Why Retail Must Learn To Love Change
In the words of the famous British philosopher Alan Watts, “The only way to make sense out of change is to plunge into it, move with it, and join the dance”. As retailers increasingly become technology companies, is the art of retailing dead, to be replaced by sophisticated code and global technology titans? Or, are the traditional skills of retailers now supercharged offering a bright new future? These are some of the opposing positions that the retail world has been grappling with for some time now. And as you might expect, a nuanced answer seems to be emerging.
We live in an era of rapid change. Retailing on the high street seems never to have been so challenging. Ushered in by ecommerce over a decade ago, nimble new entrants have not only taken significant market share from incumbent players but, powered by digitally savvy new shoppers, some are quickly establishing themselves as market leaders. They are disrupting every part of retail’s value chain.
IBM estimates that within a decade only 40% of the corporates we know today will remain. So there is no time to lose and you, my esteemed colleagues, are the front line troops.
But in many respects, we are just at the beginning. I would like to highlight three areas of change that do, indeed, demand that we dance. These are:
- The new shopper’s experience
- The role of data
- The importance of collaboration.
A connected from birth millennial generation has been at the forefront of this retail transformation. They have also become the barometer for a mindset that now reaches far beyond any year of birth. Today’s table stakes for the connected shopper are mobile, social and fast. Online journeys are overwhelmingly mobile but so too, now, are online sales. But it doesn’t stop there.
Powered by the supercomputer in their pocket, or more often in their hand, shoppers now want a personal, conversational and customisable relationship with us.
In other words, they want a digital experience.
So how should we think about experiences for this new digital shopper?
Perhaps we need to start by understanding how technology has shifted us from the economics of scarcity to the economics of abundance. We are no longer constrained by the hit driven world of old, where shelf space was the primary driver, but one is which shelf space is now virtual and unlimited, where the costs of stocking an extra SKU is minimal. So everything is available and, most interestingly, everything sells ...at least something.
This unlimited supply that we refer to as the long tail has resulted in a world of niches in which traditional gatekeepers have been replaced by new taste makers, the influencer and increasingly the micro influencer: none other than the shopper themselves. Our brands are no longer what we tell the shoppers they are, but rather what they tell each other they are.
Our customers no longer have a “where to buy" problem, they have a “what to buy” problem. And if we, as retailers, are to succeed, we must become the source of the expertise they seek.
This shift from an age of information to one of recommendation demands a new approach. But the good news is the tools and tech are increasingly accessible.
In a world where our shoppers have megaphones, we can no longer push messages at them and expect them simply to work. Instead, we need to seed conversations and master the ability to pull the shopper to us. A key part of our success will lie in how well we figure out our relationships with our expert customers.
Because before we can promote, we must first persuade.
I believe that this means that we can no longer give priority to a task focused design approach in an ever-increasing attempt to minimise what we refer to as "friction", but instead turn our attentions to a human focused design approach. One that gamifies the shopper’s interaction and stimulates loyalty through an experience they feel compelled to repeat.
In an omnichannel world of abundance, with hundreds of permutations in the routes our shoppers take, from discovery to purchase through to delivery, we must be committed to build the new filters that power the shopper’s ability to navigate.
Digital experiences driven by visual rather than textual communication: for example, Instagram. And ephemeral media such as Snapchat, give us a glimpse of how rapidly our traditional catalogue based thinking is being disrupted by these new filters.
But it doesn’t stop there. Conversational commerce driven by intelligent bots. Augmented and virtual worlds, the move to 3D. These are all now firmly within our grasp.
One of the most exciting new filters is the rapid acceleration of inputs beyond the traditional keyboard. Voice is possibly the most intriguing. Google, Amazon and Apple are betting millions on this new capability, what they call “the most natural of all forms of communication”. Whilst we are still in the early stages, the rate of change cannot be ignored. From a negligible position in 2014, Amazon reports more than 10% of all its search traffic is now coming from voice; that's over 50 billion voice searches per month being carried out through a virtual assistant.
They project this will rise to over 200 billion by 2020 and, as we all know by now, if it catches the customer's imagination this estimate may prove to be very conservative indeed.
But right now, these pioneers need to collaborate with us, and so they are courting our participation, enabling us to embed this capability right into the heart of our applications. So, if we are to be truly nimble and learn, perhaps 2018 is a key entry point for voice.
Retailers must no longer limit their use of technology to the functional, the efficient, but rather see it as our palette to paint a rich new world of colour for the customer.
One of retail's greatest strengths has always been its ability as a storyteller. Nowhere is this truer than in fashion perhaps, where the product is not so much about functionality but rather its desirability.
But we are mostly still taking baby steps…we can go much further. Technology now empowers us to make our individual shopper the star of the stories we tell. We must develop our skills as digital storytellers. Stories which are interactive, moment based, visual, tactile and certainly mobile.
To light our way, we are powered by the data that shoppers are prepared to share. But make no mistake, our shoppers have understood the value of their data. Whilst they may not take the time to read terms and conditions or data policies, do not believe they don’t care. They do. They expect value in return. This value will often be measured in terms of their experience. And in a world of abundance, they won’t hesitate to shift their allegiance when they don’t get it.
So if data is the new oil, we must make sure that we have the resources to refine it. Today’s table stakes are a flexible tech stack that allows us to move fast. But we must hone our skills in deriving actionable insights from the many touch points that we already have with our shopper, rather than content ourselves with the vanity metrics of old. And we must go further. We must gain access to new touch points that are outside our online brand universe to understand our customers better.
We must also learn from the algorithmic approach of companies like Spotify and Netflix. These companies have picked up the baton first raised by Google and now lead major stock markets around the World. They demonstrate the ability to improve their product and experience each and every time a customer interacts with them.
Perhaps one of the most exciting uses of data and undoubtedly an emerging theme is the continuing dominance of platform businesses. We have already seen demonstrated by the likes of Airbnb, Uber and Youtube a move beyond the pipeline business thinking of old, and which many of us still practice, where we deploy our assets in a highly controlled and linear manner to create value.
Instead, these new data driven platform businesses aim to hand over control to their market participants, stimulating them to interact and allowing them to create value between them. The platform ultimately becomes the pipe through which this value passes, and the platform company frictionlessly monetises a portion of it.
The unit economics of these businesses are unbeatable and, powered by positive network effects, the speed with which they can scale is not only disrupting traditional industries but redefining them altogether. Sorry Marc but it is Platforms, not software, that is eating the world.
In 2018, data will also be the force that allows us to reimagine the role of our stores. They must become a destination, an experience in their own right and this can only happen by digitalising them.
It makes little sense today that within minutes of a customer’s online journey, we can collect hundreds of data points but if that same customer chooses to spend far longer with us in store we’ll collect only two...when they walk in and when they walk out.
Our inventory too must become smart. In a geo-localised, on-demand world, a 60% level of stock accuracy cannot make sense any more. Allowing demanded items, different sizes and colours to languish in the back room when our customer is ready to buy is the commercial equivalent of tying one arm behind our back.
We need to know where every product is at every moment and technology such as RFID is now at a price where this is possible. A single stock view is a necessity.
But we must also envision technology to empower one of our most valuable resources… our sales associate. We must free them from behind their tills, empowering them to be smarter when they are with our customers and able to devote more time to them.
A single stock view and a single customer view are the building blocks to allow us to create unique and insightful experiences, at scale, each and every time our shopper interacts, whether via clicks or bricks.
We must excel in all these things, however hard they may be, because it is through our customer’s willingness to share their data as well as our ability to harvest it, that will let us harness the power of automation and speed which machine learning and artificial intelligence will make available to us. And this, like the arrival of mobile, will prove a watershed moment in retailing.
But whilst the future is undoubtedly bright for the winners, today’s constraints can be stifling. How can we embark on this journey with cumbersome legacy systems, limited resources, over stretched personnel and the technical difficulty of these sophisticated new technologies?
The answer lies in how well we explore the “windows to our world”. In simple terms, this means we must rethink how we collaborate. Both internally and increasingly externally.
Digital innovation is no longer a job title. It is a mindset. Our organisation’s culture is key to this. We must no longer penalise failure but recognise that it delivers learning and it is this learning which is our unit of progress.
We must destroy the silos within our organisations and, instead, build truly cross functional teams that are empowered to build, measure and learn. We must encourage them to repeat this loop at speed. Pivot or preserve will become our mantra.
We need to build bridges to the ecosystems that surround us and see research and development as much as an external mission as an internal one. We must put in place the external pitchers who will find opportunities and the internal catchers who can act upon them, unhindered by the paralysis of traditional politics.
We must give oxygen to radical innovation that challenges us, and hedge strategies that become our insurance policies.
When interacting with our ecosystem, we must master our gives and our gets. As we look at our businesses what assets can we bring to the table and how will our partners be able to extend these?
As retailers, we are challenged today more than ever, to master the digital change that surrounds us, from the customer experiences we imagine, the data we’re able to harvest through to the collaborations we can enable. These will all directly correlate to success with our shoppers. In a world of unlimited supply, they will buy from us not because of what we do but because of why and how we do it. And if we get this right, they will increasingly define themselves as a part of our tribe.
Let's never forget the words of possibly the greatest disruptor of our time, Steve Jobs, “Change is hard and sometimes life is going to hit you in the head with a brick. But don’t lose faith”.