The Retail Operating Model of the Future “Handel ist Wandel” or “Change through Trade” German Saying
02 The Retail Operating Model of the Future
Why are we talking about a new operating model? 04
The retail operating model of the future 08
Recommendations for actions 20
03 Why are we talking about a new operating model?
Retail is constant change.
04 The Retail Operating Model of the Future
Increasing pressure on retailers Four factors are driving the retail evolution: changing customer needs, market dynamics, workforce availability and new technologies.
u to er Mar et The customer mindset has With customers demanding lower changed significantly over prices, the pressure is growing; the past years: focus is on the result is increasing new aspects. consolidation among retailers.
Retailer
hange i the ne para dig retailer need to Te hnologie or for e New technologies are arising adapt to urrent trend to New employee generations like in ever smaller intervals; eep a eat at the ta le the “Millennials” transform increasing importance of expectations regarding working attracting customers and conditions. managing companies.
05 Key questions for retailers In existing trends and developments, retail- ers have to ask themselves some strategic questions with regard to their future way of operating – our survey helps to answer those for the future.
How do I need to set re my current Do I need other up my organization steering mechanisms employee skills and processes to be the right ones to going forward and future-ready – navigate through how do I become will tasks stay the new business attractive to same? models? top talents?
eloitte uropean ur e on future retail operating odel
06 The Retail Operating Model of the Future
How do I need to set re my current Do I need other up my organization steering mechanisms employee skills and processes to be the right ones to going forward and future-ready – navigate through how do I become will tasks stay the new business attractive to same? models? top talents?
eloitte uropean ur e on future retail operating odel
07 The retail operating model of the future
How do retailers have to change in the next five years to successfully match digital strategies & business models.
08 The Retail Operating Model of the Future
The operating model – “Adaptation Pyramid” The operating model enables business their strategies and are changing business models and strategies by ensuring their models, while the change of the operating successful execution: retailers have adapted models is mostly missing.
Trend
• Definition of future direction, its corresponding objectives and necessary actions. • Status quo: retailers have recognized the need for change and have adapted their strategy. trateg
• Description of how the company captures value by using, for example, business model canvas. • Status quo: retailers have started to align business u ine Model models and are working on this process.
• Definition of actions to follow business model: „How do we run the company best?“ • Status quo: only few retailer have started to Operating Model consider the high need for action.
• Definition of investments, costs and sales to determine the precise impact on business. u ine a e
09 The Operating Model – Dimension overview We define the operating model along the dimensions of “Behave”, “Organize” and “Execute”.
eha e Organi e Organi e ho did e inter ie hat did e a European retailers and retail experts Elements to assess status and future from four different sectors. of retail operating models.
t ct e o e nance a a ilities Tasks
e ute Grocery Status quo
Consumer electronics Future importance udgeting ro e e Tool
Increased speed within Cross-functional Employee training for smooth Definition of new KPIs metrics budget cycles i.e. with “rolling E2E-orientated e ute processes handling of necessary tools for success of whole organiza- geting ocesses ools s forecasts“ tion, i.e. for measurability of customer experience and innovations Drugstores Must-haves Higher flexibility in budget Process development from Centralization and standar- allocation process centralized center of dization of data with excellence relevant tools eha e pa t on alue hain
lanning tore Mar eting ogi ti Fulfillment fter ale pro ure ent operation ale DI Required actions
lt e ncenti es o lace
10 The Retail Operating Model of the Future
Deloitte Survey “New Operating Model” We asked European retailers about their perception on relevance and maturity re- garding the elements of the Operating Mod- el and have determined the “must-haves” for transformation towards a successful future.
ho did e inter ie hat did e a European retailers and retail experts Elements to assess status and future from four different sectors. of retail operating models.
Grocery Status quo
Consumer electronics Future importance
Drugstores Must-haves
DI Required actions
11 Status quo and future importance The results reveal differences between experts and retailers and clearly show which elements will have a future importance.
le ent Low e el High 1 2 3 4 5
Organizational structure
Governance system
Capabilities
Organi e Task designs
In many categories, experts see retailers as Project-based budgeting less mature as retailers see themselves Processes
Tools e ute KPIs
Overall, there is a mismatch between future importance Incentives and assessed status quo Culture
eha e Workplace
Status quo regarding element retailer view Status quo regarding element expert view Future importance regarding element
12 Source: Deloitte Retailer Operating Model for the Future Study 2019 Europe The Retail Operating Model of the Future
Operating Model gaps Comparing the status quo of retailers with the future importance of the Operating Model elements, we found eleven significant gaps within the current Operating Models.
Organi e e ute eha e
Silo structures instead of Low usage of “new” KPIs to Lack of flexibility with customer-centric organizatio- assess clients and innovations regard to work locations nal structures Lack of E2E-managed Need for open-minded Lack of joint definition and processes, steered from a employees as a basis for lifelong allocation of new job tasks (virtual) Center of Excellence learning
Lack of necessary skills as Low progress regarding Lack of focused model for well as ability to share centralization, standardization attracting the Millennial knowledge and usage of tools generation
Retailers do not own a lean Need for faster and flexible and fast governance structure planning and budgeting cycles
Source: Deloitte retailer operating model of the future study 2019 Europe 13 14 The Retail Operating Model of the Future
Organize – Must-haves & impact Retailers and experts assess that future or- with regard to ways of working and task ganizations need to become more customer design. centric, analytical and overall more flexible
tru ture o ernan e apa ilitie Ta
Focus on customer-centricity Fast, lean decision- Develop analytical and Increasing project-based making processes technological skills working & outsourcing of tasks Close and agile collaboration Iterative governance Increase knowledge sharing Standardization of tasks between functions instead system within company where possible of silos
pa t on alue hain
lanning tore Mar eting ogi ti Fulfillment fter ale pro ure ent operation ale
% = percentage of participants who value element as must-have within the next 5 years
Source: Deloitte retailer operating model of the future study 2019 Europe 15 Execute – Must-haves & impact In order to steer future business models successfully new processes, KPIs and tools will be needed.
udgeting ro e e Tool
Increased speed within Cross-functional Employee training for smooth Definition of new KPIs metrics budget cycles i.e. with “rolling E2E-orientated processes handling of necessary tools for success of whole organiza- forecasts“ tion, i.e. for measurability of customer experience and innovations Higher flexibility in budget Process development from Centralization and standar- allocation process centralized center of dization of data with excellence relevant tools
pa t on alue hain
lanning tore Mar eting ogi ti Fulfillment fter ale pro ure ent operation ale
% = percentage of participants who value element as must-have within the next 5 years
16 Source: Deloitte retailer operating model of the future study 2019 Europe The Retail Operating Model of the Future
Behave – Must-haves & impact In order to be able to attract and retain tal- ents with the needed skill-sets, more flexible work-models and incentive models need to be in place.
n enti e ulture or pla e
Detailed, regular Development of open-minded Implementation of flexible feedback cycles employees for lifelong learning basis workplace models Attraction through flexible Decrease in change Implementation of flexible work models, meaningful resistance to be able to workplace models work or work-life-balance adapt quickly
pa t on alue hain
lanning tore Mar eting ogi ti Fulfillment fter ale pro ure ent operation ale
% = percentage of participants who value element as must-have within the next 5 years
Source: Deloitte retailer operating model of the future study 2019 Europe 17 Retailers in comparison On average, most retailers have still a way to go to modernize their operating model – drugstores, however, already made many right steps.
ro er on u er rug tore ele troni Low Medium High Low Medium High Low Medium High Low Medium High Organi e e ute eha e
Strong centralization, Old structures, slow Rather agile, decentralized Partially strong efforts in learned how to manage governance and limited management, with strong digital area to foster complexity; however, only digital capabilities, partially customer orientation and customer experience, trying catching up slowly and customer-centric and good good control also due to i.e. to offset old structures and where necessary. control of backbone KPIs. simplified processes. slow governance.
18 Source: Deloitte retailer operating model of the future study 2019 Europe The Retail Operating Model of the Future
19 Recommendations for actions
How to prepare your retail organization for the future.
20 The Retail Operating Model of the Future
Actions to achieve the future operating model We recommend making eight adjustments to most retailers’ operating models to trans- form into a future-ready operating model.
in ″ ar for Talent ″ rea up old tru ture Develop flexible work models, Implement new, cross-functional good working environment and and decentralized structures. possibilities for training.
e ig data to auto ate ut the lient into fo u Standardize and automate easy lign all processes, structures and and repetitive tasks by using tools KPIs towards the client. and data. enue to the
n ure no ledge haring Operating peed eat planning Foster permanent exchange among Model Use fast and flexible planning, employees by using tools, training budgeting and decision-making and events. cycles.
Digitize to fix the basics Find our o n a Use digitalization as a tool to break up silos, dapt the operating model to the company’s improve backbone and speed up processes. heritage, strategy and business model.
21 Contacts
Egbert Wege Thorsten Zierlein Lead Partner | Retail, Wholesale & Distribution Lead Partner | Retail & Consumer Products Monitor Deloitte Monitor Deloitte Tel: +49 (0)40 32080 4596 Tel: +49 (0)89 29036 7202 [email protected] [email protected]
Jan-Sebastian Hovest-Engberding Carina Garbe Senior Manager | Retail & Consumer Products Manager | Retail & Consumer Products Monitor Deloitte Monitor Deloitte Tel: +49 (0)211 8772 5837 Tel: +49 (0)69 9713 7241 [email protected] [email protected]
22 The Retail Operating Model of the Future
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Issue 11/2019