The global retail industry is projected to have a global value of about USD 31 trillion by 2025 , and is a major contributor to jobs and economic activity, with an estimated impact of 26% of employment and 19% of GDP in the United States . It is an extremely vibrant sector which has been leading business in terms of operational innovations. Since the early adoption of Operations Research techniques , the way we shop has been completely transformed, with more variety (millions of choices), more freshness (fast product development), more convenience (deliveries at home, ability to rent or return, store experiences), more product information (reviews, social shopping), and reduced costs. This increased value for consumers has been generated by operational innovations, triggered by technological developments and new forms of organizing the business, and fueled by the extreme competitiveness of the retail industry.

In this INFORMS Analytics Collection, we seek to provide resources that can help us understand better the recent developments of the retail industry. We have organized them around five themes. The first three themes identify innovations at the retailer-consumer interface; in internal retail processes; and in supply chain, distribution and logistics, respectively. The fourth describes how recombination of the retail elements have created new business models. Finally, the fifth reviews the externalities that the retail sector creates, which are starting to be addressed in recent research and innovations.

Demand Planning

Retailers sell directly to individual consumers, which typically makes them more customer-centric that other organizations. It is indeed important to understand consumers well, to be able to serve them adequately. One key retail process is forecasting, in which needs must be detected, and most importantly quantified so that they can be translated into the right offer. This encompasses choices on inventory levels, with an extremely high complexity of billion decisions made of combinations of stores or stocking points, stock-keeping units (SKUs) and dates; assortments (which require balancing profitability with market coverage and customer willingness to explore); and prices (requiring proper estimation of sensitivities).

Store Execution

Some internal retail processes are essential to provide a satisfactory shopping experience. Staff plays a crucial role in generating sales, because of their direct involvement in the shopping process with assistance, persuasion and generally the creation of a positive service experience. In addition to the people, some technical procedures can also support sales, such as provision of information about product fit, correction of inventory record inaccuracies, perception of scarcity, or return management. Mastering retail execution ensures that potential demand, in the form of store visits, can be translated into revenue, in the form of transactions.

Supply Chain

In the last decade, fulfillment has emerged as a key competitive weapon in retail. Specifically, Amazon’s Prime program has moved the industry standard into same or next-day delivery windows, which has resulted in a major shift in logistical practices. This applies to both online deliveries to customers as well as internal retailer logistics. Recent developments have looked at quantifying the importance of delivery speed. One way to expedite lead-times is to ship from neighboring stores, which requires properly allocating orders to available stocking positions.

New Business Models

At the end of the 1990s, retailers were relatively homogeneous, and were differentiated mainly by the type of products they sold (general merchandize vs. specialties) and the store format (small/convenience vs. large/big box). Since then, and specifically with the birth of e-commerce, the retail business model has gained in complexity: not only pure online players have appeared, but many hybrid business models have proved successful. The notion of omnichannel has taken over the industry, and every player these days is combining some kind of online activity with an offline presence: showrooming helps retailers promote their products and generates online sales; and webrooming drives shoppers to visit the physical store. Furthermore, the ability to obtain more precise information about demand has led to faster product cycles, in the fast fashion business model; and to use social networks to best promote new items.

Externalities

Retail’s major impact on the economy results in many interactions that should be carefully checked. First, retail distributes physical goods that are manufactured by external suppliers. As the Rana Plaza disaster exemplified, retailers have a social responsibility on working conditions. Second, retail thrives as a consequence of a consumerist society, and this has serious environmental consequences. Retailers can adopt new selling practices, moving away from sales into rentals or other circularity models that involve reusing and recycling. Finally, retail activity is an engine for urban vibrancy, and its impact on our human habitats cannot be underestimated.

• INTRODUCTION
• DEMAND PLANNING
• STORE EXECUTION
• SUPPLY CHAIN
• NEW BUSINESS MODELS
• EXTERNALITIES