The new digital customer
“Every century or so, fundamental changes in the nature of consumption create new demand patterns that existing enterprises can’t meet.” If pure play online was the game changer of retail two decades ago, in recent times, digital technology has brought about seismic shifts in the customer shopping cycle, changing the way retailers interact with their customers.
For instance, consider the process of product discovery. Earlier, finding the right product depended on the customer’s familiarity with the product or just serendipity. The salesperson was usually the authority on the product, with considerable influence over the sales conversion process. Today, product discovery begins well ahead of the purchase process as customers research the product online, sifting through reviews or listening to social media chatter. With 79% of online shoppers spending 50% of their online shopping time researching products, product information can be obtained anytime, anywhere, and from anyone.
The proliferation of new retail channels has led to increased competition, especially from pure online retailers, who are squeezing the profitability of brick-and-mortar stores through aggressive pricing and price transparency. Showrooming brings the threat of online directly into brick-and-mortar stores as customers can immediately make price comparisons and choose the best price. Shoppers are no longer compelled to fulfill a purchase in a brick-and-mortar store, forcing sceptics to question the very existence of stores.
Changes in purchasing behavior are occurring across the customer lifecycle, right up to the feedback process. Earlier, customers wrote in or called the business call center to complain or give feedback but today the ubiquitous digital customer is more vocal across social media, web chats, and mobile surveys. Retailers now need to monitor several channels to understand their customers and manage their reputations.
Clearly, the traditional 'funnel' purchasing model based on a linear customer journey is no longer relevant. While the fundamental stages of the customer journey remain the same, the purchase decision process is more complex, and spaghetti-like with many touchpoints, loops, diversions, and switchbacks.
The imperatives for digital age retailing
The retail industry has reached a turning point, and is facing a tsunami of change. While the business drivers for retailers continue to be the traditional — an increase in profitability and revenue, stickier and more loyal customers, and better employee effectiveness and productivity — customers in today’s digital age want anytime, anywhere shopping, good deals and lowest prices, superior customer service, and ease in doing business. How then can retailers create a win-win situation that benefits both themselves and their customers?
To balance customer expectations against the industry’s desire for growth, market share, and customer loyalty, it is becoming imperative for retailers to re-architect every aspect of their business, be it customer experience, supply chain, store operations, marketing or merchandising. Incremental changes are no longer adequate.
Introducing Digital ReimaginationTM
Digital – the same force which is changing customer behavior - will become the savior for the retailer. Digital ReimaginationTM is the process wherein organizations reimagine their business models, business processes, customer experience, channels, and workspaces, by leveraging the digital five forces, namely mobile and pervasive computing, Big Data and analytics, cloud, social, and robotics and artificial intelligence (AI) (refer Figure 1). The concept of Digital ReimaginationTM is fundamentally different from digitization. It is not about taking an existing process and digitizing it nor is it about leveraging one digital force at a time. Digital ReimaginationTM is more than a ‘bolt-on’ digital transformation strategy—it is a tectonic change in the way business is done or the customer is served, by leveraging a combination of the digital five forces. Digital ReimaginationTM can be applied to both internal and external processes. In retail, digital reimagination is the only way to stay relevant.
Figure 1: Digital ReimaginationTM: Redefining retail by leveraging digital five forces
With several store closures, the question being asked is what must stores do to stay relevant. There is fear that robots will take over the responsibilities of store associates, and threaten their livelihood. Instead of perceiving the digital forces as a threat, retailers can leverage Digital ReimaginationTM to recreate the customer journey at the store. Every aspect of the in-store experience - from product discovery to check out - can be redefined and made more compelling. This can help convert showrooming to webrooming.
Recognizing customers as they enter the stores, delivering rich search experiences with technologies like augmented reality, immersive digital displays, connected fitting rooms, way finders, shoppable windows, self-help tools in the store, are some examples of how digital forces are redefining the in-store shopping experience. Home Depot, the home improvement retailer, offers its customers the ‘Store-in-my-Phone’ mobile app, which allows customers to use their mobile phone to navigate the store, locate items, or find store associates. The checkout process can also be reimagined from fixed lane checkout to eliminating checkout altogether with Customer POS (C-POS), where customers use their own device to checkout.
Even the workspace at the store offers the potential to be reimagined. From the time the day begins at the store until the time the store is closed, there are several tasks which need to be completed and millions of customers who need to be served. Store workspace needs to be reimagined with predictive and intelligent operations, powered by the forces of analytics and mobility.
Today, the store associate is right at the end of the value chain, with little information or tools to provide a superior customer experience. However, it is at the store that the customer spends the maximum time and the point at which the retailer can influence the customer. This situation is very similar to the airline situation where the crew, which spends the maximum time interacting with customers, has the least information about them. Airlines are addressing this by enabling their crew with customer engagement solutions.
Empowering store associates with information about the customer (profile attributes, transactions and interactions, their likes and dislikes), in-depth product information, and other relevant information using mobile, enables collaboration and sharing of experiences among store associates.
Reimagining buying and merchandising
Empowered customers and tough competition from online retailers are shaking the traditional tenets of merchandising. Hence, there is a clear need to re-visualize the process of merchandising and digitally revamp it. Competitive price management is one such key process which needs to be reimagined. Traditional retailers make 1-2 price changes a day. According to an analysis by Profitero, a U.K.-based price intelligence firm, Amazon implemented more than 2.5 million price changes every day during the month of November 2013, to woo millions of Black Friday shoppers. To combat this and to leverage the falling cost of implementing price changes and new prescriptive analytics tools, retailers need to reimagine the pricing process with the following aspects in mind:
How can they collect and analyze competitor information?
How can they make pricing decisions quickly?
How can they implement price changes quickly?
Several retailers are already exploiting the digital forces to attain competitive advantage in pricing. For example, Sears is using Big Data to set prices in near real time and move inventory by giving loyalty shoppers customized coupons.
Another key merchandising process that needs to be reimagined is the merchandise buying process. Traditionally, buyers go into the field and source the right designs for products. This process can be digitally reimagined. For example, at a fashion show, buyers can take a picture and digitally annotate it to evaluate fabric and color options, search for additional information like sustainability, and also share information with colleagues for quick feedback. Buyers can leverage social media to understand trends and listen to feedback from fashion bloggers. Analytics on cost information and sales forecasts can be used to optimize buying. Concepts of gamification can be applied to select the best vendor for the merchandise.
Reimagining supply chain
Superior cross-channel inventory management and responsive supply chains can be facilitated by Digital ReimaginationTM. Supply chains, hitherto optimized for stores, must be digitally reconfigured to be more responsive to anytime, anywhere delivery. Both internal data (historical sales data, seasonal trends) and external data (weather conditions, occurrence of natural disasters) can help improve supply chain responsiveness.
A robust and demand-driven supply chain powered by Big Data and analytics can be used to track and monitor real-time inventory. Cloud can be used to share order information with all the players in the supply chain. Social media can be used to improve communication with supply chain partners and understand customers’ desires and wish lists. Emerging technologies like the Internet of Things and 3D printing can be instrumental in reducing the product lifecycle.
The balance of power is shifting from retailers to customers, as the latter grow more connected and demanding. Forward thinking retailers are already incorporating the needs of this new and evolving customer into their operations and processes spanning all customer touch points. Digital ReimaginationTM involves tapping the digital five forces of mobile and pervasive computing, Big Data and analytics, cloud, social and artificial intelligence (AI) and robotics, to redesign all processes-customer facing or back end-to enhance customer experience at different stages of the shopping journey.
The power of Digital ReimaginationTM can be realized only by redesigning processes and workspaces keeping in mind the digital forces and not just by digitizing existing processes. Further, the power lies in leveraging a combination of the forces, multiplying the power of digital. By doing so, retailers will not only be able to design and deliver a superior customer experience, but also drive profitable growth.
TCS Retail Forum Journal
Read other articles
- Reimagining Retail: The Digital Imperative
- Restore the Store: Strategies for Brick-and-Mortar Survival and Resurgence
- The Dawn of Digidexterous Stores - A Perspective on the Future of Stores
- Universal Store Commerce: More than a Digital Experience
- Global Retail CIO Agenda 2014: Taking on the Digital Paradigm Shift
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