What is ECR?
The ECR ("Efficient Consumer Response") movement effectively began in the mid-nineties and was characterized by the emergence of new principles of collaborative management along the supply chain.
It was understood that companies can serve consumers better, faster and at less cost by working together with trading partners.
At the heart of ECR was a business environment characterized by dramatic advances in information technology, growing competition, pressure on margins, global business structures and consumer demand focused on better choice, service, convenience, quality, freshness, safety and sustainability and the increasing movements of goods across international borders aided by the internal European market.
This new reality required a fundamental reconsideration of the most effective way of delivering the right products to consumers at the right price.
Non-standardized operational practices and the rigid separation of the traditional roles of manufacturer and retailer, as well as the lack of collaboration between them, threatened to block the supply chain unnecessarily and failed to exploit the synergies that came from powerful new information technologies and planning tools.
To better serve the consumer, ECR set out to invert the traditional model and break down non-productive barriers. The impacts were extensive and continue to resonate across industry.
How can the Uber model be applied to retail? Different customers may place different value on an item; retailers use one price, then end up discounting across the board — leading to lost profits. If retailers could customize prices for those who value items more and those who value them less, it creates a win-win: a customer surplus and higher profits.
But in order to understand what value an item has to a customer, retailers need more data about them. A woman wandering into a shop could decide a designer handbag she loved just wasn’t worth the price and then wander out — all without retailers getting any feedback.
As more and more staple purchases of center-store product have moved to alternative channels, including e-commerce, the net effect has been for consumers to fill their baskets and carts more and more with fresh and special-occasion foods…as well as convenient fill-in purchases. The massive pantry-stocking carts of yesteryear are very hard to see anymore.
The result is that we are seeing American consumers increasingly use their neighborhood supermarket as they once used specialty stores. And the supermarket chains that have seen this trend early are already shifting their stores upmarket to simulate a specialty-store experience, primarily in the perimeter departments. Kroger, Raley’s and Schnucks are perhaps three of the best examples in the past five years.
Amazon’s newest brick-and-mortar concept, Amazon Go, uses the latest in technology to offer a very different type of grocery shopping experience — one that makes self-checkout look old fashioned.
Shoppers click on the new Amazon Go app as they enter the store, and hold their smartphone to a scanner similar to an airport security line. Every time the customer picks up an item, it is automatically added to their virtual cart. (If the shopper puts the item back on the shelf, the item is automatically removed from the cart.) Once the customer leaves the store, their purchased is billed to their Amazon.com account.
Amazon broke the news about the concept via a video on its website. Explaining the technology behind Amazon Go, the retailer credited a combination of “computer vision,” “deep learning algorithms,” and “sensor fusion much like you’d find in self-driving cars.”
Market polarisation has been one of the defining trends of recent years. We have seen the ‘big four’ (Tesco, Morrisons, Sainsbury’s, Asda) lose ground to discounters and premium retailers. While discounters’ role is well documented, it’s worth taking a closer look at why premium retailers like Booths, Waitrose and Whole Foods Market are doing well.
Premium retailers concentrate on what makes them unique: providing high quality or specialist products in upmarket stores. They balance this with supplying the leading brands that shoppers want. Even during tough economic times, they resist the pressure to tone this identity down.
The growth of online sales at the current rate will inevitably reduce the market for traditional shops. By the time that online sales represent 5% or more of domestic retailing then the continued growth of online retailers is likely to come at the expense of conventional stores. In Europe as a whole, online retailers in 2016 are expanding by 16.7% in a fairly stagnant retail market, hence sales through stores are expected to diminish by -1.5% overall this year, and as much as -4.3% in the UK. The comparable figure in the U.S. is -2.2%. This is creating major strategic issues for store-based retailers. For policymakers, the results will be fewer physical stores and reduced employment in this key sector.
Pinterest's focus on consumer lifestyles and aesthetics has long made social commerce a natural fit for the platform, and the latest offerings — Shop the Look, especially — allow for easier product search and less friction on the path to purchase. Brands have often struggled to measure and prove ROI for their social marketing efforts but deeper retail integrations from Pinterest could bolster these strategies, and the site has strong early partners like Target and Wayfair coming on board.
Retailers, with their voucher schemes and loyalty programs, hold vast amounts of data not only about our financial and personal details, but also our purchasing habits. Also in retail, there are so many points of entry for the hacker through the points of sale or the supply chain, for example.
Compare this to the fact that retailers have under-invested in retail cyber security over many years, and this makes them an obvious target for data breaches from hackers looking for fullz information.
XIII ECR Annual Forum will take place in Moscow 13-14 September 2017.