Loss Prevention Research Council Weekly Series - Episode 155 - Back-to-School and Accelerated Digital Transformation
With Dr. Read Hayes, Tony D'Onofrio, and Tom Meehan
Back to School Spending to Tumble 10%: Deloitte
https://www.retaildive.com/news/back-to-school-shopping-spending-declines-ten-percent/686653/
Let me start this week with some back news on projections for USA back to school spending as reported by Retail Dive.
- According to research conducted by Deloitte, families with students in kindergarten through 12th grade will spend 10% less on back-to-schoolitems, for an average of $597 per child. Spending for the season will reach $31.2 billion.
- Nearly 70% of parents will spend the same or less than last year, and over half of those that are spending less cited lower disposable income. With discounts in mind, 80% of back-to-school shoppers favor mass merchants, 60% look online and 33% favor off-price retailers and dollar stores, Deloitte found.
- Spending on traditional school supplies is up 20%, but down 14% for apparel and down 13% for technology, per the report. Still, nearly six in 10 parents “are willing to splurge on better quality products or to treat their child” when it comes to apparel and technology.
Inflation overshadows Deloitte’s results this year, though the monthly Consumer Price Index report for June from the U.S. Bureau of Labor Statistics, released Wednesday, registered inflation at 3%, the lowest rate since March 2021.
Deloitte researchers cite that index in noting a 23.7% increase in the cost of school supplies in the past two years; on Wednesday, according to the government’s June report, the CPI for educational books and supplies fell 2.7% year over year.
Wonder if this forecasts any challenges with retail for the upcoming holiday season?
The Rise of the Faster Smarter Machines Continues
https://www.linkedin.com/pulse/rise-faster-smarter-machines-continues-tony-d-onofrio
Switching topics, let me summarize my latest article that I just published across multiple platforms titled “The Rise of the Faster Smarter Machines Continues”.
As I wrote in that article, the two hottest buzz words in all industries these days seems to be ‘digital transformation’. Linking these words was actually an evolutionary process that started in the 1970s when computer-aided designs and manufacturing were first used in business. In the 1980s enterprise resource planning was added, followed by customer relationship management in the 1990s.
The objective of these solutions was to improve efficiency and productivity by digitizing manual processes. The machines and software driving digital transformation are getting faster and smarter. The pace of change is accelerating. Survival as a company requires intensive focus on increased digital connectivity with consumers and markets.
Some interesting statistics of the increased digitized world:
- 70% of organizations either have a digital transformation strategy or are currently working on one.
- Global spending on digital transformation is expected to reach $6.8 trillion by 2023.
- 87% of business leaders think that digital transformation will disrupt their industries.
- Digitally mature companies are 23% more profitable than their less mature peers.
- The success rate of digital transformation is below 30%.
I have been tracking these trends for some time and I have actually defined three megatrends that the retail industry has transitioned through, driven by technology. Post World War II, efficient production lines concentrated the power of retailing in the hands of manufacturers. This changed in the 1970s with the introduction of the barcode.
On June 26, 1974, at 8:01 AM, a 10-pack of Wrigley Juicy Fruit bubble-gum was the first item scanned with a barcode at a Marsh Supermarket in Troy, Ohio. Those simple black lines which became ubiquitous on all consumer packages shifted the power of retail into the hands of retailers.
The third megatrend occurred on June 29, 2007 with the market release of Apple’s iPhone. The Wall Street Journal lauded the device on balance as a beautiful breakthrough handheld computer. Time Magazine named it the Invention of the Year. The true reality is that the smartphone shifted the power of retail into the hands of consumers.
Innovation is not isolated to the retail industry. Long waves of technology changes have been taking place since the industrial revolution. We are currently in the sixth wave which includes artificial intelligence, Internet-of-Things, robots & drones, and clean technologies. Note that the length of each wave is getting shorter.
The Forces Speeding Up Innovation
Two major forces have been speeding up innovation in recent years. The global Internet and smarter mobile devices are connecting the majority of the world’s population. Through mobile devices, by 2030, 64% of the global population will have access to the Internet. A major opportunity for brands and retailers is that 92% of those connections will be on smartphones.
As technology has evolved, it is not just people but all devices that are being connected to the Internet. We have labeled this concept as the Internet-of-Things or IoT with many billions of connections still to come.
The pace at which new technologies are being adopted is accelerating. It took the airplane 68 years to reach 50 million users while Pokémon Go did it in 19 days. ChatGPT achieved 1 million users in 5 days and two months later had 100 million. Threads which is the competitor to Twitter just released by Meta reached 1 million users in one hour and 100 million users in a stupefying 5 days.
As I concluded in the article, digital transformation trends will continue to accelerate. Retail is not THE leader in delivering impactful ROI from all the investments to date. The most impactful ROI from digital transformation is in manufacturing in the next 12 months with this sector reaching 79%. Retail is at 59%.
Success requires clear strategic planning, incremental investments that build on each other’s value, and never forgetting what made the core business successful in the first place. Reaching too far into far flung horizons of technology gets you close to that 30% failure that has a very poor return on investment.
Soon, I will unveil the 4th retail megatrend that will carry the retail industry forward to a much brighter future. As technology adoption has accelerated, the potential for costly mistakes has also increased.
Aristotle summarized it best. “Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny.”
