Why digital transformation is at the core of the 2019 retail fightback

No sector has been immune from the advances in cloud, artificial intelligence, data management and IT services, and this new operational environment has ushered in an age of positivity. Business today is better, quicker, slicker, cheaper and more productive than ever before. The challenge for retailers is to keep pace with this rapid change to avoid being left behind.

The retail industry was never far from the headlines in 2018. Poundworld, Toys R Us and Maplin went bust and disappeared from the British high street altogether. Other household names – Homebase, Mothercare, Carpetright and New Look – were forced into restructuring deals with their landlords, closing hundreds of stores. Unfortunately, the annus horribilis of the high street is unlikely to be a one-off. According to British Retail Consortium, the worst December sales performance in 10 years means a challenging start to 2019, a warning amplified by the recent closure of HMV.

Digital transformation: the core of business

Clearly, technology is not a silver bullet solution to retail woes. Issues such as increasing business rates and the threat of a no-deal Brexit tightening consumer purse strings are uncontrollable. But nevertheless, there is still an awful lot the right technology and tools can support. It is equally important that retailers do not simply follow the latest trend in what’s hot. There are so many solutions available that arguably the most critical step is separating the technology that will drive growth in the business from that which will end up being just another toy in the toy box.

In previous eras, technology was considered an office supply job and decisions were delegated to “the tech folks”. With digital infrastructure critical to business success, many companies have paid the price for badly thought-out technical decisions, from poor eCommerce solutions that can’t cope with the peak and trough retail sales cycle through to low-end marketing automation platforms that can’t scale in the cloud. The list of potential pitfalls is endless and varied but one constant is that bad technology can cripple a company’s strategic growth. Today, the most progressive businesses view their tech “stack” as being just as critical to long-term success as customers and strategy. Nowhere is this more heightened than in retail, an ever-evolving ecosystem with changing consumer habits at its core.

The millennial experience

If retailers thought technology was the only thing to change how they operate, the rise to prominence of millennials will have come as a shock. The age group that has grown up with technology has transformed how brands and customers interact. Communication is driven by images and video on platforms like Instagram and YouTube, while content is shared on WhatsApp and Twitter. There is no trade-off between speed, performance, price and quality: millennials expect the full package and in an age of public rebuke at anything less than peak performance, retailers are walking a very fine line. However, the ‘glass half full’ scenario paints a different picture of a demographic that trusts its peer group more than traditional advertising and is happy to spread positivity. If retailers can solve issues quickly, engage on a personal level with shoppers and deliver a fluid and seamless experience, they will gain the loyalty of a hugely influential section of society.

Of course, the shopping experience today does not end at the checkout. Customers want an experience that follows on naturally from their store visits without any issues. This means it’s not just goods and cash being transacted but also data. Billions of information points – on dwell time, historical purchases and spend, search terms and many more – are now setting the parameters of how we shop. This is placing critical emphasis on establishing a digital infrastructure that is fit for purpose at the core of retail.

For a best in class example, look no further than tech giant Amazon. Its Amazon Go concept store – launched to the public in Seattle last year – is the perfect blend of a seamless digital and bricks and mortar experience. Cash, checkouts and queues are all a thing of the past (unless you’re waiting to get in) and they have been replaced with shelves that auto update on stock, transactions done digitally via the user’s Amazon account and personalised follow-up ads and targeted posts based on what was bought.

The rise of hyperlocal

Admittedly, Amazon is of a scale few, if any, retailers can match. But data, the asset it has been able to harness so successfully, is all around every store, individual and location, and comes in multiple forms, be they socio-demographic, geo-local shopper reviews, influencer blogs, local mobile search or points of interest. Today, retailers can rely on hyperlocal data to pinpoint exactly where to build their stores, determine the right merchandise for each location and send the right products at the right time to optimise supply chains. Using cognitive insights from shopper data, combined with information such as weather, local events or holidays, demand forecasts can be dynamically updated in real-time.

Harnessing this data, transforming it with analytics and discovering new opportunities with AI is the way retail winners will be able to distance themselves from their competitors. Doing it at scale requires a reimagination of business models but will fundamentally change the potential for what can happen in a store. It will convert many more browsers into customers, reduce shoplifting, eliminate lines and make the supply chain more efficient. It will also help to streamline activities in other areas of the business, such as merchandising, operations and marketing.

There’s no doubt that we’re about to enter a new technologically-enabled dimension of retail. The success of the Amazon Go concept store is testament to the solidity of this innovation and the signpost to the future we’re heading to. So much so that what was initially imagined as being nothing more that a PR stunt now looks like it will be rolled out to cities worldwide.

Iain Shearman, MD, KCOM NNS

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