In the current landscape of the retail sector, it becomes imperative to recognize the rapid transformation it has undergone in recent years. This revolution is fueled by constant technological innovations, dynamic changes in consumer patterns, and a range of other relevant factors. In this context of continuous disruption, it is essential to delve into a reflection on the predominant challenges in the retail industry; understanding and addressing these challenges becomes a crucial element to stand out in an era that completely redefines the rules of the game. The efforts and strategies that retailers undertake today will be decisive in shaping the future of retail over the next 20 years.

5 Strategies to Excel in a Disruptive Era

  1. The shift in customer behavior poses a crucial challenge for retailers. Despite having tools to understand their preferences, the constant evolution of the consumer raises fundamental questions. What are they exactly looking for?

Today’s consumers show a growing concern for the environmental impact of their purchases and seek sustainable products. According to GlobalWebindex, 60% of millennials, 58% of Generation Z, 55% of Generation X, and 46% of Baby Boomers are willing to pay more for environmentally friendly products. Furthermore, an analysis by McKinsey and NielsenIQ reveals that products with sustainability claims on the packaging have experienced a cumulative growth of 28% in the last five years, surpassing the 20% of products without such claims (McKinsey Quarterly, 2023).

Online commerce is a relevant challenge, driven by COVID-19. Nearly half of consumers, especially millennials and Generation Z, draw inspiration from social networks, celebrities, and blogs for their purchases, adopting an omnichannel approach.

The rise of online commerce has posed an additional challenge: speed in delivery. Current consumers are not willing to wait, considering three-day shipping as the limit before seeking alternative retailers (McKinsey Quarterly, 2023).

Personalized shopping experience is another important consideration. Consumers seek their needs and preferences to be addressed in the retail world, with products and services that adapt to their lifestyles and specific desires. Additionally, there is a growing interest in health and well-being, with an active search for products that promote a healthy lifestyle.

Lastly, in the consumer realm, a significant challenge is presented characterized by a trend of making purchasing decisions at extremes, avoiding mid-priced products: “over the last five years, the proportion of consumer spending on mid-priced goods and services has decreased by 10%. April 2023 data reveals that approximately 80% of American consumers opt for more affordable alternatives, while around 40% of consumers in Europe and the United States plan higher expenditures.” Addressing this extreme attitude implies retailers adapting their strategies to offer both economical options for price-conscious buyers and high-quality experiences for those willing to splurge.

  1. Less Engaged Workers. Secondly, a crucial challenge involves employees in the retail sector, who have undergone a shift in their job expectations. Compensation alone is no longer sufficient; employees seek positions that provide a high level of satisfaction and happiness, translating into optimal job performance.

A Korn Ferry survey revealed a global turnover rate of 75.8% in retail positions as of November 2022, marking a 68% increase since 2021 (Carlos Franco, 2023), highlighting the challenge of retaining employees in the retail sector.

This implies the need to offer greater workplace flexibility, professional development opportunities, attention to health and well-being, adequate compensation, and the sense that their work holds significant value. However, a concerning statistic indicates that only 28% of companies worldwide (Mercer, 2022) address these needs, and the average performance in the retail industry is lower than that of other sectors. This situation poses a significant challenge for retailers, as high turnover results in increased training costs and the presence of a less experienced team.

To address this issue in retail, retailers must focus on investing in the development and well-being of their staff, providing training opportunities, growth, recognition programs, and rewards that stimulate their engagement. By balancing this investment in employees with cost management, retailers can create a positive work environment that enhances satisfaction and employee retention, ensuring a more committed and productive team in the long run.

  1. Continuous competition in the retail sector represents one of the main challenges. Economic openness and globalization have led to increased market contention. This expansion has been further intensified due to the proliferation of establishments offering similar products and growing rivalry in the online space, resulting in constant price pressure.

Competition in the retail market has significantly heightened, with a crucial focus on online commerce experiencing an impressive surge driven by the effects of the pandemic. In the year 2020, this sector witnessed astonishing growth of 27.6%, surpassing 4 trillion dollars in value, emphasizing its undeniable expansion.

But let’s not go too far. According to Statista, in 2023, a total of 300 million consumers have become digital shoppers, and this figure is projected to increase by over 15% by the year 2027. These revealing data underscore the importance for retailers to not only pay attention to competition in physical stores but also in the online realm, as part of their strategy to stay relevant and active in the race for customer preference.

Considering the aforementioned, it is imperative that retailers direct their efforts towards differentiation through unique value propositions, such as personalized experiences and exceptional services, as these are fundamental requirements for online customers today. An effective strategy to achieve this goal involves strengthening their analytical capabilities, ensuring they can build closer relationships with their customers and maintain competitiveness in an increasingly digital market.

  1. In the context of inventory management in the retail sector, several challenges are presented in the 2023 landscape. The potential economic recession, coupled with persistent inflation and geopolitical tensions, increases uncertainty in the market. This affects retailers, as they may experience a decrease in demand for finished products, leading to increased pressures to cut costs and optimize logistical operations. Mexico’s dependence on the United States in terms of exports and other economic factors adds an additional layer of complexity to inventory management, and the potential decoupling of monetary policies could pose new challenges in managing adjustments in exchange rates. To address these challenges, there is an emphasized need for more sophisticated inventory management and increased financial literacy among retail investors.

In the realm of inventory management, these challenges translate into the need to adjust inventory levels more effectively and maintain proper synchronization throughout the supply chain. Lack of coordination among different actors in the supply chain can result in unnecessary costs and reflect inconsistencies in inventory management. Therefore, more flexible strategies and a cost optimization-focused approach will be required as retailers seek to overcome these challenges in an uncertain economic environment. (Roberto Aguilar, 2023)

  1. Digital transformation in the retail sector, involving the integration of technology and the adoption of digital tools such as e-commerce websites, mobile applications, and online payment systems, poses a significant challenge. While it represents an opportunity to increase sales and reach new customers, many retail companies face the challenge of acquiring the knowledge and resources necessary to carry out this transformation.

The CTO of Grupo Tendam explains this in more detail, “We are being demanded a very high speed when it comes to delivering value solutions; but all those technologies and developments don’t happen on their own, we need people to do it. And nowadays, it’s very complex in many aspects and many verticals; every day we try to save talent, but with a lot of difficulty.” (Byte Magazine, 2023).

To overcome the challenge of digital transformation in the retail sector, companies must focus on acquiring the necessary knowledge and resources, as well as on retaining technological talent. The incorporation of technology and digital tools, such as e-commerce websites and mobile applications, offers significant opportunities to increase sales and reach new customers; however, to achieve this, it is essential to have a skilled team that can implement and maintain these technological solutions effectively.

Facing the dynamic challenges of the retail sector is essential for growth and prosperity. Discover innovative solutions, key strategies, and the latest trends at Expo ANTAD, the number one retail event in Latin America. Explore how sustainability, personalization, and differentiation can be the pillars to stand out in this changing environment.


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