Is the pace of change more rapid than ever before and how should retailers think about Digital?
Retail is changing faster than ever. Digital, voice technologies, augmented reality, artificial intelligence are changing the way we shop – creating richer experiences which link online and offline creating more intuitive experiences making buying quicker, cheaper and more enjoyable.
Whilst retail is changing faster than ever one thing remains constant, we are still shopkeepers. Our sole purpose is to serve the customer. The customer must always remain at the centre of our thinking and the customer must be the driving force behind all of our strategies and initiatives.
In an even faster, ever more competitive environment companies need to take stock of their proposition and consider is it fit for the future, are we really serving our customers in the ways they want to be served or are we running the business in a way that makes it easier for us but not the customer? There is no room for complacency and relying on past success.
Digital capability and leadership are becoming core to future success. Doug McMillon, CEO Walmart, recognised that people continue to be at the heart of retail success but it is the use of technology which is critical to people realising their full potential and creating more rewarding and satisfying roles which in turn better serve customers. This sentiment was very evident at Asda where there is a strong, long standing customer service culture. It is also at the centre of Waitrose’s thinking. As an employee owned company it is the Partners and their knowledge and passion which make a difference, really adding to the experience of shopping at Waitrose. By digitising retail tasks and making better use of data, Partner or Employee’s time can be freed up to spend more time serving and helping customers.
Technology is no longer an implementation detail, it is central to an organisation’s ability to survive and thrive in a competitive market. To realise technologies full value however we need to break out of traditional organisational silos and thinking. Placing Digital at the core means not simply selecting the right tech but it also means looking at your company’s operating model and ways of working. Digital requires a different mindset and a different skillset.
For me there are 3 areas to focus on:
- How do I effectively engage with my customers?
- Do I have compelling branch, mobile and online propositions which complement and support each other?
- What do I need in my Core Operations from a technology, people and organisational point of view.
Deepening Customer Engagement
Do we truly know who our customer is, what our customer wants to buy, when they want to buy it and how our customer prefers to be served?
Traditional customer loyalty schemes are dead, they no longer work. Variety, ease of transacting, product and price transparency all mean customers are more promiscuous or disloyal than ever. During any week there is a promotion, a sale, a flash sale, an offer somewhere and finding them is straightforward. I love 7 for all Mankind jeans but I would never dream of paying full price. I really enjoy my wine but there is so much choice and competition I take the promotions.
We need to use the customer data we have and we need to consciously collect more to truly understand our customers, their needs and their preferences to provide increasingly relevant, personalised, contextualised and timely interventions. If loyalty is dead we also need to find and create those regular opportunities to meaningfully engage. This is about data, AI and real time decision making.
Amazon is of course renowned for this. You may already know that Amazon updates its software every second, but did you know that around half of the software written is collecting data and measuring?
Amazon’s Echo Look is a voice assistant with a screen that includes a depth-sensing camera with LED lighting. Style Check, part of the new range of services offered with the device, allows a customer to have their outfit evaluated by a combination of algorithms and fashion specialists—and allows Amazon to build up knowledge of its customers’ wardrobes, adding more and more to their knowledge and intimacy with customers.
Waitrose is loved for its range and the quality of its products. But, as it becomes easier to buy online why would you want to visit a branch? Many of us would prefer not to. Waitrose would love you to visit branch because you are likely to spend more in Branch than online. So the branch needs to become about experience and inspiration. Waitrose customers are passionate about food so creating the opportunity to sample the products, learn how to cook it, discover which wines work with which food are strong propositions – increasingly their branches are providing these opportunities and a reason to visit branch.
To support this the branch Partners need to be freed up from some of the more tedious tasks to spend time with customers and to do this effectively they need the tools and the knowledge to do a great job.
How far could this go? The reality is there is enough data to reliably predict most of what a customer wants in a weekly shop. Why not have it ready at the store to place in the boot of their car whilst they attend a cooking demo and browse the new range? Not only is it a great experience it frees up floor space to do more interesting things as you no longer need to give up so much space to soft drinks and toilet paper.
This desire to see and experience products and to be inspired is also increasingly supported by the online world. As JWT put it in their Future 100 moving from URL to IRL (In Real Life).
Brooklyn-based startup Bulletin rents out temporary physical space to independent brands that are normally online only. The store has been called a “WeWork for retail” for its collaborative approach to retail space, and has also been referred to as “the physical embodiment of a lifestyle blog.”
In the US Everlane an online clothing retailer has recently opened it first stores. Everlane is also interesting for its values – Exceptional quality, Ethical factories, Radical Transparency. This means being able to demonstrate product provenance and by providing price transparency sets a real challenge for everyone else.
And we all know Amazon and Alibaba are testing in the real world. The outcome of the combined lessons of Amazon Go, Fresh, Pantry and Wholefoods will be fascinating.
Digital at the Core
I am often asked what is the difference between Digital and IT? A simplistic answer is – there is no difference, its just about using technology in smart ways. The reality is the difference is mindset.
All too often when companies think about IT they think in terms of a system implementation, delivering the technology. And, yes we should of course consider the change impact of the new system on people and process. This gets you so far but more often than not it leaves opportunity and value on the table.
Digital on the other hand is about how do I use today’s technology capabilities to innovate and to transform my business to run more efficiently and better engage with and inspire my customers. Simply overlaying technology on an existing business architecture does not work. You need to take a step back and re-think your culture, operating model, decision rights, the skills you need in your organisation and partnerships with other businesses to realise the full potential and value that technology enables.
As Venkat Venkatraman says in his book The Digital Matrix – You need to shift your attention from thinking about how digital technologies support your current business to examining how they could also shape your future strategy and business models. Only then can the potential of powerful computing, pervasive connectivity and potent cloud be realised.
What does this mean for our core IT? In my view it is essential that wherever your systems directly connect with your customer this is your point of differentiation and you need to be in control of your software, managing and developing it in a fully agile way. Continuously evolving your capabilities as you collect data, measure and learn. Further back, say in warehouse management then yes buy standard off the shelf systems but still collect data, measure, learn and adapt how you use these systems. The key is not to fall into the trap of believing that anything is good enough, it won’t be, things are changing constantly and will continue to do so.
Digital is happening, its impacts are only accelerating.
The impacts will be profound, reshaping our businesses and how we run them and impacting our people.
In the United Kingdom alone, 62,000 jobs were lost in 2016 due to the growth in online shopping and the increased use of automated cashiers. According to the British Retail Consortium another 900,000 retail jobs will cease to exist over the next decade.
As recognised by Walmart, Waitrose and others People will remain part of the core of Retail, they will however need different skills and technology to realise their full potential.
There has never been a more exciting time to be in Retail.
Charles Webb. Interim Technology, Digital and Transformation Leader