BUSINESS MEGA TRENDS ANALYSIS IN RETAIL SECTOR
Business Mega Trends Analysis in Retail Sector
When E- commerce was introduced as an option to conventional trading, little did the business experts know that it would grow into the most preferred business transactional process in a span of just ten years. Today technology, market forces, customer satisfaction and ease of transactions are the factors which determine the success rate of a business enterprise. These factors, also known as Mega trends are driving changes in the retail sector and unless retailers recognize and restructure themselves to build a competitive edge in the present international market, they may be heading for extinction in future.
These Mega trends also offer a range of opportunities for Entrepreneurs on the lookout for new avenues in business products and services. They offer a platform for the business visionaries to innovate new processes that revolutionize traditional methods and establish new and profitable ventures. Acknowledging the effect of megatrends on change in consumer preferences provide the entrepreneurs with opportunities which can be utilized to invent new products and processes.
An attempt has been made to analyze and understand the influence of Megatrends especially in the retail industry, by studying the operations of Walmart, a retail store that has used the megatrends to its advantage but has further scope for innovation. This report discusses the concept of Megatrends, their impact on retail sector and the opportunities offered by them to innovate new products and services to entrepreneurs.
Hajkowicz, S.A, et al, (2012, 4) defined megatrend as “a major shift in environmental, social and economic conditions that will substantially change the way people live”. Effects of megatrends can be verified by factual data. It can be inferred that Mega trends have a global reach, sustained and macro economic impact on business, economy, society and individuals. Evaluation of these mega trends and their consequences forms the basis of a company’s strategic planning as well as provides the necessary opportunities for entrepreneurs to start a new venture. They provide information on probable future developments by extrapolating present trends becoming a starting point to visualize the world. They help identifying the signals that indicate possible future demands and the impact on behavior and organizations (Guemes-Castorena, D., 2009, 2391)
Megatrends are results of revolutionary changes brought in by new technologies, tastes of consumers, economic fluctuations, climatic conditions and demographic patterns that are there to stay. Existing products and processes undergo evolution to accommodate these changes. (Cox. C, 2014) has identified five megatrends that have the potential to change the global business trends as rapid urbanization, technology, emerging markets power, global warming and demographic changes. The list is not exhaustive, but it addresses the major drivers of changing business methods and products. The Mega Trends report 2015 by EY publications claims that each of these megatrends is interrelated. Successful outcomes in one triggers development in others. Cox concludes that companies should gear up and plan to meet the demands projected for infrastructure, consumer items, modern gadgets, ecological processes accelerated by these megatrends if they want to be relevant to the changing business atmosphere.
Impact of Megatrends on Business
Megatrends affect both the manufacturing and retailing activities across regions and industries. According to the KPMG Industrial Manufacturing Megatrends Research (2014,2), the modern industries must take these megatrends into consideration in order to stay competitive, add value for its shareholders and strengthen its position as a preferred partner for its customers and stakeholders. Urbanization provides opportunities for infrastructural development and attracts business (Shome, S. 2013, 412). The effect of urban development on the service sector has been presented by (Hermelin, B. 2007, 70) with reference to a study conducted in Stockholm where a substantial growth in service economy was noted as a result of urbanization. One of the major shifts in manufacturing perspective is the sustainability issue. Technological innovations, new business models and new lifestyle models will be the determinants of the new sustainable universe particularly in the manufacturing sector (Garetti, M. and Taisch, M., 2012, 89). This implies that there will be innovations in design and technology to develop products and methods aimed at conserving natural resources. Sustainability produces market imperfections which cause entrepreneurial opportunities (Kuckertz, A. and Wagner, M., 2010. 528).Another megatrend that influences manufacturing is the globalization of market players. Product differentiation is the keyword to stay ahead of the increased competition faced by manufacturers because of globalization of markets. One of the perspectives identified to remain competitive is generating economic value through implementing economies of scale (Bowersox, D.J., Closs, D.J. and Stank, T.P., 2000. 1).Value addition and after sales service are ways to achieve product differentiation and consumer satisfaction. Entrepreneurs have formed strategic alliances to exploit the opportunities globalization has offered (Yoshino, M.Y. and Rangan, S., 1995). The most revolutionary shift in global trends is the emergence of E- business that has facilitated internet enabled supply of raw material and finished goods, recruitment of work force and monetary transactions for manufacturers. The electronic marketplace provides a challenging interface for entrepreneurs, where boundaries between organizations, suppliers, consumers and competitors have disappeared (Hasan, M. and Harris, E., 2009.93).Today manufacturing initiatives are directed at producing cost efficient and sustainable goods that are recyclable and ecology friendly, adopting latest technology for manufacturing, using digital methods of transaction and outsourcing resources. All these initiatives are direct results of global megatrends.
Just has business megatrends have compelled manufacturers to innovate, they have altered the retailing business significantly. They have necessitated that retailers reinvent new methods to sell which are consistent with the changing buying patterns and consumer preferences. In the following pages a detailed discussion is undertaken to analyze the effect of megatrends on retailing, the opportunities generated by them for entrepreneurs in retailing sector and future developments.
Mega Trends in the Retail Sector
Mega Trends summarized above have a lasting effect on the retail sector as well. Retailers are the distributive channels of manufacturers and interact directly with the customers. While all the Mega Trends discussed above has an impact on the retail sector, the Mega Trend that has most influenced it is the advent of e- commerce that has revolutionized the process of buying, supply and payment. As discussed earlier in the report this megatrend has also influenced other megatrends like consumer preference and supply chain management. The Mega Trends relevant specifically to retailing industry has been summarized into seven categories by (Karim, S. 2015) are stated below. These megatrends and the general shift in business pattern provide entrepreneurs with a whole new scenario for innovations and start ups to address the evolving preferences of customers.
Improvement in Daily Quality of Life
With accessibility to a variety in choices in wearable, smart devices and other items, the consumer can purchase items which will enhance his quality of life. He will be able to interact better with society, access better customer support systems and share information which will enhance his in- store shopping experience.
Localization of supply
Tie –ups with local suppliers will result in retail facilities like same day delivery, graphic printing and making and sharing by private designers.
Using Big Data to Service Customers
Big Data, will be useful in predicting customer needs and help big retailers to improve on core execution and get stronger. It will also assist support service providers to extend prompt and efficient service to clients through anticipation of their needs and attending to it.Growth of E- commerce
Karim,S. (2015) predicts that online sale continues to grow compared to physical retail. U.S. internet sales, at $449 billion, surpassed physical sales for the first time by 10% in 2013. Similar trends are visible in the markets of the developed countries of Europe and America, while Asian countries like India and China with their growing disposable income offer huge opportunities for online retailers.
Global Connectivity
The increasing use of social media and smart devices will augment interactions at the international level. Consolidation of Retail business
Private investments and IPOs will provide impetus to both competition and consolidation in the retail sector. The retail sector has witnessed growth of private equity, IPOs and takeovers in the recent past as well as closure of many big stores like Sony in Canada. There were mergers and rightsizing in the retail sector.
Data Security and Privacy Policy management
Securing customer data from trespassers are the top priority in the retail segment especially in online retailing.
These seven megatrends provide retailers with exciting challenges for entrepreneurship. The chief concern in retailing is now customer satisfaction which can be achieved by using
Technology to deliver great products at the customer’s doorstep at very reasonable prices followed with great after sales service.
Opportunities generated in the Retail Sector by the Mega Trends
Researchers have presented examples of companies like Mc Donald to establish that collision of two megatrends provide opportunities for innovation in business (Lancefield, D.’ Et al, 2015). Mc Donald invested in the opportunities provided in the intersection of the mega trend of markets shifting towards Asia and the recent demographic awareness towards health and introduced samples targeting Asian preferences. Similar intersection of mega trends and their effective assessment provide immense opportunities for retailers in the intersection of technology and mergers in retailing to introduce services for customers, bring new trends in fashion through 3D and digital printing in wearable, tracking of orders by logistic services (van Donselaar, K., et al, 2005, 12) and delivering tailor made goods at the client’s doorstep in no time. Opportunities in the emergent markets for retail franchising have also been observed by the researchers (Welsh, D.H., Et al, 2006.130). Innovations are crucial to the survival of international retailers to beat the competition and must be responsive to the respective market and consumer characteristics (Reinartz, W., ET al, 2011. 63).
Wal-Mart’s Innovative Strategies making use of the Megatrends
Wal-Mart, a global retailing giant was smart enough to evaluate the opportunities presented by the megatrends of consumer power, E business and Big Data management and aligned its activities to stay relevant to the new retail environment. Wal-Mart has demonstrated that innovations in only IT are not enough. Several Wal-Mart innovations, both large and small, are now used as standards in retailing sector. Wal-Mart invented the large-scale, or "big-box," format; "everyday low prices"; electronic data interchange (EDI) with vendors; and the strategy of expanding distribution outlets. These innovations resulted in the passing its savings on to customers (Johnson, B.C., 2002 41).
Some of the strategies undertaken by it are discussed below (Walmart Corporate , 2016)
Every Day Low Price is a price focused strategy that makes available to the customer a broad assortment of items under a single roof at very competitive prices, serving them online, through mobile apps and physical stores. Its stores are tailor-made to suit the neighborhood demographics and have succeeded in reducing thefts. (Fishman, C., 2006).
Wal- Mart has advantageously used its size and scale to provide high-quality goods and fresh, nutritious food at everyday low prices to customers across the world by tie ups with local suppliers across the globe. It has distribution channels spread internationally to access the global market in retail supply. Its innovation in retailing and winning over distributors and customers is evident from the ‘Sam’s Club’ opened in1983 to assist small business owners save money on goods purchased in bulk (Vance, S.S., 1994). Its membership has risen rapidly to serve families and entrepreneurs by saving members money on the items purchased most and surprising members with the anywhere, anytime provision and offers specialty services, including travel, auto buying, healthcare aid centers, auto spares and support services
It is the world's largest, fastest-growing and most dynamic e-commerce retailer. With its HQ in California's Silicon Valley and operations in Bangalore, India and Sao Paulo, Brazil – Walmart Global e Commerce steers all online and mobile innovation for Walmart.
With its data scientists and the largest collection of commerce data in the world coupled with social insights, it wants to enhance the shopping experience for the customer and combine online and physical stores.
Conclusion
It can be derived from the above that megatrends are the driving forces behind the changes in business products and services. Analyzing megatrends provides an insight into future demands and thus directs innovations. Thus Megatrends produce ample opportunities for entrepreneurs in both Manufacturing and Retailing.
E- commerce, consumer satisfaction and low pricing are the major trends that have been the driving force between Wal-Mart’s innovations in retailing. However there is a lot more scope in retailing using big data to anticipate customer needs and suggesting products, using logistics to track deliveries and provide reliable information to customers and innovating digital printing and designs to address customer preferences.
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