How To Win In A Digital World Where Technology Is Rewriting The Rules Of Retail

Judy Cubiss and Ginger Shimp

The world is changing fast. By 2025, a majority of the First World will be intricately connected online. This connection goes deeper than the Internet we think of today. Consumers are changing the dynamic of how they shop. They are more selective and informed about where they shop, who they shop with, and how they shop. For example, automated checkout systems alone could add up to $380 billion in potential value to the retail industry, but when you take into account the Internet of Things (IoT), the impact could be much greater, up to $1.2 trillion.

Recently, Brian Fanzo and Daniel Newman, co-hosts of the popular S.M.A.C. Talk (Social, Mobile, Analytics, Cloud) Technology Podcast, caught up with Matt Laukaitis, senior vice president and general manager – Retail Business Unit, SAP, on an episode of Digital Industries, an extraordinary series that examines how digital transformation is affecting 16 different industries.

There is so much going on in retail, and amazon is at the center of that

Digital transformation truly touches every aspect of a retailer. Thus, the retailers that thrive will be the ones that can execute seamlessly to deliver the ultimate customer experience that enhances that brand promise.

Digital transformation

One aspect of digital transformation is managing product information throughout the lifecycle. Historically that product information has been kept in many different places in the company. Now retailers must have a common understanding based on a consistent, comprehensive view of information throughout their company. This consistent, company-wide view is essential to creating an effective branding strategy. Scattershot data, according Laukaitis, precludes a company “from being able to do things, enter new markets, treat customers differently, embark on new, different strategies.” This is a huge step above simple Big Data aggregation. Every retailer has the ability to bring together large datasets; successful retailers will need to interpret those datasets through their branded lens on all platforms.

Another aspect of digital transformation that retailers need to master involves the associate or team member experience. That frontline employee is responsible for delivering the brand promise, in person, consistently to every consumer. When an associate has insight into a consumer’s total buying history through all channels, as well as their preferences per channel, the associate is better able to help that consumer effectively.

Simplifying complex systems

Laukaitis quotes a study that has looked at the relative cost of complexity: “If you take a look at the top 200 global companies, there’s a hidden cost of complexity of about $237 billion. So, there’s lost productivity, lost opportunities.”

In the past, retailers have been able to sustain complex business processes, but that has meant a lot of different and complex technologies, systems, and user experiences. This has meant a lag in the availability of data – not being able to see things in real time, having to wait until Monday to see what had happened over the weekend – before they can rebalance stock or change focus onto a hotter color or style.

Laukaitis explains that not having to wait for a predefined report to be built if retailers want to analyze data from a different perspective – to answer any “what if” questions – gives them the power of understanding the data in real time, in the moment. Not to mention that being able to drill down on any dimension to complete that understanding can fundamentally change the game.

because consumers are making decision in the moment, retailers that respond and adapt and understand those in the moment decision are separating themselves in the market and in the future

“We had a phone provider that was only able to do promotions once every two weeks,” Laukaitis continues. “After bolstering their ability to assess and respond to real-time data, they were able to do that several times an hour.”

Real-time responses involve a complete change in company culture. The philosophy of continuous improvement involves changing a business away from the structure of iteration entirely. No longer will products be tested behind closed doors and rolled out to the public. Marketing campaigns attempting to hide the weaknesses of a product will be less effective. Word-of-mouth and review sites have more power today than any multimillion-dollar-campaign, and incorporating instantaneous feedback into your production schedule is the only viable response.

68 percent of retailers believe that failure to adapt to hyperconnectivity is their biggest risk

From: “Hyperconnected Organisations: How Businesses Are Adapting to the Hyperconnected Age,” The Economist, report sponsored by SAP, 2015.

The consumer – the architect of the future

The consumer experience will drive the retail space for the next business cycle. People will expect personalization and unique experiences from the brands they choose to patronize. Companies will begin to compete on these terms rather than competing against each other. Many experts predict a “super segmentation” of audiences that will remain highly loyal to brands that cater to them.

Although experts believe in automation, there will always be a need to have good people involved in any retail experience. Huge companies that relied on mass-market techniques – companies like Sears and JCPenney – could easily have invoked automation to cut costs. The truth is that they now are being replaced by more nimble companies, companies that are building experiences for customers. This is the future for companies that expect to be successful in the age of digital retail transformation. Laukaitis enthuses: “It’s probably the greatest time in human history to be a consumer, because the consumer is really in power, and they’re really architecting the future.”

To listen to this episode of Digital Industries for the retail industry, co-produced by SAP and S.M.A.C. Talk Technology Podcast, click here.

Transforming into a truly digital business is so much more than just implementing new technology to meet the demands of a digital age. It’s more than keeping up with the deluge of transformation happening all around us. Digital transformation is about understanding how to harness these changes and incorporate them into your business strategy. It’s about driving agility, connectivity, analytics, and collaboration to run a Live Business. A digital core empowers you with real-time visibility into all mission critical business processes inside your “four walls,” and in your interactions with customers, suppliers, workforce, Big Data, and the Internet of Things.

For more on how SAP can help you drive your own digital transformation in the retail industry, visit us online.

Judy Cubiss

About Judy Cubiss

Judy Cubiss is Global Marketing Lead for Industrial Machinery and Components and Automotive at SAP. She has worked in the software industry for over 20 years in a variety of roles, including consulting, product management, solution management, and content marketing in both Europe and the United States.

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.