Results Count ... everything else is conversation.: The great Occam’s Razor paradox for Retailing in 2016

The law of parsimony is great for consumers, but a burden for retailers

If you peruse the retail headlines, you will now see many retail predictions for the future of retail. 2015 was certainly a transformational year in terms of holiday shopping. Online has consistently grown, while store sales are flat or declining. Based upon the stats for online sales from Black Friday through Christmas, traditional bricks and mortar retailers are at a proverbial tipping point in terms of competing with online. Strategies for success vary from testing new store concepts, to complete overhaul of ecommerce. The underlying premise of Occam's Razor suggests that in terms of theories and strategies, "simpler is usually better". But, how does this law of parsimony apply to retail? Who determines "simplicity" … and what exactly does that mean for retailers?

Why this is important: Retail is not rocket science, it's harder. The law of parsimony focuses on simpler models. But, simplicity defined by today's consumers creates the paradox of even more retail complexity to deliver the desired solutions.

Occam's Razor – The question for parsimony and simplicity

Image Credit: Danilo Rizzuti

The principles of Occam's Razor are generally attributed to William Ockham, who was an English Franciscan friar, philosopher and theologian. He is credited with the problem solving principle called the "law of parsimony". Occam's principle can be summarized as:

Among competing hypotheses, simpler assumptions are preferable to more complex.

In science, Occam's Razor is a heuristic technique to guide scientists to simpler models which are generally more testable, as well as understandable. The "razor" refers to the processes to cut away and pare down extraneous information and superfluous explanations. Occam's Razor has been literally used in science for centuries to focus on empirical solutions that can be verified, and to reduce the models to the simplest terms for greater predictive value.

Occam's Razor applied to retail – Quest for simpler solutions that work

In our IMS Retail University workshops, we continue to use the phrase that Retail is not rocket science … it's harder. Retail is not a difficult business to understand. It does not involve complex math or science. What makes retailing so difficult today is all of the incredible details that have to be managed simultaneously in order to get the specific product that consumer wants, to be available … when and where they want to purchase it.

There is an incredible amount of planning, details and logistics required to manage thousands of SKUs across distribution to the store shelves in hundreds of stores. And, with omnichannel as the new normal of how consumers shop, there are additional layers of details and complex execution required to manage and integrate ecommerce, as well as social media dimensions. As retailers head into 2016, Occam's Razor core principles sound appealing:

Other things being equal, simpler solutions are generally better than complex ones
The simplest explanation is usually the correct one, or at least the most testable
"Entities must not be multiplied beyond necessity"

The Paradox of Occam's Razor in 2016 for Retail

The essence of Occam's Razor is to "shave away" those things that are not necessary. The goal is to pare down solutions to the simplest form that add the greatest value. Large retail chains operating hundreds of stores (aka Walmart) have essentially been using Occam's Razor to pare down and stream line operations, distribution, inventory and logistics … all adding value to the retailer's bottom line by reducing costs and increasing ROI.

So, what's the problem? What's changed?

What's changed is a massive paradigm shift from historical retail centricity to consumer centricity. In the "new normal of omnichannel", consumers are the ones that now determine "value" based on their preferences of how they shop and chose to purchase. In the context of Occam's Razor, it is today's consumer that is paring away complexity and defining simplicity, but from their own perspective … NOT the retailer's!

Consumers Occam's Razor is redefining "simplicity" for retail in 2016

If there is a line of demarcation in retail, 2016 will be another tipping point for omnichannel. What's driving this paradigm shift is the consumer preferences for choices that simplify their lives. Consumers as the new "POS" now define where they shop, how they shop, when they shop and where they decide to purchase. And, the ultimate challenge is that today's consumer's choices are situational. There are times where consumers value hands on experience in stores, and there other situations with time constraints when consumers chose the simpler solution to purchase online. For some, their simplicity and preference is a hybrid choice "click and collect" … shop online but pickup in store.

Occam's Razor is generally associated with science and models. But, if you look at the basic premise of "simpler solutions are better", consumers are essentially applying their "razor" to pare way time wasters to find the simpler, efficient solutions that work best for them.

Consumers' shift toward personal choice and simplicity includes:

Shopping anytime, and everywhere is of great "value" in convenience and selection
Seamless integration of online and stores is simpler and better
Consumers want online lists and research to follow in a store
They also want the store to "follow them home" with services and value add
Consumers want simple and easy tracking of everything: wants, orders, shipments
They want simple and easy choices how, when and where to purchase
Free shipping with simple delivery options: at home or click and pickup
They also want easy to personalize … simple solutions to customize purchases
Basically, in 2016 consumers want simplicity in choices to "Have it my way"

The Paradox of consumer simplicity = Retailer Complexity

Image Credit: Stuart Miles

The list of consumer's views of what constitutes "simplicity" in retail could almost be endless permutations of simpler solutions decide the value tradeoffs between time, personal experience and value (price). While all of these Occam's Razor choices make things much simpler and more flexible for consumers, the paradox is that simpler for the consumer multiplies complexity for retailers! Seamless omnichannel experience and simplicity solutions are not simple for retailers, and most require extensive investments!

Case in point is "Click and Collect". In our recent post, we highlighted how purchasing online from store shelves greatly simplifies things for consumers, but the execution of this consumer centric solution greatly compounds the executional complexity on the part of retailers! In fact, many store based retailers will not have the infrastructure, systems or resources to execute click and collect as a simple solution deemed reliable and valuable by consumers.

How will retailers respond to consumer demands for simplicity?

What is the converse of Occam's Razor? I not sure. Perhaps, the metaphor is like one of "Rube Goldberg's machines" with infinite gadgets and thing-a-ma-jigs that look impressive, but don't add anything to the core objective. If you played the game "Mousetrap" as a kid, that is a perfect visual of what is happening in retail as layer after layer is added to "fix" things.

What retailers are facing in 2016 is unprecedented demands requiring much more complexity in order to deliver the "simplicity" valued from the eyes of the consumer.

The paradox of Occam's Razor for retail in 2016 is simply this … all of the simpler more convenient solutions valued by consumers create compound complexity and increased requirements for retailers. One safe prediction for 2016 … it will be a great year for consumers, and an even more challenging year for retailers!

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