What lies ahead for omnichannel? Q2. How will retail change?

A project where employees of Dentsu Inc. answer "What will happen next?" on flip charts regarding five topics related to omnichannel. The theme for the second installment is "Retail."
The first installment, including self-introductions from the four respondents, is here.

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Can Retail, Facing Major Change, Become "Soft-Bodied"?

Maruyama: For the first question, "What will happen to consumers?", opinions included that while shopping environments will become more robust, allowing unconscious purchases, more people will also become discerning shoppers. Alternatively, the sheer number of choices might sometimes become overwhelming.

Now, let's move on to the second question. What will happen to retail?

A.1: "Become like a mollusk"

Kanno: I believe it will become like a mollusk. As omnichannel retail advances, the retail sector may face the most significant transformation.

Traditionally, the process of getting products to consumers was divided among distinct roles: manufacturing, distribution, and sales. As these boundaries continue to dissolve, retail can no longer simply say, "We'll just handle the 'selling' part in stores."

But even so, I still believe retailers remain the closest point of contact for consumers when it comes to purchasing goods. Therefore, they need to transform while maintaining that characteristic strength. If they try to stay as they are, I fear they will be eliminated because the surrounding business environment and consumer awareness are changing rapidly.

Maruyama: Sounds like evolution. Companies that adapt to the times survive. What do you think, Horikita-san?

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A.2: "It will become 'very difficult'"

Horikita: Saying "it will be tough" here might be a bit problematic. But honestly, I feel they're facing significant challenges.

Last time, Uehara-san mentioned that consumers will "be able to shop easily via smartphones and IoT devices." Against consumers who keep acquiring and mastering these new tools, retail is the first line of defense. We have to meet all kinds of demands. That's why it's tough. Echoing Kanno-san's comment, I think it's because we have to "evolve" into something like a mollusk.

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A.3: "Product → Consumer"

Matsunaga: When I wrote "Product → Consumer," I meant that the focus retailers should be on is shifting from "products" to "consumers." Of course, product-centric thinking is still necessary, but I believe we must become much more consumer-centric.

I handle various data daily, so from a data analysis perspective, we can now clarify "what consumers want" much more clearly than before through analysis. However, retail fundamentally operates on a single-item management basis. We negotiate with manufacturers for each product we want to sell and then display it in-store. This creates the challenge of balancing these elements.

Watanabe: I see. So as data analysis becomes more precise, things that were previously invisible become visible, but that also brings new challenges.

Matsunaga: That's correct. For example, from the manufacturer or retailer's perspective, they might want to sell Product A right now. But data analysis shows customers actually want Product B. Furthermore, looking at customer LTV, it turns out that getting them to buy Product C now could turn them into long-term customers... Once such insights become clear, you can't just focus on selling what suits your own agenda. However, I fully understand it's not as simple as saying, "Then let's push B or C." It really feels like a challenging era.

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A.4: "Mass Efficiency or Personalized Customerization"

Uehara: I'll use the illustration series. On the left is an efficiency-focused model where robots or AI manage operations, directly shipping products from warehouses to meet consumer needs. The right side is the opposite: a service-focused model emphasizing even more attentive in-store customer service by shop staff. For example, companies that previously standardized inventory across all stores are now delegating purchasing to buyers by region, leveraging the strengths of each area or individual store.

Companies like Amazon seem to be leaning completely to the left. In Japan, however, many businesses still appear to be wavering somewhere in the middle. If that's the case, it might be a bit tough. This might be the opposite opinion to Mr. Jinno's "soft-bodied creature" analogy.

When and how to incorporate technology, and whether they have the capacity to do so

Maruyama: You suggest it might be the opposite. What do you think, Mr. Kanno? One perspective I wanted to explore is: with e-commerce now commonplace and two retail models existing—digital-first and store-first—what strategy should companies adopt to differentiate themselves from competitors?

Kanno: I think Uehara-san's perspective is valid too. It's often pointed out as the "retail smile curve" – you really need to lean either towards cost consciousness or service enhancement, otherwise profitability becomes tough. I share that view.

When I wrote "soft-bodied creatures," I meant not being confined to the "sales" world, but incorporating more of "manufacturing" or "distribution," or even media functions. Looking solely at "sales," I think both scenarios Uehara-san described are heavily driven by digital technology. So, results will likely vary depending on where and how you incorporate those elements.

Horikita: Adapting to change requires stamina, right? So perhaps the number of retailers that can survive by becoming soft-bodied creatures isn't that large to begin with. However, what we must also be mindful of is that shopping should fundamentally be an enjoyable experience. No matter how much digital advances, physical stores shouldn't disappear. We tend to view the present and future from a corporate perspective, but as Mr. Matsunaga pointed out, we must never forget the consumer's viewpoint.

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Q.3 "How Should Manufacturers Change in the Omnichannel Era?" continues...