Coming out of the recession, manufacturers and retailers face new challenges in a rapidly evolving retail environment, according to Lisa LaBruno, senior VP of retail operations at the Retail Industry Leaders Association.

“Retail sales are back to where they were before the recession, and retailers are breathing a collective sigh of relief that they are once again competing for a piece of a relatively large pie,” she remarked during a presentation at the International Fragrance Association North America’s annual business meeting Dec. 4.

But while sales have rebounded to pre-recession levels, “the retail ecosystem has permanently changed, in part because consumers have changed,” LaBruno said.

Retailers are working closely with entities in the supply chain to create efficiencies by reducing packaging and transportation costs, among other expenses, LaBruno noted.

Consumers are less brand-oriented, seeking deals above all else, so retailers are “pulling out all the stops,” pushing promotions, cutting prices and overhauling product assortments to win over shoppers, she noted.

In this environment, the exec said, retailers are willing to accept smaller margins if it means preserving or expanding their share of consumer spending.

To maximize profits, retailers are exploring new ways to reduce costs. According to LaBruno, retail jobs have increased steadily over the past few years as the economy has improved, but there are still 200,000 fewer positions than before the recession and no indication that a full recovery is in sight.

In the interest of greater efficiency, “retailers have managed to find ways to do more with fewer workers,” she noted.

Sustainability Includes Supply-Chain Efficiencies

Pressure to bring down costs has retailers “doubling down” on their sustainability programs, according to LaBruno.

She cited a RILA survey in which members identified packaging design and transportation as two areas where they are focused on reducing expenses over the next two years as part of their sustainability plans, and they are working with manufacturers to achieve those efficiencies.

“[It’s] become clear to us is that our members’ sustainability programs are very laser-focused on their supply chain,” she said. “You can expect retailers to continue to aggressively address what they perceive to be inefficiencies throughout their enterprise, but with a focus on the supply chain.”

With retail giants including Target and Walmart implementing safe-cosmetics policies in their stores, LaBruno urged IFRA and its members to reach out to RILA to discuss the issue and fill in information gaps, maintaining that the retail industry is “open to dialogue.”

Sustainability for retailers also means meeting consumer demand with regard to product safety, including addressing concerns about ingredients.

Large retailers including Target and Walmart are making moves to increase transparency and eliminate chemicals with perceived risks from products sold in their stores under safe-cosmetics policies, essentially acting as gatekeepers for consumers convinced that the personal-care sector is under-regulated Also see "Target To Reward High-Scoring Personal Care Under Sustainable Standard" - HBW Insight, 4 November, 2013..

LaBruno urged IFRA and its members to reach out to RILA to discuss the issue and fill in information gaps, maintaining that the retail industry is “open to dialogue,” as retailers “know that they don’t have all the answers.”

“There’s got to be a meeting of the minds, and I think retailers have the right intentions relative to their customers and relative to their suppliers,” LaBruno said. “The key to success is that you are protecting your intellectual property and retailers are accomplishing their objective of knowing what’s in the product.”

The exec acknowledged that working with mega-retailers on an individual basis as they move forward with their similarly themed but nuanced sustainability programs is a daunting prospect for manufacturers.

As an alternative, “RILA would be a very effective conduit for whatever the messaging is around this topic,” she asserted.

From Multichannel To “Omnichannel”

In addition to streamlining cost structures and responding to consumer safety concerns, manufacturers and their retail partners must cater to evolving consumer preferences for the way they shop in an increasingly digital world.

This involves a change in mindset, as brick-and-mortar, online and mobile retail have been considered separate channels in the past, affording distinct shopping opportunities. However, with consumers more prone to using their smartphones in stores and other public places to research and purchase products, the channels are converging and creating a new paradigm, according to LaBruno.

“If you would have said to me five years [ago] that consumers would be walking into a store and scanning an item with their iPhone, I would have never believed it,” she said. To further illustrate the dynamic shift in consumer behavior, she provided the example of an individual scanning a code for lettuce on a wall display in the subway and having it delivered and waiting for them when they get home.

“Today what’s happening is retailers are recognizing that those channels” previously believed to be discrete “are inextricably related now, so the new term is ‘omnichannel,’ to be distinguished from ‘multichannel,’” the exec said.

Meanwhile, brick-and-mortar stores are undergoing transformation as retailers look to expand to under-penetrated areas. According to LaBruno, urban neighborhoods offer opportunity and new challenges, with rural and suburban areas nearing saturation.

Retailers launching urban store locations face land constraints, parking issues and often “ridiculously cumbersome local ordinances,” all of which demand innovation, the exec noted.

“Here you see the flexibility and the thought leadership, creativity and innovative thinking of retailers that they are able to adapt to these challenges,” she said.

Retailers have responded with multi-level stores equipped with cart escalators that appeal to urban shoppers with special amenities and targeted product selections to address local needs.

She pointed to a two-story Walgreens store in Chicago that sells wine, has a built-in salon and features sushi and smoothie bars.

Walgreens-owned Duane Reade took a similarly upscale approach in its flagship Wall Street location, which opened in July 2011 as a beauty testing ground for the parent company ([A#02110718004]).

Firms Face New Retail Challenges In Post-Recession Climate – RILA Exec

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