 10.3%
9. Wegmans – 8.9%
10. Walgreen Co. – 7.8%