Industry disruption challenges all sectors at regular intervals. Large-scale, technology-driven changes have been the biggest industry-changing force over the last decades. Disruption has caused the wheels of change to rotate, whether we like it or not. The change is permanent, the strategic cycles are shortened and new solutions are sought for business models. There is no longer a question, whether employees and business executives have the right knowledge and skills but how agile they adopt new business models and business processes. Renewal is needed in one way or another.
In the field of retail, the changes have followed each other at a steady pace. Especially in the specialty goods trade, tremendous changes have occurred also earlier in history. At the beginning of the last century, department stores revolutionized the form of trading. Until then, customers were served by the counter in specialty stores. The store where customers could choose their product from the wide range quickly became an iconic Shopping Place. In addition to the sale of goods, trade strengthened its social role in society. Department Stores became a meeting point for all social classes.
In the 50s, shopping centers and supermarkets appeared in the field of retail. In the 1980s large units, hypermarkets, were rapidly expanding retail format. In the 90s, the expansion of international chains began to expand in many countries and the competition, especially in the fashion business, became international. Coming to the 2000s digitalization has accelerated and e-commerce has risen as a channel along with the brick-and-mortar. The global market of the retail has opened to consumers, despite the time and place, and always at the best price of the day. The traditional trade structures have broken, the retail is divided into multi-channel.
For example, in Finland, retail is the largest employer in the business sector. Retail employs some 300,000 employees, while the second largest Metal and Electronics Industry employs some 200,000 people (Source, Statistics of Finland). In addition, trade is one of the largest investor; retail invests in the home market – Finland. According to the information collected by Euromonitor, the development of brick-and-mortar in Europe has turned negative in 2015, while the annual sales growth of online stores remains at around 15%. In the United States, this development has led to dramatic changes. According to the forecasts, up to 30% of shopping centers will be under closure in the next few years (Source: Time 12.5.2016). Significant challenges are faced when the market seems to have ruthless powers.
The status of the retail is complex, it consists of many interacting parts, and the impact relationships are difficult to explain. Such an industry disruption needs different, new capabilities. The relationship between operational and tactical activity compared to strategic actions varies widely depending on the company’s own situation and the industry’s requirements. The individual’s ability to reform and abandon the old is limited. Large transformations require changes in management so that sufficient “change muscles” are achieved.
Disruption is inevitable and the outcome is difficult to predict. However, future scenarios can be built on enduring resources. For example, in the field of retail it is certain that; Consumption continues, c-to-c sales increase, e-commerce’s share out of total retail sales grows, the importance of mobile devices and technology in purchasing process strengthens, physical space requirement from retail point of view decreases, shopping is part of entertainment and has a social role. Also, one thing is sure, the winner of this game is the Consumer.
How well to prepare for the future is highly depending on key personnel competencies and potential to change. It is also necessary to move competencies between the industries so that the future can be seen from the new direction. Birn + Partners is your partner when you think about your organization’s ability to face the challenges of the future. We produce high quality Direct Search, Career Advice, Onboarding, and Talent Assessment and Development Services for Individuals and Management Teams. Our international team in nine different countries consists of a wide range of expertise and psychologists specializing in personal assessment and selection.
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Jouko Pitkänen, Partner
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