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The New Rules of Retail: Q&A with Barbara Kahn

Barbara Kahn is director of the Jay H. Baker Retailing Center at The Wharton School, University of Pennsylvania and the Patty and Jay H. Baker Professor of Marketing. On June 20, the center, with the Marketing Science Institute and the Fashion Institute of Technology, is hosting a conference on “Retailing in a Global, Multichannel World.” Below, she discusses the evolving challenges of retail.

What are the biggest issues facing retailers?
The increase of local and national retailers going global is a big change in today’s market. Historically, retail has been inherently local, because it is about getting goods and services into a local market. But today national retailers, looking for new growth, have attempted to enter international markets. Many of the big players have stumbled on their first attempts; first example, Carrefour and Tesco had some rough going when they first entered the U.S. markets. Walmart and Circuit City had some problems initially in China. Although there are global brands that sell directly through their own retail stores (e.g., Chanel, Ralph Lauren, Zara, H&M), pure play retailers with successful global strategies are more unusual.

The other new trend is the emergence of omni-channel strategies. Many retailers are selling under one brand name through multiple channels, e.g., the offline world, online, mobile, catalogue. The goal for the retailer is to offer a seamless experience as the consumer is frequently channel-agnostic, and wants to interact with the retailer across many different platforms. For example, the consumer may purchase online but want to make returns offline; or the consumer may want to search online and buy offline or vice versa. From a consumer point-of-view, it is all one retailing experience, but from the retailing point of view there are complicated logistics issues, inventory issues, and employee compensation issues.

What are some of the differences between retailing online versus offline?
One big difference is that there are fewer constraints online with regard to the size of an assortment. This leads to very large assortments online as compared to offline. Sometimes these large assortments will offer “too much” choice, and cause the consumer to feel confused or to delay making a purchase. Retailers are looking for new ways to present their assortments, in some cases offering “curated” assortments, so that consumers are able to appreciate the amount of variety offered. There are also strategic implications as to what the online assortment should contain as a function of what is offered offline.

What else is on the horizon for retailers?
New online retailers like Warby Parker, who sells eyeglasses online, and Fab.com are inventing new models of retail. These new retailing models are inspiring new ways for the consumer to shop and these new behaviors introduce many new areas for research. It is similar to the 1920s when the emergence of self-service supermarkets (as opposed to small grocers, butchers, bakers) encouraged an explosion of research on packaging design, studying of in-store consumer behavior patterns, etc.

In addition, there is innovation offline as well. Fast-fashion retailers like Zara and H&M are bringing runway designs to the masses much faster at much cheaper price. Inventory turnovers are much faster as well.

For more information about the conference, go to http://www.msi.org/conferences/conferences.cfm?conf=142