The new era of retail is here (we know). Digital has been rewriting the rules of engagement for retail (retailers know).
We’ve been shown the vision of a seamless fusion of offline and online coupled with dynamic supply chains for a new world of retail. We’re seeing innovations including Big Data analytics and artificial intelligence (AI) redefine the core elements of retailing (consumers, merchandise, and stores) and their relationships. And we’re witnessing retail business models being disrupted and business processes being reinvented right on our home ground in Asia.
Led by cutting-edge technology no doubt, but there’s more
Retailers know that much of this evolution is rapid. And that it’s led by cutting-edge technology. Retailers also know they need to transform. Reinvent. Reimagine. Redefine. Whatever the verb is, the message is clear and resounding: Change is in the cards.
But there’s more to it.
While a discard-it-and-replace-it approach may appear the quickest way to attain all those shiny, new digital capabilities to delight consumers, turn merchandise into personalized experiences, create new revenue streams, and attain new levels of profitability in stores, it often isn’t pragmatic.
More often than not, it is not an approach that many Asian retailers can adopt at the moment. This drives a significant amount of frustration, especially when technology evangelists (like me) share new success stories of how the latest technology game-changers have driven new retail wins in the industry.
In the face of this, the key questions to ask become clearer. More pertinently, we need to ask: How can retailers shift to the midway groove where they can remain competitive without ditching all that they have? How can retailers straddle this in-between position and remain future-proof? And more importantly: What are the core retail fundamentals that retailers must get right regardless of how they transform?
We will deal with questions 1 and 2 in my next blog. Here we shall deal with the more critical challenge of getting retail fundamentals right.
Core fundamentals matter (regardless of how we redefine the retail landscape)
Randy Evins, my counterpart in SAP Americas, proposed this framework, and it has resonated with much of what I’ve been seeing in Asia. In retail, regardless of how we redefine business models, processes, and the way our people work, a few themes recur. There’s a reason why: These are core fundamentals that we must address before we embark on any transformation journey.
So, what are they? The classics:
This is about reducing waste and achieving greater efficiency so retailers can pass on the savings and what matters to consumers and business partners. It involves orchestrating the supply chain to realize a more efficient and leaner system. And it’s about getting the right inventory levels and the right assortments.
How innovations may be employed: With the growing complexity of the supply chain, this may entail implementing “smarter” warehousing, employing predictive analytics to understand channels and predict customers demand, and translating the insights into “smarter” buying decisions.
This revolves around about creating delighted customers; it’s about how retailers can engage the consumer’s five senses and use his/her sensory perspective to create a delightful experience.
How innovations may be employed: With Google Home and Amazon’s Alexa, voice shopping is on the rise. While it’s relatively new, it is gaining traction and this could redefine the shopping experience for consumers. The prime factor is that it facilitates a new level of interactivity with the consumer – adding the auditory perception into what used to be purely visual and kinesthetic – and it is very convenient.
This does create an interesting tension, however. Will brands be sidelined in favor of Google’s partners or Amazon’s house brands? The intimacy retailers have enjoyed with consumers has been usurped once brands started reaching out directly to consumers. In the advent of this new platform and experience, will retailers regain that intimacy? That remains to be seen as retailers start to think about how they can harness voice and other innovations to create delightful experiences.
This is tied to the ease in which consumers can interact and conduct business with retailers; about how well retailers can fit in snugly with a consumer’s needs, activities, and plans
How innovations may be employed: Obviously, it entails being omnichannel – delivering seamless customer experience across all physical and digital touchpoints. Very likely, we need predictive analytics to know and anticipate the customer to provide consistent, meaningful experiences to customers at every touchpoint. And AI may be utilized to prompt consumers to restock more of what they bought at the right time.
Be good at 2, but be “darn good” in 1
But the key now is not about becoming an Amazon or Alibaba, which takes years and significant resources. It is not about being #1 in all three core fundamentals right away. Rather, the crux of retail’s core fundamentals framework is: Be good at 2, but be “darn good” in 1!
Hence, the imperative today is to identify current strengths and capitalize on them to create the right momentum to swing into the next mode. For example, a retailer with an appealing existing social media presence could think about how to further exploit that edge to draw consumers to their physical and online stores. Or retailers with an overload of dormant data could plan for a taste of how predictive capabilities may create new retail occasions, change how customers interact with them, and see how that impacts sales.
Ultimately, it’s about breathing new life into an already robust area – and making it the muscle to flex.
So what’s your strength? And how are you harnessing it to make it your competitive advantage? This is a lively conversation I’m having with Asian retailers. I’d be keen to hear your views.
For more on digital disruption in the retail industry, see The New Retail Reality: Moving Beyond Sales.