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Has the improvement in high street retail logistics made us all more loyal customers?

| January 20, 2017

Introduction

To most businesses, the main objective is to make profit for the shareholders and satisfy the needs and interests of all the other stakeholders in the business. However, profit making is gradually getting more difficult as the liberalisation of markets has led to massive competition in most industries (Kumar et al., 2013). Consequently, companies have had to evolve in order to remain competitive and achieve their goals and objectives both in the short-term and in the long-term. One of the means commonly used by companies to ensure sustainable profitability is through capturing the loyalty of customers. The more loyal the customers are, the more businesses get recurring income and reduce the costs of doing business (Pepe et al., 2011). The retail stores in High St have been in the process of improving its services to their clients and the general public. This is with the aim of improving the levels of customer loyalty and thus increasing sales (Alessandra, 2007). This paper explores the logistical improvements that have been made by high street retail companies to make their service to customers more effective. It seeks to establish if those improvements have related to customer loyalty to the company and to the brand. This will be achieved through the critical analysis of the supply chain and the detailed evaluation of the systems employed in relation to the benefits gained by High Street Logistics in its business.

Findings and Analysis on High Street Retail Logistics

Agrawal and Smith (2009) define retail logistics as the flow of goods from the suppliers to the stores and then to consumers. There is a specific logistical model through which this flow is managed to ensure efficiency and cost effectiveness in the process of doing business. The level of competition in high street retail is very high and all companies need to have a competitive advantage in order to be able to survive and thrive in the industry (Bruce & Daly, 2011). As such, there is need for companies to evolve and adapt to the latest trends so as to continue being profitable. Customer loyalty is critical in the performance of retail stores globally. The cost of retaining customers is far much cheaper than that of acquiring new customers thus reducing the cost of doing business for an organisation (Chan & Ip, 2011). The other advantage that is derived from customer loyalty is that the loyal customers will help in the marketing process of the brand name (Alessandra, 2007). Statistics from McKinsey.com (2013) indicate that more people tend to use brands, products or services that have been recommended by people that they know. Thus, such references can only be made by customers who are loyal to the company or brand. To make the customers loyal, retail stores have come up with incentives to entice their clients to continue shopping with them (Lawfer, 2004). Such incentives have involved logistical changes which have improved over the years and part of such an improvement is multichannel retailing. This section intends to address some of these logistical improvements that have been made by high street retail stores.

Multichannel Retailing

Within the last decade, there has been a shift of retail logistics principles from the traditional modules to the multichannel retailing (Waters, 2010). This evolution has been facilitated and necessitated by technological advancement, the rise and expansion of the internet, and change in purchasing habits. Convenience for the customers has been the primary focus in the evolution of the logistical processes where the needs and wants of the clients are met through all means possible (El-Manstrly et al., 2011). The level of logistical improvements by companies is dependent on how forward thinking the companies are. The future oriented companies have put in place measures in its logistical process to ensure that needs of their techno savvy clients are met in the best way possible (Agrawal & Smith, 2009). As a major improvement in the retail logistics in high street retailing, multichannel retailing is termed to be customer centric and transformative to the manner in which the both customers and the retailers relate (Miller, 2012). The process starts with research of the tastes and preferences of the consumers even before the products are stoked. The emerging trends of the market are also monitored and scientific analysis conducted to ensure that the company is able to predict the needs of the customer (Poloian, 2009). The anticipation of what the customers need has been able to help in satisfying the needs of the customers better and more effectively thus creating a perfect relationship between the company and the customers. This in turn fosters customer loyalty to the highest levels (El-Manstrly et al., 2011).

Multichannel retailing involves the use of multiple channels to facilitate trade and other transactions, which include after sale service to existing and potential clients, browsing for the desired goods and services, purchase of the goods and services, returning of faulty goods and post sale services to the clients (Poloian, 2009). Based on the channels that a company uses to make sales, the logistics of the retail company are customised to suit the clientele and the goals/objectives of the company. For instance, Argos only used to sell to their clients through their retail stores. However, there was need to develop an online presence in order to be as competitive as companies such as Wal-Mart (Miller, 2012). As a result, the company started an online store which has turned out to be very effective and profitable. Customers prefer the online store as they can window shop without much hustle and get better prices for the goods and services that they need (Pearson, 2012; Grewal et al., 2011). The online stores also created a need for delivery systems to be part of the logistics package. The goods that have been purchased by the clients are delivered to their door steps for their convenience. Multichannel retailing has contributed towards increasing customer loyalty because regardless of what could be termed as an inconvenience to make a purchase via one channel, there is always an alternative. As such, customer needs are catered for in a better manner, which also increases loyalty (Bruce & Daly, 2011). Even though researchers have established that multichannel retailing is highly beneficial for customers, the fact that customers are always looking for better deals – especially when shopping online – makes it challenging for a single business or brand to maintain certain loyal customers. This is especially when other brands are also trying to attract the same customers (Pearson, 2012).

Data Mining

Data mining has been one of the most conspicuous forms of improvement in the retail logistics that has been experienced in high street retailing. It is conducted by companies by reviewing the shopping trends of their clients and enables them to make predictions on the types of products or service that will be needed by their clients (Kantardzic, 2011). For instance, a company can check on its online stores which goods have been purchased most and by what category of their customers for instance, the products could have been purchased by female customers with young children and from a specific region of the country or part of the city (Linoff & Berry, 2011). By possessing this data, the store can be able to stock the product for an anticipated need or to maximize on the profitability of the product. The same case applies to seasonal products which need strategic stocking for limited resources not to be wasted (Phan & Vogel, 2010).

Clipper, the leading retail and high value logistics company in the United Kingdom investigated the changes taking place in the retail logistic that are taking place in high street retailers presently and that are anticipated in the near future (Clipper Logistics, 2013). The company notes that in today’s ever changing world, high street retailers cannot afford to lack creativity and innovativeness the way that they do business (Clipper Logistics, 2013). Thus, it is necessary for companies to formulate strategies that will give them a competitive edge over their competitors. In some cases, however, companies have been sued for mining client data through unauthorised means (Kantardzic, 2011). Whereas data mining is intended to provide more customized customer services that will increase customer loyalty, such incidents are detrimental to the achievement of this objective. For companies that use the appropriate means to mine data and provide services tailored to meet the needs of clients, there is a definite potential of increased customer loyalty (Linoff & Berry, 2011).

Other Logistical Improvements

Many retail logistics companies offer a full redesign of a company’s logistics system, which includes fully automated or semi-automated warehousing systems which run most the retail channels for their clients (Agrawal & Smith, 2009). The other service that is offered is inventory management for the purposes of improving the shelf availability of the products and services. Distribution to clients and dealing with suppliers is another role that has been taken over by retail logistics companies as service providers (Poloian, 2009). Most of the high street retailers have outsourced these services while others have decided to have an in-built system but seek the consultancy services of retail logistics companies. No matter the approach taken, the main aim is to improve on service delivery, reducing the costs of doing business and ensuring that the customers’ needs are met (Bruce & Daly, 2011). Many high street retailers also have follow-up surveys to ensure that the quality of customer service is up to the required standards. With the current level of internet accessibility among consumers, if feedback is not collected from the clients directly, it is received on social media platforms where most clients air there grievance (McKinsey.com, 2013). To avoid such situations, logistics of retail high street retailers have undergone several improvements to ensure prompt and adequate communication with customers (Phan & Vogel, 2010;Grewal et al., 2011). All these improvements that have been made by companies have been done with the aim of increasing customer satisfaction as well as improving their competitive edges (McKinsey.com, 2013). This has also led to an increase in customer loyalty for high-street retailers.

Conclusion

All businesses have to evolve at one point or another in order to remain relevant in the business world. High street is no different from other competitive markets for retail business and most companies have come up with ways and means to ensure that their retail logistics are up to the latest standards and that all the customers are satisfied. Improvements in the logistical processes, such as the delivery of goods, e-commerce through mobile applications and online store and the innovation in new channels for retail, have played a great role in customer satisfaction. Customer satisfaction in turn translates into more sales for the company and most importantly it translates to customer loyalty. The level of customer loyalty has been enhanced through the new services that have been brought about by the improvement in the logistics of these companies. However, the fact that some logistical developments require a lot of customer information has raised some scepticism among several customers. Based on technological advancement, the level of competition in the market and the changing consumer needs, more changes and improvements are still expected.

Recommendations

Although much has been done in the retail logistics sectors, there is still more to be done through technological advancement. Application of artificial intelligence to the logistical process is recommended for the retail stores to serve the purposes of automating processes and making predictions of future consumer trends with higher accuracy (Bodhani, 2012). The use of artificial intelligence will not only raise the integrity of the companies and the transactions in which they are involved, but will also aid in fully satisfying the needs of the customers even without the mentioning of the needs by the clients (Phan & Vogel, 2010). Such high quality services will lead to customer loyalty and thus profitability of the high street retail stores. One of the limitations of this recommendation, however, is the fact that it needs a lot of financial capital to implement.

References

Agrawal, N. M., & Smith, S. A. (2009). Retail supply chain management quantitative models and empirical studies. New York: Springer.

Alessandra, A. J. (2007). Stairs of customer loyalty. New Jersey: Electronic & Database Publishers.

Bodhani, A. (2012). Shops offer the e-tail experience. Engineering & Technology, 7 (5), 46-49.

Bruce, M., & Daly, L. (2011). Adding value: challenges for UK apparel supply chain management–a review. Production Planning & Control, 22 (3), 210-220.

Chan, S. L., & Ip, W. H. (2011). A dynamic decision support system to predict the value of customer for new product development. Decision Support Systems, 52 (1), 178-188.

Clipper Logistics. (2013). Evolution vs Revolution. ‘Death of the High Street? Retrieved July 18, 2014, from http://www.clippergroup.co.uk/wp-content/uploads/2012/10/Future-Forum-Conference-Brochure.indd-2.pdf

El-Manstrly, D., Paton, R., Veloutsou, C., & Moutinho, L. (2011). An empirical investigation of the relative effect of trust and switching costs on service loyalty in the UK retail banking industry. Journal of Financial Services Marketing, 16 (2), 101-110.

Grewal, D., Hall, K., & Robertson, J. R. (2011). Innovations in retail pricing and promotions. Journal of Retailing, 87, 543-552.

Kantardzic, M. (2011). Data mining: concepts, models, methods, and algorithms. New Jersey: John Wiley & Sons.

Kumar, V., Sharma, A., Shah, R., & Rajan, B. (2013). Establishing profitable customer loyalty for multinational companies in the emerging economies: a conceptual framework. Journal of International Marketing, 21 (1), 57-80.

Lawfer, M. R. (2004). Why customers come back how to create lasting customer loyalty. Franklin Lakes, NJ: Career Press.

Linoff, G. S., & Berry, M. J. (2011). Data mining techniques: for marketing, sales, and customer relationship management. London: John Wiley & Sons.

McKinsey.com. (2013). Reorganizing to build customer loyalty. Retrieved July 18, 2014, from http://www.mckinsey.com/client_service/organization/case_studies/improving_on_success

Miller, J. (2012). Preparing the High Street for online shopping. Journal of Urban Regeneration and Renewal, 6 (2), 122-130.

Pearson, B. (2012). The loyalty leap: turning customer information into customer intimacy. New York: Penguin Publishers.

Pepe, M. S., Abratt, R., & Dion, P. (2011). The impact of private label brands on customer loyalty and product category profitability. Journal of Product & Brand Management, 20 (1), 27-36.

Phan, D. D., & Vogel, D. R. (2010). A model of customer relationship management and business intelligence systems for catalogue and online retailers. Information & Management, 47 (2), 69-77.

Poloian, L. G. (2009). Multichannel retailing. New York: Fairchild Books.
Waters, C. D. (2010). Global logistics new directions in supply chain management. London: Kogan Page.

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