This author has penned a number of prior Supply Chain Matters commentaries offering evidence that fundamental structural changes related to consumer shopping habits are occurring in multiple retail sectors. Yesterday, the Wall Street Journal published a report: Shoppers Flee Physical Stores. The most important and compelling takeaway from the article was a citation of Shopper-Trak data indicating that: “physical shopper visits have fallen by 5 percent or more in every month, for the past two years.” Further noted: “Online sales have grown more than 15% every quarter for the past two years and are having a big impact on the way many companies are looking at their brick-and-mortar stores.”
These are compelling trends that provides a ton of implications. I recently read a commentary that noted that in retail, the supply chain has moved from the back office to the online front office.
As noted by the WSJ, shoppers would rather research online than wander the aisles making impulse purchases. Rather than physical merchandising and goods placement strategies the new emphasis is on online merchandising and social-media enabled product promotion. Rather than networks of distribution centers and fleets supporting individual physical stores, the new emphasis will be on high-volume online fulfillment supported by combinations of fulfillment centers and multi-purpose retail outlets.
This author has argued that there are two leadership competencies that will differentiate tomorrow’s executive leaders in retail. They are a deep understanding of social-media fueled marketing and Internet focused retailing, and a deep awareness, understanding and appreciation of end-to-end supply chain inventory deployment and fulfillment capabilities. From our lens, recruiting for retail C-level executives has been too focused on classic merchandising, finance or traditional brand marketing. Tons of money and effort are invested in online presence and consumer intelligence without consideration for the impact on supply chain response needs.
After many months of searching, Target has announced Brain Cornell as its new CEO. The retailer elected to select an external executive candidate with experience in consumer goods supply chains including Pepsico and Tropicana, along with retail experience acquired in a stint at Wal-Mart. According to reporting by the Wall Street Journal, Cornell was an outside contender to succeed current PepsiCo CEO Indra Nooyi. Target was willing to compensate its new CEO with over $19 million in equity grants to convince him to join the retailer.
Of more interest is that Mr. Cornell should obviously understand the important contribution that supply chain will have in the new era of retailing. Time and events will tell the next chapter for Target.
There are many other executive recruiting efforts underway among retailers including JC Penny. The time clock continues to tick and the retailers and leadership teams that internalize the permanent changes in shopping and customer fulfillment will outshine those that do not.