PRESENTED BY WIRED with Deloitte Digital
Condé Nast and Deloitte Digital have teamed up with leading specialists on Digital Transformation to present Connecting in the Digital Age, a series that will provide an insider’s look at a framework for Digital Transformation, and how it’s been applied across industries and around the world. See how no two transformations are alike, but each shares a common denominator: the power of connection. Here, how tailoring a transformation to both improve the customer’s life and align with a brand’s values means more than just a win-win.
THE NARRATIVE in the retail sector has been bleak the last five years: Brick and mortar stores, the story goes, are destined to fail at the hands of e-commerce.
But while that may be what we’ve all been hearing, it’s not the full story. In fact, the total percentage of online retail sales in 2018 was just 14%. This number is rising steadily, however, it still illustrates just how far e-commerce has to go to overtake brick-and-mortar experiences.
But what if that’s a misread of the data? What if the most successful players in retail aren’t either e-commerce or brick and mortar, but the right combination of both?
According to Nicola Johnson, principal in Deloitte Consulting LLP’s retail practice, the most-successful retail brands of the future will be those that can use emerging technologies to create integrated online and offline customer experiences.
“You’ve got this wide array of needs in retail today,” says Johnson. “There’s everything from mobile apps to real-time data analytics. In the retail industry it’s a move towards a seamless experience—and nobody’s done it well yet.”
Many brands are venturing into this kind of cross-pollination—e-commerce companies trying their hands at brick and mortar, traditional brick-and-mortar companies looking to master online shopping—but efforts so far are generally piecemeal. These transformations, suggests Adam York, senior manager in Deloitte Consulting LLP’s retail practice, often lack clear direction.
“Successful digital transformations are about changes that stitch together multiple pieces of the business,” says York. “Think everything from the upstream supply chain all the way to how an employee interacts with a customer in a store. I think many retailers over the last few years have been doing what we like to call ‘Random Acts of Digital’: little pieces of the puzzle without a cohesive ambition.”
First: Focus on Ambition
Johnson and her teams are helping retailers—from newly emerging, digitally native brands to legacy companies—to achieve this goal of a streamlined consumer experience that connects in-store and online interactions through digital transformation. Their first step: help retailers define an ambition. And since there’s no one-size-fits-all approach for transformation, it’s important to ask questions about how that ambition, once achieved, will be assessed. By growth in sales? Net promoter scores? Shareholder value? A well-defined ambition, when expressed through a digital transformation, is a way through the disruption that retailers face. It’s a way of uncovering new business models and building competitive advantages for long-lasting impact.
And that’s just the beginning of the process. When a retail client approaches Deloitte to talk about how their company can transform, the answer isn’t just: You need an app or take your business online or add an in-person, digitally driven experience. While some variation of these options may be where things head, Johnson and her team work with retailers in taking a closer look at their business landscapes—including economic indicators, shifts in consumer behavior, and changes in technology—to help inform recommendations. The economy, for example, affects people’s financial security, which is at the root of people’s purchasing decisions.
And because the way people buy is ever-changing, Deloitte doesn’t just consider how the economy is trending now, but also how it’s expected to trend in the future. To help frame their transformations, retail companies consider questions up front like: How can the company survive an inevitable recession?
“If you plan for a digital transformation based on exactly what’s happening today, by the time you’re done with that work in six months, or a year, or two years, the market’s going to have moved on,” says York. “We like to use our economic research to help clients understand where we think the market will be when they’re in a position to be completing their digital transformation activity—not where it is today.”
Technology Brings a Smooth Experience to Life
The retailers that successfully transform their businesses will be the ones that keep the customer top of mind. Consumers are now provided with an abundance of choices—multiple brands designing similar styles, retailers selling at similar price points, and so on. And as those choices continue to bloat the industry—from exponentially growing online marketplaces to new digitally native brands—experience is a differentiator.
According to a number of reports, experience matters: In one report, after controlling for other factors that drive repeat purchases (for example, how often the customer needs the type of goods and services that the company sells), customers who had the best past experiences spent 140% more compared to those who had the poorest past experience. Another survey of 200 marketing leaders reveals that where personalization is being applied in a robust way, enterprises are seeing positive results—40% report that their customer personalization efforts have had a direct impact on maximizing sales, basket sizes, and profits in direct-to-consumer channels like e-commerce.
“There is a very deliberate need to ensure that the experiences consumers have—whether online or brick and mortar—are consistent,” says Art Ash, principal in Deloitte Consulting LLP’s retail practice. “Simply saying ‘I have both brick and mortar and ecommerce’ without consideration for the strategy, the operating model, and the consumer experience isn’t enough.” Likewise, implementing an experience without a clear strategy for how it maps back to your brand values won’t work either.
These consistent experiences are bolstered by the right technology: often a mixture of cloud infrastructure, automation, customer-relationship management software, and data analytics. There are many different departments at work to keep a retail operation running and customers engaged.
Ash and his teams recently saw these behind-the-scenes technologies at work while exploring retail experiences in the field. They asked a Gen Zer to take them to what she considered the best stores in the area. After visiting about 10 different places—spanning apparel, home furnishings, and fast casual restaurants—they asked their guide how she’d made those choices. She held up her phone and cycled through the 10+ apps she’d used. All of this, says Ash, points to the speed at which consumers move—and the volume of data that needs to be processed and quickly served to them—just to get them to engage with a brand.
“The different platforms she’d used got real-time insights from consumers with real-time perspectives. And it was those real-time perspectives that actually shifted where we went. Immediacy was expected as smartphones drastically reduce wait times for goods and services. And when information wasn’t displayed almost immediately on one app, she moved on to a different app,” says Ash.
Like that Gen Z shopper, consumers today are operating at high velocity. But retailers on a path of digital transformation shouldn’t simply mirror that velocity; rather, they need to clearly define their ambitions, then make sure those goals match their larger company strategies. Only then will deploying technology increase the speed at which the different touchpoints in the retail value chain finally work together to provide the best possible experience.
And change the narrative from bleak to bright.
Connecting in the Digital Age continues with stories that expand on the power of connection. From elevating the human experience, to forming strategic alliances and creating ecosystems for innovation, to determining value on your own terms, this series will continue to explore the elements of executing a successful Digital Transformation.
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