Wednesday, January 31, 2018

Wal-Mart Tightens Delivery Windows for Suppliers

Large suppliers will soon need to meet one- or two-day windows 85% of the time, or be fined, executive says

Sarah Nassauer and

Jennifer Smith

Updated Jan. 29, 2018 7:18 p.m. ET

Wal-Mart Stores Inc. WMT +0.11% plans to ask suppliers to deliver more goods to warehouses exactly on time or face fines, another step in the retailer’s efforts to keep inventory low and shelves stocked as it battles with Amazon.com Inc.

At an annual conference for suppliers this week, Wal-Mart executives plan to announce that large suppliers need to deliver full orders within a specified one- or two-day window 85% of the time or face a fine of 3% of the cost of delayed goods, said Steve Bratspies chief merchandising officer for Wal-Mart U.S., in an interview Monday. Previously, suppliers had to hit a 75% threshold to avoid fines. For smaller suppliers the on-time threshold will move to 50%, up from 33%. The change will take effect in April.

“This is not a ‘Hey, let’s see how unreasonable we can be,’” said Mr. Bratspies. “We need the product that the customer wants when they want it.” Wal-Mart would rather have the products on-time than fine suppliers, said a spokesman.

As Wal-Mart, Kroger Co. and other retailers demand tighter delivery windows, suppliers including Kraft Heinz Co. and Procter & Gamble Co. have invested heavily to meet those requirements and make their supply chains more flexible for online buyers. Last February, Wal-Mart executives told suppliers more accurate delivery times would be a focus going forward and first introduced fines for inaccurate deliveries last year.

A more precise delivery window helps Wal-Mart keep shelves stocked and the flow of products more predictable, while reducing inventory, say executives. That goal has become increasingly important to the world’s largest retailer as it pushes to make stores more profitable so it can marshal funds to boost online efforts. In addition, accurate inventory data is more important to retailers as they offer shoppers more ways to buy online and pick up in store.

“They’re trying to get as much inventory as possible off the books,” said Adrian Gonzalez, a supply-chain analyst and president of research firm Adelante SCM. “They want to order more frequently and in smaller quantities, and kind of accelerate that whole process.”

That strategy also increases the risk of products being out of stock, and consumer disappointment, Mr. Gonzalez said. “Wal-Mart is trying to balance that…while still making sure the product is on the shelf.”

Empty shelves or otherwise unsaleable products add up to some $75 billion in lost sales a year, according to the Food Marketing Institute, a trade organization.

Nearly 4,000 suppliers are expected to attend the meeting in Bentonville, Ark., where Wal-Mart will outline plans to for the first time widely share with suppliers data on which precise products are on shelves at any given time and why products are out of stock, as well as what products Wal-Mart plans to stock in each store. The additional data, which will become available throughout the year, will help with on-time delivery and “help our suppliers become more efficient and help solve problems,” Mr. Bratspies said.

The tightened delivery window comes as freight costs are soaring for manufacturers and retailers. Many companies are scrambling to book transportation, particularly for time-sensitive deliveries, because demand has outstripped the supply of available trucks. Prices on the spot market, where shippers arrange last-minute transportation, are up more than 20% compared with this time last year. Fuel prices are also rising, adding to costs.

“Trying to find a truck in today’s environment is next to impossible,” said Cathy Roberson, an analyst with Logistics Trends & Insights LLC. “Fuel surcharges are going up and the suppliers are going to have to pay all of this.”

Strategies for Today's Distribution Center Labor Challenges

By: SupplyChainBrain, sponsored by Fortna
01.29.2018

Finding and managing distribution center labor has become more complex with the rise of e-commerce. But the argument for investing in automation technology is compelling.

Distributors are feeling the heat from all sides — competition for a diminishing pool of labor and rising labor costs are compounded by higher transportation costs, driven by labor constraints, and margin pressure from increased customer expectations for fast and free shipping. Although there’s no simple solution that works for everyone, achievable strategies are within reach. This Special Report analyzes the state of the DC labor market and how technology can help solve today’s growing labor challenges.

Although the rise of next- and same-day delivery — the so-called “Amazon Effect” — feels like it’s turning the world of distribution upside down, that’s only one of a complex mix of factors putting additional pressure on distribution operations. Changes in the availability, cost and quality of labor are driving many operators to review their distribution operations with an eye toward technology for solutions to address the challenges and enable competitive advantage.

Today’s DC operators must develop strategies to strengthen operational capabilities, reduce costs and provide flexibility to adapt in a rapidly changing environment. Technology offers solutions, but first, it’s necessary to understand the DC labor challenges driving the imperative to adopt new strategies.

Growing Customer Demands, Shrinking Workforce

While customer expectations intensify, the pool of qualified, reliable and affordable labor for DC operations is tight and getting tighter. This is happening for a number of reasons:

The economy has achieved nearly full employment, increasing competition for workers across all sectors;
Wages for warehousing jobs, including picker/packer and lift driver, have not kept pace with the rising cost of living;
Millennials are better educated and they tend to have a poor perception, or lack awareness of logistics careers;
Baby Boomers, historically a major source of DC labor, are retiring;
Immigrant labor is no longer expanding due to changing political dynamics;
Drug testing is disqualifying a larger number of applicants, particularly as the national opioid epidemic continues; and
Finally, DCs are frequently located in areas of lower population density and hubs where competition for labor is high and driving higher wages.

These forces are constraining labor availability across all levels of staffing, from line employees to supervisors and managers.

At the same, time the rapid growth of e-commerce and customer expectations for faster delivery is driving the need for more DCs, which require more workers.

Scarcity of labor brings with it increased costs in the overall supply chain. And transportation costs are rising at the same time distributors are bearing the burden of higher consumer expectations.

Plus, there are non-logistics demands for more labor, putting additional pressure on DC operations. For example, Tesla is opening a large factory in Reno, offering light manufacturing jobs that pay considerably more than DC jobs in the area. As that facility moves toward full production, the local workforce may be insufficient to support existing distribution and manufacturing operations — driving even greater competition for workers.

Finally, DC operators — along with other businesses — see labor costs rising due to minimum wage laws and rising healthcare costs.

Holiday Cheer Can Cause DC Blues

The real crunch time for many logistics operations occurs during the run-up to the holidays, and has extended to the post-holiday period due to the rise of returns. Manufacturers, carriers and DC operators add lots of labor to meet demand and move more products with greater speed.

During the 2017-2018 holiday season, DC operators saw peak season hourly pay rates rise 10 percent in response to the urgent need for labor to meet the seasonal surge. Other extra-cost labor retention tactics include providing benefits such as free lunches, bonuses, stock incentives, etc. For one DC located in an affluent suburb’s industrial park, the need to simply retain existing workers was met by offering a lunchroom catered by a local restaurant chef, daycare and additional costly amenities, such as a gym and upgraded break room facilities.

Adding lots of labor to meet peak demands can potentially result in an oversaturation of staff at key points, creating congestion that lowers overall productivity. And a labor force prone to high turnover can cause even greater unintended cost increases when they fail to show up for work, or if they don’t work productively. By contrast, technology that both reduces the need for additional labor while making existing workers more productive, becomes the obvious alternative.

Either way, the cost of all this is coming off the bottom line, even as distributors are being squeezed by customers’ expectations for free shipping, faster shipping, free returns and value-added-services. These capabilities are no longer “added value”; they are table stakes.

Technology Boosts Productivity by Reducing Reliance on Labor

Looking ahead, the labor pool is expected to be further constrained, while costs continue to rise. With labor in short supply, the question DC operators face: Do they take whatever steps are necessary to continue to add staff, or is that no longer a viable strategy? In a growing number of scenarios it is no longer economically feasible to use labor for certain activities, or a sufficient labor pool simply does not exist.

Of course, one answer won’t fit all circumstances. Nevertheless, technology options that can either increase the productivity of existing labor or, replace it, are now an essential part of the solution.

It does take time to design and implement technological solutions, but there are strategies that can help bridge the gap:

Thoroughly review opportunities to increase the productivity of existing operations. Does the DC follow best practices, are processes being properly executed, and has every reasonable effort been made to incentivize a productive workforce?
Re-set customer expectations to match your actual capabilities, remembering that it’s better to over-deliver than under-deliver on promises. If it is not possible to meet same-day delivery demands, don’t offer it — especially during peak.
Shift labor to where it is needed, or shift orders to where there is capacity to fulfill. Consider fulfilling same-day orders from stores rather than DCs.
Consider hiring part-time labor (college students, stay-at-home parents, etc.); though the trade-off might include higher training and recruitment costs than with full-time employees.

Long-Term Technology Strategies for Improved Competitive Advantage

Even while implementing quick fixes, it’s important to start developing long-term strategies that maintain the health of your enterprise and, most important, position it to be highly flexible as unforeseen developments occur. This is essential for enabling competitive advantage. Typically, automation solutions take 18 to 24 months for results to be realized.

“There’s a perfect storm occurring in the DC, where labor availability is diminishing and labor costs are increasing. And it’s only going to get worse,” says John A. White, III, president and CEO of Fortna, a professional services firm that designs and implements distribution solutions. “The good news is that new technologies are reaching maturity and often have a strong business case for justification — goods-to-person (GTP) solutions, autonomous vehicles, robotics, and others can help, and are flexible in ways they weren’t in the past. And as technologies become mainstream, we are starting to see commoditization and lower prices. Companies that implement automation now to augment the workforce, or reduce dependence on labor by automating processes, will have a significant competitive advantage over those who wait,” says White.

Selecting the Right Technology Requires Balance

Find the level of automation that works best for the business, and even for each DC. The first questions when considering technology solutions for the DC are likely to be, what about the time, the management resources, and the business case for such a significant change? Is it justifiable? Is it flexible?

The introduction of new software and automation is usually not simple, and it requires research and careful planning. Fortunately, many of today’s technologies offer greater flexibility than ever. Operations design can be structured to enable incremental implementation and investment so that CapEx can be spread out over time, allowing businesses to add technologies and capacity that meet needs as they arise.

For the near future, most automation implementations will be focused on reducing reliance on labor, rather than eliminating it. Material handling equipment, systems and autonomous robots have been developed that no longer require an either/or choice regarding labor. Rather, there are many good options featuring lighter and more flexible automation, such as robots that can function alongside workers, helping them become more productive.

In many instances, the first and best opportunity for implementation of automation is picking and packing. These are the most labor-intensive aspects of DC operations. One of the key factors that drive up labor costs is the travel required by each worker to traverse a large facility. Travel adds cost, not value. There are several technology solutions that optimize and eliminate travel, or increase storage density to reduce travel while increasing throughput and reducing order cycle times.

For packing, there are proven technologies that greatly speed labeling, packing, insertion and value-added functions. Any technology that increases productivity does more than reduce costs. It also enables a DC to meet customer demands for faster order cycle times. While achieving a 50 percent reduction in labor, one successful implementation also met a steep increase in direct-to-consumer demand by allowing later cut-off times for completing orders in the DC.

Because it’s not possible to predict how customer requirements will evolve, these flexible solutions will support a more nimble enterprise, one that can adapt and maintain competitive advantage over time.

Determining what is appropriate depends on many factors, including:

Service expectations, order profiles, volume, and product characteristics;
Existing DC capabilities, which can vary from manual operations to low-level automation or highly automated;
Acceptable levels of risk including ROI, impacts on cash flow, impact of change, flexibility required and sensitivity to labor shortages.

Whatever the situation, it makes sense to work with a qualified distribution consultant who can help create a technology road map, develop a business case for investment and navigate through manufacturers’ offerings. The “horror stories” around failed DC automation usually result from implementation of systems and equipment that were too rigid for changing business conditions, or systems that weren’t properly integrated. Success is dependent on both art and science that considers all the variables and leverages the flexibility points that have the most impact on overall performance. An experienced, reputable consultant will have the industry knowledge to optimize a solution for the unique needs of the business and analyze the tipping points to ensure that the solution provides flexibility for the future.

It’s always been about achieving a balance between cost and service, but today’s operators must also consider the risk that labor may not be available, or too costly to sustain margins. More than ever distribution operations must be built for flexibility as the industry continues to evolve and the future comes into focus. New technologies are available today that reduce risk, increase flexibility and are cost-justified. With the right strategy and knowledge, labor challenges can be turned into opportunities for competitive advantage.

Here are some examples of real-world distribution center labor challenges:

A wholesale distributor with a DC that relied heavily on manual labor built a new facility. Rather than going with full automation, the new facility made minimal use of automation, incorporating basic technologies like AGVs, a shipping sorter, and engineered pick modules to produce the same output as the old facility with 33 percent of the previous workforce.
A large omnichannel brand apparel owner hired and trained 200 temporary workers to handle peak, starting on Labor Day weekend. The problem: 25 percent of the new hires didn’t show up, forcing managers to scramble to meet demands with insufficient labor.
A specialty retailer foreseeing that labor availability would continue to decline, impacting DC operations, is designing its newest DC for full automation.

The Business Case for Automation

Demographic trends indicate further decrease in the available labor pool.
Rising health care costs and competition for workers continue to increase labor costs.
Automation can increase productivity without increasing head count.
Technology drives greater accuracy and reduces human errors.
More efficient operations enable shorter order cycle times and later cut-off times.
Technology makes training new associates easier — reducing training cost and time to value.
The cost of technology is trending down.
Newer technologies are available that enable flexibility for an uncertain future.

Click here to download the report

Resource Link:
Fortna

Monday, January 29, 2018

How Fleets Are Looking to Outsource Maintenance and Repairs

January 2018, TruckingInfo.com - Feature

by Denise Rondini, Aftermarket Contributing Editor - Also by this author

**Gerry Mead, center, former Senior VP of Maintenance for U.S. Xpress and now with Phillips Industries, was on a panel on Meeting the Parts and Service Needs of Today's Fleet.** *Photo courtesy Today's Trucking*

Data from MacKay & Company consistently shows that fleets say they want to outsource more of their maintenance and repair, but continue to do much of it in-house as they try to find service providers that can meet their needs.

Outsourcing was the first issue discussed by a panel of fleet executives at the recent Heavy Duty Aftermarket Dialogue in Las Vegas. Gerry Mead, former senior vice president of maintenance at U.S. Xpress and current executive director of innovation at Phillips Industries, said when he was with U.S. Xpress his philosophy was “no on loves your fleet like you do.” When the fleet went outside for maintenance it used dedicated shops that had to meet certain qualifications. To help with utilization, U.S. Xpress, scheduled all needed PM services at the same time and tried to schedule PM service on drivers’ home time.

To help manage the technician shortage the fleet works with schools and the armed forces and has also developed mentorship and in-house certification programs. It also invested in training for management. “Most people quit because of bad management,” Mead said, “so we focused on management so they know how to lead.”

Advanced Disposal does all the maintenance and repair on its fleets in-house except for major overhauls at its 90 shops in 16 states. Brian Beaudrie, vice president of corporate maintenance, acknowledges that retaining and training technicians is an issue. Advanced Disposal solution is to create a team environment in its operation based on the philosophy that “it’s easy to quit a job but hard to quit a team.” Part of the effort of creating a team means techs provide input on service-related issues.

Ernie Sibbick, maintenance supervisor at Keith Hall & Sons Transport, LTD., said all maintenance for his fleet is handled in-house except for rebuilding. “We operate expensive trailers which we keep them for a long and rebuild them when we can,” he said.

Chris Trajkovski, vice president of transportation for C&S Wholesale Grocers, said his fleet handles 70% of its maintenance and repair in-house, but said there is no one right model. He suggests fleets determine their own scale for maintenance and repair by looking at the labor environment, real estate and infrastructure. Trajkovski has had to get creative with its shop scheduling because for his operation. “It makes no sense to have techs in for the first shift because that is the time the trucks leave for their routes.” He has also taken technicians who are in their twilight of their career and moved them into the fleet service center, which handles breakdown services. “We use their expertise to troubleshoot without having to dispatch a service vendor.” C&S also cross trains technicians in the shop with the technicians who maintain the refrigeration and robotics in its warehouses.

The fleet panel was also asked how they determine what to spec and more specifically if they thought the industry was at a tipping point when it comes to air disc brakes. Trajkovski said C&S has been all air disc since 2016 and Beaudrie expects Advanced Disposal to have moved the whole fleet to disc brakes by the end of this year. Mead said for safety reasons and to meet reduced stopping distance requirements, air disc brakes are the right choice. He said, “It is tough to put an ROI on avoiding an accident but avoiding even one accident pays for the investment in ADBs. They also are easier to maintain, quicker to replace and easier to understand.”

The fleet managers also weighed in on what are the most important features they look for when choosing replacement parts. Beaudrie said he looks at value and quality, but “safety is our number one factor. We cannot gamble on inferior parts. Name brand is important when it comes to replacement parts.”

For Mead it comes down to relationships. “When you have a relationship you know the parts will be there. Replacement parts are a piece of the equipment buying discussion. It is about both price and availability. You also have to consider resale value.” Mead said if he had to rank the factors it would be relationship, availability, quality, and price.

Beaudrie reminded the audience that, “there are two parties to every transaction and it is critical to building a strong relationship to make sure both parties are doing what they need to do.”

Finally the fleet managers talked about where they are on the adoption curve for new technology. Mead said U.S. Xpress likes to “lead from the front. You never know when a big game changer will come on the market. Sometimes we go all in and sometimes we don’t. We are on the cutting edge, but not the bleeding edge.”

Beaudrie said Advanced Disposal takes the opposite approach. “We take a back seat approach and wait to see if the technology will succeed or fail.”

Trajkovski said, “Your vendors and suppliers need to know your operations and your appetite for risk then they will be a funnel for the new technologies. I have seen some successes with fleets being on the leading edge, but I have also seen some epic failure. You have to understand how to balance risk.”

Sunday, January 28, 2018

Moving from push to pull: demand-driven supply chain management

Date : 23 January 2018

In this blog we talk to Simon Eagle and Ankur Bhandari, Partners at CAMELOT Management Consultants about the latest developments in Demand-Driven Supply Chain Management (DDSCM)

IGD: How do you see the food and grocery industry developing in the future?

Camelot: We’re seeing an increasing number of players and an increasingly competitive environment, with all involved looking to grow market share and drive down costs while at the same time dealing with the complexity and implications of distribution channel disaggregation. The market is also becoming increasingly globalised and we are seeing growing demand volatility driven by high promotion intensity, social media, price-sensitive consumers and fast-changing consumer loyalties.

Market volatility is being reflected in shorter life cycles and more volatile demand patterns, both of which are complicated by the longer lead times associated with increasing global trade. On the retailer side, the emergence of low-cost retailers with, ironically, smaller ranges of product have had an impact in recent years, establishing a significant and growing market share across Europe.

IGD: How would you define demand-driven supply chain management and how does it differ from traditional methods?

Camelot: One of the easiest ways to understand demand–driven is to contrast it with methods used by industry right now. Traditionally, manufacturers start by taking a forecast of what they think will sell, compare that with what’s in stock and future planned production, then plan to make the difference to achieve a so-called ‘safety stock’. Whenever the future inventory balance is predicted to miss the ’safety stock’ level, the planner is messaged to change the supply schedule.

Because demand forecasts are always incorrect, and getting worse in today’s volatile markets, companies are inevitably making the wrong product at the wrong time in the wrong quantities. This explains why supply chains are characterized by substantial amounts of expediting and schedule interruptions, as attempts are made to prevent service failures. These forecast-driven supply chains are always in a position of excessive or not enough stock. The continuous disruption of the schedules makes things worse by using unplanned capacity that increases costs and contributes further to excessive, unbalanced stock levels, and longer lead times.

Instead, supply chains should be about flow, allowing materials and products to move continuously to the customer without interruption. Supply chains should therefore be demand driven, predominantly making what has been sold rather than making what is estimated might sell. To do this, you set up strategic decoupled stock positions for all your items across the supply chain. These would be as finished goods, raw materials and maybe also at a disaggregation point in the factory, this could include a KANBAN style replenishment process in a factory for example.

The target stock levels are calculated using the daily forecast average over, say, the next three to six months. Then, the average demand over the replenishment cycle and lead time, plus a calculation for error, is aggregated to work out the target stock level for on-hand and on-order inventory.

Actual supply execution across a range of items then follows a pre-determined cycle and sequence and only what has been sold of each product is replenished. This allows for a stable, uninterrupted and efficient supply cycle. If the stock targets have been set correctly, such a process will successfully service base demand volumes and variability without need for any expediting and interventions. It means that planners can focus on real value-adding activities such as maintaining accurate stock targets and actively managing the exceptional and extreme demand events that are outside of base demand.

IGD: What are the benefits?

Camelot: The decoupled and demand-driven supply chain can deliver planned service levels with significantly better capacity utilisation, no fire-fighting, much shorter lead times, and the correct, lower level of stock. Companies that adopt the demand-driven approach have been able to reduce their stock levels by up to 50%.

Some businesses may think that their demand patterns are just too volatile for this approach to work. However, if you have consistently high volatility, then the average and standard error is still valid, so this approach will still be effective. You’ll obviously be holding more stock than if demand was less volatile, but the key benefit is that you won’t be disrupting supply operations with expediting and fire-fighting as you would if you were trying to be forecast driven.

IGD: What are the barriers that exist?

Traditional manufacturing resource planning (MRP) systems have not been compatible with this methodology. With demand-driven, each inventory point is decoupled from the rest of the supply chain, whereas MRP has always been based upon fully dependent demand. Therefore, it has proved exceptionally difficult to embed into legacy systems.

In recent years, many businesses have attempted to use spread-sheet-based demand-driven supply chain management which has worked on a small scale but is not a sustainable and scalable way of working across large and complex supply chains.

The emergence of ‘Software as a Service’ (SaaS) has allowed Camelot to enhance MRP systems to implement a robust enterprise-wide demand-driven process. So now this technical barrier has disappeared, companies can take their current systems, ‘add in’ the enhancement and begin making changes immediately.

A more significant barrier to adoption of demand-driven is perhaps conservatism amongst manufacturing companies. Despite the fact that demand-driven is really just a software-enabled lean pull approach with event management, the change is almost too large for some companies to comprehend. Paradigm shifts need a concerted change management effort to roll out, and some businesses are afraid to be innovators. But we are rapidly moving through this early adopter phase as some major FMCG companies are now trialling this approach, so we envisage a considerable acceleration in uptake over the next few years.

One of the advantages of using Software as a Service is that it allows for demand-driven simulations to be run, using a manufacturer’s demand data and parameters to quantify the benefits. So no leap of faith is necessary and subsequent small-scale pilots are feasible allowing for an incremental roll out.

IGD: Thanks for your time, to summarise, what does the future of demand-driven supply chains look like to you?

Camelot: Going into 2018/19 we are already seeing many companies, particularly in the FMCG industry, beginning to trial demand-driven. SAP’s announcement, with Camelot, that they are also supporting adoption of DDMRP through their new software releases has also helped in raising awareness and brought it into the mainstream.

This can be a genuinely transformational way of working, requiring a degree of ambition and appetite for change, along with senior level sponsorship. Those companies that adopt this approach early will undoubtedly be able to secure a competitive advantage.

The Store Of The Future

Forbes Technology Council

Elite CIOs, CTOs & execs offer firsthand insights on tech & business. Opinions expressed by Forbes Contributors are their own.

POST WRITTEN BY

Beck Besecker

Co-founder and CEO of Marxent, the leader in virtual reality and augmented reality for homes, furniture and spaces.

Beck Besecker , Forbes Councils

Shutterstock

Over the past few decades, there’s been a tremendous cultural shift in how we live, work and shop. Local retail has remained dominant through this period, though the future of the in-store experience won’t look like anything you grew up with.

Doubt it? Don’t. I’ve worked closely with major retailers such as Tesco, Target, Safeway and Macy’s. Know that while they are facing enormous challenges, they have very smart people now building the future of retail. One thing is collectively true: These businesses are wholly aware that Amazon is eyeing what's theirs and that what worked yesterday probably won’t work tomorrow. They are motivated to embrace change and flow with their customers -- which is good since their customers are changing, too.

According to data from the Pew Research Center, dual-income households with young children in the U.S. have become more commonplace over the past six decades, going from 25% in 1960 to 60% in 2012. We have constant access to entertainment and communication through smartphones and the internet while real estate development trends are leaning away from bedroom communities and toward new urbanism and gentrification. At least 40% of working moms who work full time feel rushed all the time -- and they also believe they spend too little time with their kids -- according to a different study by the Pew Research Center.

All that said, most shopping still happens in a store. It’s easy to forget that while Amazon is the undisputed leader in online shopping, it doesn't crack the top five when you look at the whole retail pie. There is a vibrant future for local retail that accounts for changing consumer habits that favor convenience, experience and personalization. Such a store will feature these three characteristics:

1. Indispensable

Personal shopping and design services have always been a tenet of high-end shopping. With advancements in logistics and next-day delivery possible, in-store retail is naturally becoming less about inventory and more about providing intermediary and indispensable, location-based services that result in sales, craft relationships with customers and capture new data.

Think Best Buy using Geek Squad to support local customers who make new tech purchases or how Macy's 3-D room-planning service and VR furniture showroom can be used to help consumers build confidence in major household purchases. Nordstrom’s acquisition of Trunk Club and Walmart’s acquisition of Bonobos also nod to a future of service-oriented retail that scale to the mass market. Stitch Fix and Laurel and Wolf have used technology to bring personalized purchase-planning services to a mass-market audience, and now more traditional retailers are taking note by reimagining the in-store experience to lead with services.

2. Small

Retailers are exploring smaller store formats, in many cases making up for lost square footage with digitally integrated experiences. A couple years ago, Macy's announced it planned to open four Macy’s Backstage stores in New York, all of which are smaller than a typical full-service Macy’s department store at an average of about 30,000 square feet. In October, Target opened its 55th small-format store (across from Macy’s flagship New York City store, no less), which is designed to maximize shopper efficiency. It’s a strategy that Target CEO Brian Cornell touted as driving twice the sales per square foot of a regular store.

There are plenty of other examples: Tesla eschewed the traditional dealership model in favor of small retail storefronts. Warby Parker stores average 1,613 square feet, and it opened its Tampa, Florida, store inside a bookstore. Dollar General has been experimenting with smaller stores that will work in densely populated urban areas.

Emerging technologies combined with a reimagining of the customer journey is allowing retailers to slim down, stay relevant and sell more. Size matters -- and small is where retail is headed.

3. Inspirational

Brick-and-mortar retail has always been about the fantasy of what is possible, and that inspirational experience remains at the root of modern retail. In an age where shoppers can buy almost anything online and have it delivered within hours, the public still heads to Ikea: Nearly 25 million consumers spent money there in spring of 2017. And people head to Walmart and Target in droves: 84% of U.S. consumers spent money at Target last year and 95% spent at Walmart. Why?

The answer is novelty, inspiration and entertainment.

Emerging retail formats will further blur the line between shopping and entertainment -- so much so that the customer may lose sight of the fact that they are in a store. Take the Ikea shopping experience, which is designed to help people imagine Ikea products as part of their day-to-day lives. Ikea doesn’t just sell furniture -- it sells a lifestyle, and its stores are set up to entice customers to adopt the Ikea way of thinking.

There’s also an endless string of buying clubs, loyalty programs and in-store treasure-hunt-style incentives meant to lure shoppers off the couch -- many of which are now getting high-tech augmented reality upgrades. Digital natives are happy to buy products online sight unseen, but they are also in pursuit of novel and inspiring experiences that provide them with personalized insights and information that reflect their tastes and values.

Shopping Has A Bright Future

So don’t despair. This is a time for optimism. The nature of retail is changing, sure, but the brands that are responsive to how people actually want to shop will soon win the next generation of consumers. And that’s as exciting as it gets.