The path to building a scalable, successful retail business isn’t what it used to be. Rather than focusing on brick-and-mortar first, cutting-edge brands are starting online and then building digital, hyper-local communities.
“Digital Champions” have embedded technology into all areas of their business. Conversely, many retailers still look at technology as a reactive solution to one-off problems and pain points. Worst of all, technology is often perceived as a cost center rather than a profit center.
Digitization and integration of supply chains
Onset of digitization
Ubiquitous digital products: computers, digital cell phones
Computer-integrated manufacturing (CIM)
Common industrial protocol
(CIP) and other digital
Online business models (e.g., AOL, Amazon)
You’re not tech savvy?
You’re not tech enabled?
That’s no longer good enough.
BE WILLING TO EXPLORE THE FRONTIERS OF TECHNOLOGY
IT employees are on the frontlines of new tech innovations. This is their
passion and what they do every day. Give them the power to explore new opportunities and investments that could benefit the business. However, when you give them that power, you must also be open to hearing how technology can transform your thinking about new business capabilities and opportunities.
Source: The Digital Transformation People
Since the emergence of omnichannel shopping behaviors in 2010, retail executives have played a constant tug of war: they understand the critical role of technology but
are struggling to embrace it in a way that’s meaningful
for their customers — and impactful for their businesses.
How Retailers Can Recalibrate Their
DNA and Embed IT Into All Facets
of the Organization
UNDERSTAND INDUSTRY 4.0’S IMPACT
Organizations of all sizes and across industries are relying on technology to not only sustain their day-to-day processes, but to bring their businesses to the next level. Here are some brands we think you could learn a thing or two from.
DISRUPTION IS REAL.
AND IT’S A
By 2020, PwC predicts
we’ll be entering the era
of the “Digital Ecosystem,” in which business leaders will implement flexible
and integrated value chain networks, adopt fully developed IoT technologies and services, and more.
It’s no secret that as an industry, we are tasked with navigating — and responding — to greater change than ever before. Not only are the disruptions themselves significant, but the rate at which these changes are happening has accelerated.
Although it feels like the sources of change and disruption are multiplying, we’ve found that they typically fall into three core megatrends.
The problem is, many retail organizations are not thinking
or operating this way. Most leaders know that technology helps support their own business function and their own unique goals. However, they often have little to no visibility into how their technology investments may constrain other parts of the organization today, or how they may inhibit
the organization in the future.
find your tribe
be digital first
DEVELOP A PLAN FOR HOW DIGITAL INSIGHTS WILL ENABLE THE BUSINESS
As the business becomes more digitally enabled, you will generate additional data. Determine how new data and insights will be extended across the enterprise and how they can be further leveraged to help the overall business reach its objectives, especially to inform and improve the customer experience.
Industry 3.0 involved the automation of single machines and processes. However, Industry 4.0 brings this automation to the next level, integrating the entire value chain into an end-to-end, digital platform that includes sensors, robotics, analytics, the Internet of Things (IoT) and cloud-based software, among others.
What kind of outcome are we looking for?
Customer behavior change? Associate behavior change?
It's better to come to the table with goals rather than
ideas for how the process should already work.
Conversely, retail leaders that
advocate for technology to help
shape the organization’s Tech
DNA can expect myriad rewards.
In fact, PwC found that companies
championing digital investments
stand to gain 50% more benefits
than those that have not.
Visit the “Built for Change” microsite
for more insights and resources.
PROVIDE ADEQUATE FUNDING AND EXECUTIVE SUPPORT
Leadership is quick to sign off on tech investments when they address a
known pain point or have a clear ROI. However, platform-based technologies
that provide value long after the initial pain is solved are often undervalued
or ignored at the expense of point solutions. Why? Because their long-term
value isn't as easy to convey to the rest of the executive team. Additionally,
softer benefits are often discounted. The executive team must give technology the funding and support it needs to create the digital businesses and
services required to keep pace with Industry 4.0.
THE INDUSTRY 4.0 MARKET WILL REACH $1 TRILLION BY EARLY 2030.
Retailers must prepare for “recombinant innovation,” which is the practice of using and recombining existing technologies to form completely new experiences and use cases. The key to adapting? Having a foundational technology platform to build upon.
When it comes to time and dollars, consumers are feeling stretched. Their attention is being pulled in a multitude of directions — between work, family and personal wellness. As a result, consumers are focusing less on things and more on experiences.
Organizations that are capitalizing on the opportunities of Industry 4.0 are
“Digital Champions,” according to research from PwC.
Everyone else is a “Digital Novice.”
If this effort is successful, what other things will it enable us to do next?
This lets you capture the value of a platform over a point solution
that may do one thing well but can never lead to anything else.
Sephora was one of the first retailers to go all-in on an innovation lab. While some companies have decided to outsource their lab or eliminate it completely, Sephora is still relying on its lab to develop innovations that enhance the customer and employee experience. Ideation, testing and creating are critical parts of the process, and then technologies are tested in the field.
One of the primary reasons why Sephora Lab is so successful is that its creations don’t sit in a vacuum; they are initially presented at an Innovation Fair and are then tested and implemented into specific business functions. The more notable innovations impact the store experience, such as using AR to allow customers to “try on” different lipsticks or embracing AI to find the perfect foundation shade for a customer. These experiences impact buying behaviors, which ultimately dictate product trends and allocation. Digital innovation is essentially touching all areas of the business and is making customers’ Sephora experiences more fulfilling.
Digitization of product and service offerings
Mastering Industry 4.0 requires a
deep understanding of collaboration,
the commitment of top management
and a clear strategy.
To better understand how these trends are impacting the industry,
we’ve studied dozens of retailers — retailers from different categories, pursuing a variety of target customers, and retailers executing different growth strategies.
Through this analysis, we found the organizations that are thriving in the era of constant disruption display a consistent set of behaviors and practices. We were able to break these methods into six key steps that we believe every retailer should follow in order to create an enterprise built for change.
BE 'TECH FIRST,'
NOT 'TECH LATER'
MAKE NO MISTAKE, RETAILERS ARE INVESTING MORE IN TECHNOLOGY THAN EVER BEFORE.
Nearly two decades later,
the influence and impact of technology in consumers’ lives is more profound than ever. However, retailers are still missing the true value of technology as they struggle to integrate it into all facets of their business.
Being Tech First means looking at how technology can help you do what you do every day, but better. It also means considering how technology can help you execute ideas you never previously imagined.
Global IT spending for the
retail market is expected to
reach $188.5 billion by 2026.
In comparing Digital Champions to Digital Novices, PwC uncovered a stark difference in revenue and cost reduction, among other results.
In order to reboot your business’ Tech DNA, you must reconfigure the way you think about technology. It isn’t just a tactic or something to be considered after leadership establishes new requirements.
be global early
The reality is, technology impacts all areas of the business and
helps make the experiences we design across channels a reality. As a result, we’ve found the most successful organizations across industries have “Tech DNA.”
a radical change in
an industry, business,
especially involving the
introduction of a new product or service that
creates a new market.
Vertical and horizontal
integration of digital operations across the value chain
New business-to-business enterprises
Data analysis integrated with customer insight, real-time response and operations
Expansion of computer processing power
(including 3-D printing)
at industrial scale
Section Three Coming Up Next:
Both Types of Benefits
• Road map for digitally oriented
strategy and implementation
• Digital experts and dedicated
Source: PwC’s Strategy & Global Digital Operations 2018 Survey
Learn From The Leaders
Section Five Coming Up Next:
Sure, Netflix isn’t a traditional retailer, but the company’s rich tech-driven DNA is something to which retailers should aspire. The very essence of the Netflix experience is built upon personalized service and streamlined experiences. This is where retail is heading: product and retail as a service.
The Netflix team is constantly looking for ways to improve upon its streaming experience and user experience. The company’s Medium blog account spotlights all the different tests and investments being made to improve user satisfaction, boost streaming times and ultimately drive recurring revenue.
Industry 4.0 isn’t going away. And it’s no longer just impacting manufacturing. It’s impacting all industries.
If retailers refuse to prioritize technology in a way that allows them to keep pace with the realities of Industry 4.0, they will undoubtedly be left behind within the next two years. Technology must be the lead consideration in how the business runs every day.
Too often, the store sits on
its own island, and the data gathered from these immersive experiences cannot be integrated into other business functions or influence other processes. Even worse, they are often disconnected from each other as part of the same customer journey, forcing store associates to use multiple devices to serve one customer.
You Must Be
Retail’s future is being written by organizations that develop a powerful digital foundation and build their businesses upon it. These companies have the power to move faster and will leave everyone else behind.
The question is: Are you sprinting towards the finish line or are you being left in the dust?
Now’s the time to start using technology and platform thinking to reimagine the way business is done.
Netflix is an optimal example of how a company uses member feedback and behaviors to influence several areas of the business. For instance, data has been used to make subtle tweaks to the app interface and transform the way Netflix-original content is promoted. Tech team members also use streaming data to see how they can improve the quality of content delivery—from the audio to the video and even the “bingeing” experience. How can you delve deeper into customer behaviors and insights to make more informed decisions?
It means that technology isn’t just IT’s responsibility. It’s everyone’s responsibility.
And it’s not just a line item on a budget
sheet. It’s an enabler that will help your
business survive and thrive amidst the
next wave of disruption.
If you're ready for the next step, visit our Aptos ONE Resource Library for more details on our enterprise platform that is enabling retailers to transform their customer experience.
Or contact us to schedule a call with one of our experts.
foster an innovation mindset
BE A DIGITAL
Based on our research, retailers see the most success in becoming tech-driven businesses when they pursue the following steps:
Having Tech DNA means that everyone from the C-level down understands the central role of technology in their business. In addition, it means everyone has a centralized vision of how technology will help fulfill the brand promise, using business and customer data to create unified customer experiences.
The last five years have proven to us that technology is a constant
disruptor of the retail industry. But it can also save us.
EARLY RESEARCH FROM
IDC RETAIL INSIGHTS
FOUND THAT RETAILERS
STRATEGIES SAW A:
Developing innovative digital business models
YOU MUST BE ‘TECH FIRST,’ NOT ‘TECH LATER’
In order to compete and thrive, retailers must embrace
these data-driven technologies to integrate functional silos. They also must use customer insights to inform all areas
of the business — especially the customer experience.
A New Wave of Disruption Is Coming
DEVELOP A PLAN FOR HOW DIGITAL INSIGHTS WILL ENABLE THE BUSINESS:
Oftentimes, IT is seen as an order taker who runs off to make someone’s
big idea happen. To truly adopt a tech-first mindset, IT must have a
strategic seat at the planning table. IT must be an equal partner in the
business and play a role in preliminary discussions regarding new
processes, technologies or experiences that will be implemented.
Not sure how to develop Tech DNA when your organization
is bound by years of legacy tools, processes and mindsets?
Read on to discover what we’ve learned in our work with retailers of all sizes and levels of tech maturity.
Shopper Behaviors Will Only Continue to Change
Reinventing your business and developing Tech DNA that extends
across all functions may seem like a big task. That’s because it is.
Let’s use brick-and-mortar as
an example. Tech-enabled
stores are the investment du jour, with brands funneling big bucks
into high-tech experiences, associate-facing mobile devices and glitzy store displays.
The list goes on and on ...
INDUSTRY 4.0 HAS THE POWER TO IMPACT
ALL AREAS OF THE RETAIL VALUE CHAIN:
15% to 35% increase in
average transaction size
5% to 10% increase in
THIS IS A CALL TO ARMS
FOR RETAIL EXECUTIVES
systems, Internet of Things, networks
Adopting data and analytics as a core capability
Sephora has a consistent process for developing and testing ideas, acquiring executive buy-in and making innovations a reality. Because all stakeholders support these innovations, they are fully adopted and integrated into the business. Embrace a similar top-down approach to get everyone aligned with your company’s new tech-minded approach.
In 2010, Amazon also reported
that mobile generated $1 billion
in sales for the business within
a 12-month period, inspiring
the release of its groundbreaking Price Check app. The app would eventually drive the showrooming movement, which turned the entire retail industry upside down.
Many times we have a particular vision of how new technologies
will impact our business. However, once those technologies are
implemented, you may find that people are using them differently than
what you had in mind. Be open to new opportunities to take advantage
of what technology can do — even if it goes against your initial plans.
While brimming with point solutions for specific business functions and immediate needs, most retail businesses have struggled to balance those needs with addressing them in a
way that’s efficient and flexible. For too long, IT has been the order taker of executives competing for scarce IT resources.
And many times, these executives don’t fully understand the tradeoffs or impact of the technology decisions they dictate.
BE A DIGITAL
ASSESS THE ENTIRE VALUE CHAIN, LOOKING FOR FLAWS AND GAPS
A multitude of tools and platforms have been adopted over the course
of your company’s history. In some cases, these technologies sit in their
own silos. In other cases, they’re on the brink of ageing out. IT should take
an end-to-end look at the entire value chain and assess all systems and
platforms to determine if there are any risks or gaps that need to be
addressed. For instance, if you try to add a new capability to a fragile, brittle platform, there is risk that this or any future innovation will become an island.
INDUSTRY 4.0 IS SHAPING RETAIL’S FUTURE
What kind of data will this generate, and what kind of insights
will that lead to for the business? What kind of data is needed
for this effort to be successful, and do we have it now?
ASK THE IMPORTANT QUESTIONS EARLY ON
Before your organization invests in any new technology, there are some
IT-specific questions and considerations that need to be addressed.
What and who your customers like -- and how they behave -- is far more important than who they are or where they live.
Winning retailers use digital properties to establish their brand promise and integrate that story into their stores.
Source: Industry 4.0 Research
It is imperative that you are global out of the gate; find your tribe wherever they are in the world and be prepared to compete against global brands.
Customer service and experience
WHAT DOES IT MEAN
TO HAVE TECH DNA?
Leading retailers we studied invest in relevant experiences that directly align to target customers’ expectations, history and values as a key tenet of sustainable loyalty.
Algorithms may not drive every facet of your business, but data is undoubtedly the fuel that makes your business move. Look to digital systems and platforms to inform your knowledge of your customer and their experiences with your brand. This insight will help paint a powerful picture of how your experience stacks up and how it can be improved.
Innovation is a culture, not a strategy; foster a community that encourages communication and collaboration and rewards innovation.
Stitch Fix was created to help take the pain out of shopping. Removing the frustration of the traditional fitting room experience, Stitch Fix delivers customers a tailored box touting five clothing, footwear and/or accessory items, so customers can try things on in the comfort of their own homes. Since its inception, Stitch Fix has used technology and data to power and influence all areas of the business—from its marketing to its e-Commerce experience, assortment planning and recommendations.
Every “Fix” sent to a customer is crafted using a combination of algorithmic and human curation and is based on a multitude of feedback points from the individual customer. Customers can offer pointed feedback on each item in a “Fix,” accounting for price, fit, style and quality. Tools such as Style Shuffle also allow customers to identify which items align with their personal styles. The goal is ultimately to create experiences that prove to customers Stitch Fix stylists understand their needs and preferences, while also integrating new brands and styles that help them expand their horizons.
This is the final iPaper in a six-part series, where we’ll explain why technology can’t just simply exist within your retail organization. In order to thrive in a disruptive climate, technology must be embedded company wide.
Source: Transparency Market Research
Flexible and integrated
value chain networks
Virtualized customer interface
as a key value driver
Fully developed Internet of Things and services
Intelligent algorithms (augmenting human decision making and managing continuous processes)
Digital Revenue Increase
• Digitization of product and
• Market leadership through compelling
• Management of a multi-enterprise
Mass production, assembly line,
Tech DNA does not begin and end with the customer experience: it drives everything.
DIGITAL TECHNOLOGIES HAVE EVOLVED TO TODAY’S TIPPING POINT
Section Two Coming Up Next:
Digitized and automated industrial processes
Digital functions (seperate
from traditional IT)
Customer interface and miltichannel access
Sensors, digital video
monitors, and early Internet
of Things (IoT)
On the surface, these in-store tech investments garner a lot of buzz and attention. But the reality is, they fail to make a tangible enterprise-wide impact because they don’t roll up to larger business objectives.
Section Four Coming Up Next:
Be A Digital Champion
The Future Is Yours
Efficiency Gains/Cost Reduction
• Exchange-to-exchange platforms for
shared transactions and information
across multiple portals
• Full vertical integration of operations
using manufacturing execution systems
that track production in real time
• Production innovations such as AI
applications and collaborative robots
Expected Benefits of Being a Digital Champion
The range of benefits from Industry 4.0-related technologies, when translated into estimates of revenue gain and cost reduction, were 50% higher for Digital Champions than for Digital Novices.
ACTIVITIES AND ATTRIBUTES RESULTING IN:
ICON TO REVEAL