In today’s competitive marketplace, retailers have faced enormous challenges adapting to sky-high customer expectations and the pressures of digital on brick-and-mortar stores. In fact, today, digital influences about 64 percent of in-store retail sales, putting even more stress on companies already facing slowing foot traffic and competition from online-only behemoths.
"In today’s hyper-connected world, every company must become a technology company or face demise to disruptive competitors"
Meanwhile, 44 percent of customers admit to taking their business elsewhere following a bad customer experience, leading to an estimated $41 billion loss for US companies each year. These trends show no signs of slowing down—meaning that retailers must undergo a drastic digital transformation to keep up—and fast. But investing in new methodologies and increasing technology spend is not enough. In order to succeed, every retailer must become a technology company by 2020.
Retail Reinvention as a Technology Company
The customer of 2020 will be armed with more information and expect companies to know their individual needs and personalize the experience to an even greater extent than what’s common place today. Recommendations about what products are frequently bought together will become even more personalized—for example, by leveraging a new technology approach, Whole Foods Market is now able to focus on the customer vs. worrying about disparate systems—something that has not yet been possible to date.
By taking an agile approach, Whole Foods is able to proactively tackle the problem before it starts, by increasing employee happiness and improving productivity, in turn helping to address customer expectations and satisfaction. To keep pace with these changes and leverage the power of technology, retailers must follow in Whole Foods’ footsteps to reinvent themselves as technology companies—and reorient their business by taking an agile approach across the entire business.
Undergoing an Agile Transformation
Today’s organizations have omnichannel strategies, omnichannel teams, and even chief omnichannel officers, all with a mission of ensuring the customer experience is as efficient and consistent in-store as online, and that brand experience transcends channels—but what today’s retailers are missing out on is aligning their business processes and structure in an agile way.
No longer will development and operations work in silos. Rather, retailers must take an agile approach to product development—levering sprints, stops and starts to constantly be re-evaluating the path forward to do more of what works, and abandon what’s not working before millions of dollars have been spent. And while some companies have dabbled in digital transformation, leveraging agile methodologies will require blood, sweat, and tears from every member of your organization to truly reinvent their way of working—but it is worth the wait— the possibilities with technology in retail will be transformative.
For example, RFID technology is becoming much more affordable and accessible to retailers and it will completely alter the way they do business. For example, inventory movement and accuracy hit a new level: sensors embedded in products and the ceiling of brick and mortar stores will be able to track purchases and demand. Even further, they will able to provide data on how customers move around the store, how fitting rooms influence whether or not customers make purchases, and preferences customers have between two similar products. Retailers can even enhance the customer experience with interactive kiosks in stores that reads the RFID in the item the customer has, and immediately starts an interactive video experience touting the features and benefits of an item, as well as showing it in use.
With so much data available, retailers must gain immediate visibility into all of their information and think like a software developer to make corrections in real-time. Never has meeting (and anticipating) customer feedback been more important.
This data can also help retailers to know what to keep in stock—whether that’s 200 different styles of running shoe, or just two options for ketchup based on demographics and regional preferences.
Cultivating a Digital Culture
While investing in software is the first major step in helping to address this much-needed industry makeover, simply using software isn’t enough. The retailer of the future must make technology as big of a priority as the goods they sell, which means creating a digital strategy that permeates the entire company—and that’s not going to be easy. One key step in this transformation is making sure that business and IT priorities are one in the same. Without this buy in from senior leaders, efforts to cultivate change will face continuous roadblocks along the way. With this partnership between members of the C-Suite must come a culture that is open to change and embraces digital— meaning hiring the right talent and developers, training all employees to be digitally-minded. Companies that take a page out of the developer’s handbook will thrive, while others will be struggling to survive.
With this cultural shift, an opportunity emerges to create efficiencies through agile methodologies. Brought on by developers’ way of working and the new digitally minded workforce, agile can help to accelerate the transformation taking place, and implement a fail-fast culture. In the world of retail, ensuring the right products are on the right shelves at the right time could not be more critical. In a more traditional development mindset, the world of fast fashion would simply miss the boat, season after season.
The costs of not becoming a technology company are high. In today’s hyper-connected world, every company must become a technology company or face demise to disruptive competitors. Without predictive and prescriptive software and machine learning, retailers will grow further and further divided from what matters most: the customer’s tastes and preferences. From the runway to the retail store, without tools like demand forecasting powered by machine learning, retailers are left in the dark about what’s next and how to anticipate changes in demand. But the good news is that with today’s co-development best practices and agile methodologies, companies can save valuable time and resources by being able to pivot quickly to reap the benefits of software and drive an instantaneous shopping experience. With the addition of machine learning capabilities, customers are able to take the guess work out of forecasting, leveraging the power of super computing to deliver modern forecasting methods—and using data to back up the gut feeling of retail’s past decision making processes.
For one large retailer, leveraging modern forecasting techniques generated $125 mm in banked benefits, reduced forecast error by 25 to 50 percent and enabled reforecasting of 62 billion weekly forecasts in just 3 hours— that’s impactful.
By taking advantage of machine learning, retailers are able to take a fundamentally different approach to support truly localized forecasting and focus on details and labor efficiencies to drive a powerful user experience.
Retail is an industry that is constantly aiming to grow and advance. With an agile approach and by leveraging machine learning, companies can find out what works more quickly, and leave behind projects before it’s too late. This requires retailers to narrow their focus on the consumers themselves and realize what their likes and dislikes are— something that’s already underway with companies like Whole Foods. However, in order to succeed, retailers must not only adapt to new technologies, but actually become a software company to drive digital transformation throughout their strategy.