Retailers go digital in 2017

It’s true, we’ve all been hearing about innovation, digital transformation, mobile, and paperless offices for almost our entire careers at this point (unless you’re nearing the end of yours). The reality is that it’s not stuck, it’s not worked, and it certainly hasn’t transformed anything; so, what’s changed?

What we’re witnessing is a confluence of three things:

  • We now have enough connectivity everywhere in our lives to consider it a utility.
  • We have the ability to rapidly innovate in software, creating new applications and redefining our IT infrastructure in hours and days instead of months and years.
  • We have a new breed of worker, manager and consumer who understands how to use the first two points to change our business’ forever.

From Uber, to Airbnb to Amazon, we’ve seen that age-old industries can and will be radically disrupted by digital. This doesn’t mean that businesses must go extinct, sacrificed on the altar of innovation, but it does mean that we can no longer ignore the changes in our society as the digital natives join the workforce and begin to dominate consumer spending. If in recent years past we were seeing the early adopters and the first-movers experiment with digital, 2017 will see it firmly established into the mainstream.

What’s making it all possible now?

We’re all familiar with the massive increases in bandwidth we’ve seen in recent years, in fact some have pointed out that as end-users, we’re seeing a 50% year-on-year increase in the amount of bandwidth we receive. This, strangely, is slightly less than Moore’s law (the growth of computing transistor density and corresponding computing power) which falls in at roughly 60% per year; so, it shouldn’t surprise anyone that this will continue. What this means for us, as users and consumers, is that we truly live in a much more connected society than even 5 years ago. This state of hyper-connectivity is what’s making digital possible today. Where previously it would have been faster to get information by physically moving it, in 2017 its most certainly faster to ship any volume of information digitally.

What’s even more dramatic is the change in how our technology works, and how we as business’ and especially our IT staff interact with it. The rise of the APP culture, programmability, software defined, virtualisation and so many more advanced technologies mean that we’re able like never before to influence the function of our digital worlds in real-time (or as near to it as necessary).

This means that our IT staff are joining up this tremendous growth in connectivity with our actual systems and applications. We call it “the cloud” but it’s much more fundamental than that. Previously there were lengthy processes of change management, control and testing each time we connected any systems in our IT estate. Today the connectivity is assumed, not only between the systems and our users, but between the systems themselves. We expect our inventory management system to talk to our CRM system, and both to talk to our point-of-sale and eCommerce.

So where’s retail to go?

We started this article with the title mentioning retail, because of course this is one of the most interesting areas of digitalisation in our lives. We see Amazon going miles past its roots as an online book seller to now delivering fresh groceries to your door without a single store front or showroom. Does this mean that retail is doomed?

Quite far from it. The New Retail Reality report from Barclay’s tells us that over two thirds of British consumers would prefer to view products of value in person before buying them. This tells us that there’s real value in the high-street and in the real-world tactile experience of shopping. It also lays a trap…

How do retailers avoid becoming the showroom for their competition? Ultimately can retailing survive digitalisation when competing with the likes of Argos and Amazon and their fine-tuned logistics machines?

The real question for retail then should be how can retail be about more than just the price.

What digital looks like in retail

If we take what customers are telling us to heart, the first step is to limit the commodities in our physical stores, this means first making digital the primary sales channel for our low-end high-volume products. Instead of promoting products to draw customers into the physical location, the experience of the location and the availability of high-end and halo products should be the draw, the promotions left to be part of the online experience, or offered only in store to avoid cross-competition price-matching. Consider how digital could make high-end shopping easier by offering a more Ikea like experiential shopping experience where customers can immerse themselves in the product, and get a taste for what it would be like to live with in their real-world. Common challenges like warranty tracking, customer registration and after-sales support are all key elements of in physical retail.

Whereas price-promotion is best left to the cost-optimised channels available through online fulfilment and ordering. By ensuring that the physical location is high-margin rather than high-volume retailers can deliver more value to customers while also increasing profitability.

Certainly, some volume products can be offered in store, however these should be complementary to the high-end products and also focused on identified sales patterns gleaned through data analytics; not simply pushed into the physical stores based on sales planning.

Digital as a marketing tool

Developing the idea that the physical side of retailing is for the high-end products, and that the commodity and volume products are the realm of digital an eCommerce, we start to see how digital can more effectively be used as a marketing tool in retail.

Online comparison shopping tends to be heavily focused on price, and the wide spread choice available online often means that features and exclusivity are impossible to achieve. The opportunity then is to use analytics to understand the customers browsing patterns and then predict the shopping experience they most want. Imagine a customer journey of someone shopping for a new high-end purchase. They begin (as we do today) by researching online. Through this research they discover that your business is one of many who promote one of the products they are interested in. You’re by no means the only one to sell it, however you quickly identify where your prospective customer is and offer them a personalised shopping experience in their area at one of your retail locations. Immediately when they arrive at your retail location, your mobile app recognises them as they enter the store and directs them to the correct showroom area, and alerts sales.

Non-intrusively, your staff can approach and assist with a demo and give the customer a great experience of the product. They can help with the purchase, arrange delivery (fulfilment), installation and all the required service while also setting up the warranty and protection. After sale, the app then suggests suitable accessories and related commodity purchasing and offers them “customer only” pricing as an incentive to order more online. By maintaining this you lead the customer back to their next major purchase with your business and the cycle repeats.

Digital merges with physical

The final piece of our journey is tying together more of the physical experience with the virtual, online experience. Why do retailers insist that in-store purchases must be carried away by the customers? Surely it’s just as profitable (if not more so) to have the organised planned fulfilment done after the sale (especially if the customer is paying for shipping!).

Retailer focused apps, merging the online and in-store shopping cart, and application of virtual and augmented reality are all tools that can be employed today with little cost or complexity. Modern WiFi networks installed in store and connected to a retailers’ app allows the retailer to have detailed location tracking linked up with the customers’ browsing patterns to see if what they browse in-store matches what they browse online, and feeds all this back into the data analytics engine to help plan store layout and displays and optimise online marketing. By adding in elements of VR and AR, retailers can also expand what’s on offer in the store to include online only items or items that are out of stock in the shopping experience. There’s also tremendous opportunity to leverage and combine payment systems, streamlining the teller experience to allow self-check-out using the app of purchases made in store. The limit is only one’s imagination, once the network and the app are in place.

2017 will surely be the year that retail takes digital seriously. Customer loyalty cards need to move away from bits of stamped paper and into app form. If your business doesn’t already have its own app, it’s time to get one! Networks in the locations will be the key to enablement. Modern Wi-Fi with location awareness is essential to make the most of the APP. When it all comes together, think big-data and analytics. The first step is to gather the data and integrate it, but the real value will come from analysing the data and using it to intelligently optimise both online and in-store experiences. Digital doesn’t have to be disruptive, it can be an evolutionary force allowing you to control costs, manage inventories and stock movement, streamline payments and gain invaluable insight into your customers, their shopping and buying habits.

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