The retail industry is a dynamic sector that plays a pivotal role in the global economy. However, amidst the opportunities for profitability and growth, many manufacturers and retailers still face a multitude of challenges that demand more agile and innovative solutions. In this article, we will explore 3 key challenges that are faced by manufacturers in the retail industry and some strategies that businesses can implement to navigate these hurdles and thrive in the ever-evolving retail space.
1. Digital Disruption
The rise of e-commerce and other recent technological shifts have revolutionized the way that consumers find and purchase the products that they need. Customers now have heightened expectations and access to more options than ever at the click of a button.
Both manufacturers and retailers face the challenge of meeting these changing consumer expectations while competing with online channels. This rapid pace of technological advancement presents both opportunities and challenges because keeping up with innovations such as AI, augmented reality, and The Internet of Things (IOT) may require significant investments in new technologies to stay competitive while maintaining a balance between online and offline channels.
The future of retail is omnichannel. By harnessing data analytics, implementing AI-driven personalization, Dynamic merchandising strategies and enhanced customer service, businesses can create a more memorable and satisfying shopping journey that allows them to maintain brand relevance in the future of retail. Manufacturers and retailers that successfully integrate these technologies into their operations can gain a competitive edge in terms of both efficiency and consumer engagement.
2. Rising Operational Costs
& Supply Chain Disruptions
Both manufacturers and retailers are facing the ongoing challenge of managing rising operational costs. Striking a balance between cost-cutting measures and maintaining service quality is crucial. As a result, according to a Federal Reserve survey of CFOs, 80% of companies are passing these rising production costs to the consumers.
Also, Global events, such as the COVID-19 pandemic, have highlighted the vulnerability of retail supply chains. Retailers are grappling with disruptions, including logistics challenges, inventory management, and sourcing issues. But by embracing automation, optimizing supply chain efficiency, diversifying suppliers, implementing robust supply chain technologies, and adopting agile inventory strategies, both manufacturers and retailers can thrive in the face of unforeseen disruptions.
3. The Competition Between National Brands & Private Label Manufacturers
Another key challenge is the competition between private label and major brand manufacturers. According to a 2018 study from by Nielsen, private label dollar volumes in mass retail had increased by 41%+ over the past 5 years. This is significantly higher than national brands which only increased by +7.4%. This study reveals a big challenge for national brand manufacturers.
One big advantage that national brands have is that consumers are usually more familiar with their products so there is a stronger sense of trust, although private label tends to be at a lower cost. Some major retailers have also tried releasing more in-house private-label products in different categories. One example is Bed Bath & Beyond which made attempts to release its own private labels as part of a turnaround strategy to boost sales. This strategy did not succeed so they had to pivot to featuring more national brands that consumers were already familiar with.
Final Thoughts
Whether it’s navigating the digital shift, rising operational costs and supply-chain disruptions, or the competition between national and private label, it is paramount for both manufacturers and retailers to adopt more strategic approaches to thrive in the modern retail landscape. Retail is a dynamic industry that requires constant adaptation to meet the evolving needs and expectations of consumers. By addressing these key challenges head-on and embracing innovation, retailers and manufacturers can position themselves for success in an ever-changing market.
Sources
https://cfodive.com/news/80-percent-companies-passing-rising-costs-consumers-fed-survey/610956/
https://retaildive.com/news/private-labels-outpacing-national-brands/553227/
https://deloitte.com/us/en/insights/industry/manufacturing/realigning-global-supply-chain-management-networks.html
https://nam.org/manufacturers-third-quarter-outlook-shows-continued-supply-chain-issues-growing-workforce-needs-and-rising-costs-18798/?stream=series-press-releases
https://mckinsey.com/industries/retail/our-insights/turning-private-labels-into-powerhouse-brands
https://prnewswire.com/news-releases/store-brands-surge-by-40-plus-in-mass-retail-channel-over-5-years-far-outpacing-national-brands-300835036.html
https://retaildive.com/news/profits-dont-make-a-splash-at-bed-bath-beyond/552518/
