Retail’s Digital Future

Retailers have collectively spent many millions on digital change. The impetus has come from every direction, but fundamentally it is about consumers becoming ever-more mobile and connected, with online spending rising exponentially.

Digital retail technology has developed at the rate of knots, presenting too many shiny new directions and tools to count. A raft of new competitors arose with fresh ideas, dismissing long-held assumptions and challenging retail’s biggest names.

Yet, despite the millions, and the clever ideas, many traditional retailers still face uncertain futures; customers aren’t flocking back as they hoped. Digital was supposed to ensure survival through tough times and for the future – but that future is at risk. Why – and what can they do about it?

Survival of the digitally fittest

The concept of digital disruption is now familiar. Most retailers have made significant adjustments to compete: building impressive online presence, embracing social interactivity, and adapting processes for fulfilment.

Some brands didn’t adapt, and fondly-remembered entities like Woolworth, Austin Reed, Comet, MFI and now BHS have gone to the great retail park in the sky. The pundits bemoaned the fact that such brands hadn’t adapted to the digital age, that their vision was stuck in the high street. But, if today’s survivors are those which have made the adaptation to a digital age, why, then, are retail boards everywhere still so stressed?

It seems that no matter how impressive an online presence, how many staff have iPads, how many are tweeting and facebooking, or even how much tech you install in-store, customer attraction and engagement in a digital age isn’t easy.

Yet the pressure is on: retailers must maximise margins for survival – that means driving out cost, boosting process efficiency and, critically, engaging better with customers everywhere. Digital is the way to go, surely?

Pioneers of the digital frontier

Retailers have unquestionably made vast efforts, in addition to moving online. They have invested to engage customers in new ways: from kiosks to deliver online services in-store, to augmented reality changing room mirrors, to iBeacon broadcasts to push special offers… the high street is becoming a very technical place.

The digital frontier of retail advances daily. Digital and experiential stores emerged in the US, but are now common. From Samsung’s New York 837 which enables immersion and experimentation with products, but doesn’t sell any, to Westfield’s Jaguar/Land-Rover store which targets pure brand engagement, not sales, retailers and consumer brands are all seeking the secret sauce of digital success.

But shoe-horning digital technology and ideas into current business models isn’t enough. Retail innovation labs have sprung up – Tesco, Argos and Boots are just some who have invested, while John Lewis’s ‘JLAB’ startup accelerator scheme even helps to boost new retail businesses. Yet these can only go so far – and major disruptors such as Amazon are investing significant funds to ensure they stay ahead of the curve.

Gadgets don’t drive purchases – and marketing fame you gain doesn’t always drive long-term sales. Disconnected digital experimentation creates digital blind alleys that often lead nowhere.

Disruptive differences

If part of surviving is winning against the very disruptors that are ahead of the game digitally, then understanding them is vital:

Successful disruptors do things differently – they don’t just do the same thing digitally. Take The Chapar, a rising menswear brand with a growing fan-base via its online personal stylist approach that Austin Reed could never have delivered via traditional outlets.

  • Digital-first brands don’t launch with expensive kit on the high street – they come to market with delivery infrastructure that leans on lower-cost, higher-agility cloud technologies which they can scale with ease. They are unencumbered by legacy systems and processes.
  • A partnering mindset is common – Ocado stole a march on the grocery multiples establishment by partnering with Waitrose and has maintained a strong position even as the majors have created their own networks. Amazon Fresh, with Morrisons, is exerting similar power to disrupt.
  • They understand that more is changing than customer expectations. Customers want mobile convenience and to engage on their terms and platforms – but that’s not all.  The way they think is changing. Experiences alter how they decide what, and from whom, to buy. Demographic changes are undeniable – experience is key for Millennials, but they also won’t play by traditional rules: they won’t call traditional customer service desks, walk away after a single bad experience  and choose gamification over traditional loyalty schemes.

Re-imagine the vision

Retailers who succeed in a world where customers think differently must do things differently themselves:

  • Collaborate like never before. The collective insight and expertise of the CMO, the CIO and the new Chief Digital Officer are all required for combined solutions that enable retailers to meet changing expectations, and fulfil new needs and wants. It will means breaking down silos of data, resolving conflict and abandoning long-held concepts of demarcation.
  • Embrace digital evolution, as well as digital revolution – that means augmenting current systems to enable greater agility and gain greater insight from IT and data you already have. Your existing information could unlock vast insights if connected, to surprise and delight customers and create true 360-degree understanding.
  • Avoid wasted IP creation and coding when existing platforms help you differentiate faster, and more economically. The ability to quickly design, develop and deliver new customer-facing apps and solutions to enable employees to engage with customers will drive ROI faster than painfully in-house built apps, disconnected from the wider infrastructure. Existing community platforms can accelerate the creation of meaningful membership and engagement schemes far faster and more powerfully than DIY approaches.

A future proof digital strategy requires a fresh vision that truly articulates what the brand and business needs to be in the future, not just where and how it will deliver.

Strategies themselves must have adaptability built in – because things change faster all the time. It means innovation can no longer be an add-on to the strategy, nor a vague aim – it must be in the core.

So what is the one thing that the digital future of retail depends on?

Digital development can no longer be a side-project, but must move to the heart of business strategy. It means revising some assumptions about propositions that truly meet the needs of a multi-generational, connected, demanding and diverse customer of the future – not of the past. Above all, it will require real alignment and recognition at board level that the future of the business is different from its past.

In our recently released Connected Shoppers Report, we asked more than 4,000 adults across three key markets a variety of questions about today’s retail shopping experience. Check out this new report to see what they had to say, and use it to help shape your own vision for a digital retail future.

by CJ Follini & Michael Cirino

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