IHL Group President, Greg Buzek Shares His Thoughts on the Future of Retail
Expert Panel

IHL Group President, Greg Buzek Shares His Thoughts on the Future of Retail

Apr 09, 2020

This article is part of Raydiant’s new Future of Retail series which interviews the world’s leading retail experts to better understand how the industry has evolved and most importantly, where it’s headed. 

The following is from an interview with Greg Buzek, founder and President of IHL Group

**This interview was conducted prior to the Coronavirus outbreak**

What personally excites you the most about the retail industry?  

GB: Right now the most exciting part of retail right now is the rate of change and the influx of new concepts, new delivery methods and how retailers are now looking at IT as a technical advantage. The days of stack ‘em high and watch them fly is over.  Retailers need to have skills beyond just basic merchandising and supply chain prowess. It is moving more towards customer service and meeting the consumer’s needs however they want to shop. 

What has been the most dramatic change you’ve seen in the industry over the past 3-5 years?  

GB: Really the speed in which we have seen a separation of the Haves and Have Nots in retail.  We have heard a great deal of how parts of the population have been left behind in the digital transformation of jobs. The same is true in retail, particularly around technology Haves and Have Nots.  There was a group of retailers that saw Amazon’s retail business go profitable in the 3rd quarter of 2015 and the light bulb went off that the game had changed.  No longer would 1.5% of revenue suffice for IT spending. Instead, strategic investment in merging channels, optimizing processes and systems, and new technologies to combine both the store and digital offerings together was made for about 1/3rd of major retailers.  Those retailers are racing ahead in profitability compared to others who dragged their heals.  And sadly, those who stayed with the old formula couldn’t compete and many have gone out of business.

What are the top trends you see shaping brick and mortar retail in the next 3-5 years?  

GB: The two biggest trends are the optimizing of the store fulfillment of digital orders.  Click and Collect grew at 48% in 2019 and is growing even faster now in lieu of the coronavirus fears. But most retailers are losing 3-8% of margin on the numerous digital channels that have store fulfillment because the processes are not optimized.  This is an essential need for most retailers to get Click and Collect, Returns, Ship from Store and Local Delivery technologies and processes optimized. Then second, the need to move to accurate inventory levels. This has been a huge problem worldwide for quite some time. The difference between system counts and actual inventories can be off as much as 25%. That could work when shoppers came into stores and had many replacement options if something was out of stock. But with Click and Collect, if it is out of stock it has to be substituted or cancelled. That causes a real dilemma for retailers as they often either lose margin or lose the customers.

What technology do you believe will have the biggest impact on the retail industry in the next 3-5?  

GB: Two big areas will be RFID and Computer Vision to get to accurate counts of inventory, then once that data is clean and accurate, the application of AI/ML technologies on that data to optimize forecasting and replenishment.  There is a race among retailers like Walmart, Target, Kroger, and others for these technologies. We talked earlier about the spread of Haves and Have Nots in retail and technology. Once AI/ML can be applied to accurate inventory data, it is game over.  These retailers will move ahead in profitability as if they have rocket fuel compared to others.

What’s the future of brick and mortar retail?  

GB: Stores will be experience centers for many items and localized fulfillment centers for digital orders.  People still like to choose their own fresh items for groceries. I project we will see stores that will be quite different. There will be fewer stores as usual, those stores will have smaller show space but split their operations to support shipping, click and collect, and other options. This will even further mean that the more limited selection is accurate in quantities.

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