From the Principal’s Office
Overused terms are becoming commonplace. As they do, they lose their meaning and people begin assign them their own interpretation of what they mean. So let it be with ’digital transformation.’
I asked a number of industry thought leaders for their interpretation of ‘digital transformation’ in retail, and I got (you guessed it) different answers. Some contained similarities. Together with long-time colleague Robert Lawson, partner at Techquest, I formulated this definition. So, assuming that you accept the following definition, we will embark on a brief journey to identify what retailers need to consider as they set-out to ‘transform.’
Bob Amster – Principal, RTG
Digital Transformation – What Is It and How Are You Keeping Up?
Digital Transformation – Definition
Digital transformation is the inseparable change in: culture, organizational structure, processes, systems, and technology required to address today’s need to function in a multi-channel, multi-platform, real-time, customer-centric retail environment.
It is not evolutionary change like ‘next-generation technology’ e.g. from ECRs, to POS, to Unified Commerce.
It is revolutionary change due to digital disruptors e.g. Mobile/Location-Based Services, IoT/WoT, Artificial Intelligence, Augmented Reality, Blockchain and beyond (such as Quantum Computing), that are driving new processes and services.
It is limited by the commitment of leadership to leverage available technology and necessary resources to radically change business processes, improve performance and/or the availability of enterprise services to external entities.
Realistically, all retailers are not at the level of business maturity or financial means to ‘transform’ overnight. All the change cannot happen at once. Pick the low-hanging fruit – or more relevant changes – first. Brian Kavanagh, senior director of insights driven performance and retail evolution at The Hershey Company, said physical retailers must “make the in-store experience something the shopper wants” to take part in. Technology can help retailers do that. However, there is so much tech out there that brands big and small “can’t try everything and go with every shiny thing.” Tech companies need to understand what is unique about each retailer’s brand proposition and how they approach the market, he said. This begs a question.
What do retailers have to do to succeed in the digital transformation?
- Greg Buzek of IHL Services offers this as one mandate: “…[get] all of the ‘siloed’ systems integrated…”
- Omni-Channel Retailing – selling in stores, via ecommerce, via mobile commerce, and yes, even catalogs. This includes offering consumers:
- BOPIS – Buy online/pick-up in store
- BORIS – Buy online/return in store
- BOSS – Buy online/ship from store (I made up this one), and provide the stores with the infrastructure to ship (elegantly) from store to consumer
- Vendor Drop-Ship – leveraging the suppliers’ inventory to fulfill your online orders, and the vendor delivers directly to the consumer
- Returns – Be ready to process lots of returns. The more you sell online, the more returns you will process.
- Mobile-Commerce Web Site – Selling on mobile devices such as smartphones and tablets, each having varied form factors.
- Social Media – taking advantage the new opportunities to sell via social networks (‘buy buttons’), as well as promoting your brand without selling.
- Augmented Reality – more ‘fluff’ to upsell obvious product categories like furniture, home décor
- SOF – We have identified 33 technology components of the store of the future (not all in the same store)!
How do you prepare to embrace each and every nuance of the Digital Transformation?
Let’s look at what are characteristics of the digital transformation.
- Uniformity of the Brand’s presence i.e. one face to the customer, irrespective of the channel, and one unified set of methods of purchase (unified commerce). As Robin Lewis of the Robin Report puts it: “the POS is wherever the consumers want it to be, whenever, how often, and how they want it presented to them.”
- “More analytical, less subjective” says Paula Rosenblum of RSR Research
- No channel silos: One Marketing function, one Merchandising function, one Pricing/Promotions function
- Normalized databases
- Single version of customer information and purchase history
- Single version of product information
- Single version of enterprise-wide on-hand inventory and customer orders
- Real-time processing and inventory availability in all the following:
- OMS or DOM (Order Management System, Distributed Order Management)
- POS in store
- eCommerce platform
- 3PL fulfillment systems
- Inventory management systems
- Price-change management system
- Multiple channels for selling, such as
- Stores
- Desktop Web sites
- Mobile Web sites
- Call centers
- Social media
- A confluence of old functions
- Send sale
- Send from another store
- Send from fulfillment centers, and
- New functions e.g.
- Returns in store of ecommerce purchases (BORIS)
- Returns of in-store purchases to fulfillment centers
- Store fulfillment of eCommerce orders (BOSS)
- ‘Will-call’/Customer Pick-up in stores
- Pack/ship area and materials in stores
- Send from supplier/manufacturer (‘drop-ship’)
- Schema for ordering and paying for ‘vendor-drop-ship’ transactions
- If you are the manufacturer/wholesaler; warehouse space and functions to accommodate pick/pack/ship to individual domiciles
- Process definition and training are required for functions that didn’t exist before
- Compensation model – who is rewarded for sales and penalized for returns, and to what extent?
Leslie Hand, vice president for IDC Retail Insights, says that digital transformation in retail means more than simply adding digital technologies to the standard business plan. Instead, retailers need to rethink their business models, organizational structure, talent strategies, information management and the “technologies and processes by which you engage the customer.”
As they set out to embrace the digital transformation, retailers should provide the vision of how they would like their companies to look. External agents can be brought in to help strategize and implement.
Did you visit the Innovation Lab at the NRF Big Show in January? There were many transformative offerings there…
What are we seeing?
Consolidation, M&A
The biggest one was announced this month; Albertson’s and Rite-Aid will become a $24B company!
Emerging Technology
Blockchain is being touted more and more and IBM appears to want to lead the pack. Opportunities for blockchain technology in retail.
What’s new with us?
We have been engaged by a regional supermarket chain to assist with developing some measurement tools around warehouse, logistics/supply-chain.
We have been working with an airport-based retail chain in a communications cost-reduction initiative. Lots of money to be saved.
Visual Retailing – We are actively looking for retailers to pilot this visual merchandising software application. This SaaS solution enables retailers to deliver concise and consistent standards to their stores to ensure that the brand image and the nuances of the product offerings are accurately represented in every store. The software can be used as early in the process as design, to planning and buying, through merchandising to operations, to develop these concepts and then to communicate clear visual merchandising directives to every store under the company umbrella. The software has been successfully deployed at mark & Spencer, VF, Preca Brummel, Italy and others. We would be happy to work with you. Contact us regarding your interest.
We are working with Overheer Systems, an ITL company, to run item-level RFID proof-of-concept projects. Overheer offers a unique suite of SaaS applications – Reflect RFID – to deploy RFID and reap the benefits of this technology with minimal impact on existing system and processes. In today’s omni-channel environment, inventory accuracy is paramount in maintaining customer satisfaction and RFID delivers that and more. Through its association with ITL, Overheer Systems is now also able to deliver RFID tags in addition to the software, RFID scanners, and RFID printers/encoders. The proof of concept can be implemented at a single store with a limited range of product, in order to validate assumptions built into the business case. We are excited to have the opportunity to work with retailers wishing to develop and prove the case for RFID and are actively seeking retailers who want to engage in a proof of concept.
We continue to be enthusiastic about Theatro. The Theatro Communicator is a wearable, hands-free, voice-activated, Wi-F-based device designed with the hourly retail employee in mind. This smaller-than-a-credit-card device enables store-operations personnel to use a voice-controlled interface to call for back-up, check inventory, locate a manager, or simply communicate with a team member – enabling them to do more, heads-up/hands-free. The Product is already fully deployed at Cabela’s and The Container Store, rolling out at Fry Electronics, and being piloted at numerous other well-known retailers. As evidenced by Google’s Home, Amazon’s Echo and Alexa, and on-board automobile technology, voice activation is an effective, emerging technology. Call us to discuss how we can help you pilot this unparalleled product.
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The Retail Technology Group:
is located at:
761 Rock Rimmon Road
Stamford, CT 06903-1216
Telephone 203-329-2621