Retail: ‘Better Decisions Faster’ Needed to Stay Competitive in Market
Retailers in the United States will need to adopt business-to-business technology if they hope to remain competitive in the 21st century.
Industry analysts gathered in San Diego last week at Retail World 2001. The conference, sponsored in part by San Diego-based GERS Retail Systems, looked at how technology can assist retailers in the 21st century.
John Stiehler, analyst with Kurt Salmon Associates, said B2B will help solve one of the problems with the traditional supply chain. Typically, products flow linearly from the supplier to the manufacturer, then to the distributor, before the retailer can offer it to the customer, he said.
Information, meanwhile, moves back and forth in the chain. But the message gets increasingly garbled at each stop , similar to the old children’s game “Telephone,” Stiehler said.
“The supplier is making decisions based on shipments, not actual sales , and frequently, because of the lead times involved, has to make decisions in the absence of any information at all,” he said. “Going the other way, the retailer is making quotes on in-stock and promises dates to customers, based on what they’re hearing from the distributor.”
So sometimes, the retailer promises something to his customers, then crosses his fingers and hopes the distributor comes through, Stiehler said.
A business-to-business model would overcome that difficulty. The e-business-enabled model uses the same supply chain, but this time all the parties have access to the same information at the same time, he said.
Competition Grows Stiffer
Other advantages of the B2B is that it helps increase on-time delivery of stock and customer satisfaction, while also decreasing costs, time-to-market, and overstocked merchandise, Stiehler said.
Stiehler noted that the need to gear up is greater than ever. Retailers are already feeling stiff competition as consumers enjoy having a greater choice of goods, and numerous outlets to purchase them from.
That affects every aspect of the retail chain. Retailers work with distributors and others on cooperative marketing techniques to respond more quickly to consumer demand, while manufacturers have needed to make constant efforts in order to remain viable, he said.
“U.S. manufacturers have been forced to make great investments in automation, cost reduction, quality improvement, and develop a lot of quality products. Simultaneously, the emphasis on service has never been greater,” Stiehler said.
Challenge From China
But soon, U.S. retailers will face an additional challenge. As China prepares to enter the World Trade Organization, it will be granted lower tariffs that will help make Chinese-made goods more attractive over here, he said.
“We believe that China is the 900-pound gorilla that’s going to change the rules of the game,” Stiehler said.
Already, imports are on the rise. For example, between 1996 and 2000, imports in bedding grew from 10 percent of a $2 billion market to 25 percent of a $3 billion market. Two-thirds of the total growth came from imports, he said.
The change is inevitable. However, the good news is that it will take a few years for China’s manufacturing capacity to catch up to the United States. That gives retailers enough lead time to implement a new strategy, Stiehler said.
Stiehler noted that there are some important risks to B2Bs, including possible threats to security or data integrity. There may also be regulatory concerns, as former competitors become linked to each other.
Still, the benefits of B2B outweigh the risks, he said.
Charlie McCarthy, analyst for Answerthink, agreed.
“Everybody has outstanding customer service, rich product features, everyday low prices (and) top quality. The only long-run competitive advantage is the ability to make better decisions faster,” he said.
That means access to information. But the typical system isn’t up to the task, since it’s difficult to identify the “news” in the data, McCarthy said.
Retailers need “intelligence applications” to eliminate the danger of running out of stock, or setting prices too far out of line with actual costs, he said.
