In July, Adam Silverman of Forrester released a report on The Future of the Digital Store[i], which he discussed on September 29th in a webinar hosted by JDA Software’s Wayne Usie. There is a tremendous amount of thoughtful insights in the report and I encourage you to read the report to take full advantage of Silverman’s research. I will provide a brief recap of his findings and recommendations here.
The Retail Store Transformation
The brick-and-mortar store that most of us grew up with is being forever changed by the surge in digital technology being used in stores today. Consumers are using their smartphones and tablets in stores to compare pricing, research products, read reviews and consult their friends. The Forrester survey found that in the previous three months, 21 percent of shoppers checked prices on their mobile devices in-store and 20 percent used their devices to redeem coupons.
Retailers are also using digital technologies such as beacons and sensors to provide coupons, personalized offers, and video clips. New digital technology is also enabling retail stores to be much more efficient and flexible in responding to consumer demand. For these reasons, digital business leaders within retailers must take a much bigger role in formulating commerce and customer engagement strategies.
There are four things digital business leaders must do to drive retail transformation.
- Embrace ecosystems of value—store systems too often work in siloes, not sharing information. Store systems must be integrated for one view of the customer to support seamless shopping experiences.
- Drive digital customer experiences—the use of new technologies such as mobile POS and beacons can personalize and enhance the customer’s shopping experience. For example, you could allow a customer to add items to her digital shopping basket that are then delivered to her dressing room.
- Improve digital operations—leverage digital technology to drive efficiency and productivity through integrated store operations.
- Create new business models—digital technologies enable new business models that bring the customer and suppliers together. For example, retailers could take customized product orders that are then built after the sale. Or they could create subscription services for automatic repeat business.
One of the reasons it’s important for digital business leaders to assume more responsibility is that digital technology is increasing the speed at which retailers must operate in order to remain competitive. The digital in-store customer experience is real-time and retailers must be able to react to customer demands in real-time as well, including offering endless aisle and save-the-sale capabilities and in-store fulfillment of online orders. The new, transformed retail store is digital, real-time, customer engagement focused and capable of a much wider set of services.
Opportunities and Barriers
The transformation to the digital store will offer retailers many opportunities, but there are barriers that will have to be overcome. Digital technologies will enable retailers to:
- Personalize the shopping experience—personalized offers and pricing based on beacons, smartphone apps and loyalty data will improve the customer’s shopping experience
- Bridge the physical and digital realms—leverage digital technologies such as beacons, GPS, smartphone apps, video tracking, Wi-Fi and sensors to bring the digital experience into the store
- Influence sales—improved customer engagement through personalized offers and services can positively influence sales and customer loyalty
- Improve service levels—new fulfillment options such as click-and-collect and buy-online/ship from store greatly enhance service levels and omni-channel shopping experiences
- Empower employees—digital technologies such as mobile POS and clienteling apps enable associates to provide improved, more knowledgeable service and also can improve employee training
- Optimize profitability—there are many ways digital technologies can improve profitability. Examples include leveraging analytics for better assortment and space planning; using video to identify replenishment needs; and using task management to ensure the highest priority tasks are performed first.
- Enable new insights—analytics enable retailers to gain new insights on merchandise performance, customer buying habits, pricing elasticity and other factors impacting profitability and service.
In order to take advantage of these opportunities, retailers will first have to overcome several barriers that are prevalent in most physical stores.
- Poor in-store connectivity—a lack of internet and Wi-Fi access prevents customers and associates from leveraging digital technologies. Silverman recommends developing “customer engagement networks” that enable use of digital technologies by customers, associates and devices.
- Record-keeping focus of retail systems—stores systems focus on transactions and data, not on customer engagement. Digital stores must enable engagement through technologies that support personalized offers and services.
- Lack of real-time insights—because of poor connectivity and a record-keeping focus, store systems do not offer retailers real-time insights into customer activity that can be used to engage and influence shopping behaviors.
- Siloed operations—siloed operations and incentives between digital and physical store teams often work at cross-purposes. For example, in scenarios such as buy online/ pick-up in-store and buy online/ ship from store often require store associates to perform work while the digital team gets credit for the sale. Similarly, options such as save-the-sale and endless aisle credit the sale to the store while the DC or another store must provide fulfillment.
Building Relevant In-store Experiences is a Journey
Silverman rightly points out that the transformation from a physical store operation to a combined physical/digital environment will be a journey. He suggests using the IDEA methodology to phase the effort.
- Identify your digital store strategy—which technologies make most sense for your customer base and selling proposition
- Design in-store engagement—what platforms and processes best support your digital strategies
- Engineer digital technologies, processes and people—align and optimize all resources to carry out your digital strategies and design
- Analyze performance—monitor success on a continuous basis and improve outcomes over time.
While the transformation to a digital store is a journey, the opportunities and benefits will be substantial.
For more information on digital disruption to the physical store – check out the JDA Omni-Channel breakfast road tour coming to Chicago on December 10th!
[i] Adam Silverman, The Future of the Digital Store, Forrester, June 21, 2015