Leslie Hand, Research Director, IDC Retail Insights
Retail is in the midst of a transformation unlike any seen since the 1970's when chain retail first got serious about leveraging technology to electronically tabulate sales, automate reporting, and perform sales analysis and business and product planning. The former technological shift was driven both by consumer needs (suburban sprawl) and the new availability of technologies that addressed the challenges that hampered retail growth. Today's retail shift is driven primarily by three overriding factors - changing consumer behavior, consumer technologies and globalization. One could argue that these factors have forced retailers into a position where they simply must leverage the latest and greatest technologies just to stay in the game, no less keep and win new customers with attractive brands armed to satisfy the customer.
“Commerce and fulfillment are two of the biggest technology investment areas forretailers today”
This new customer is omni-channel, and follows a path to purchase that is more complex than before, potentially shopping online, mobile, catalog and store channels in parallel. The consumer's purchase decision is influenced by a variety of digital technologies - mobile information sources, social networks, email, text messages, mobile enabled sales associates and digital signs and billboards. The consumer experience of a brand can all be boiled down to three primary activities: buying, receiving and using goods. All of the marketing, merchandising, selling and supply fulfillment processes that a retailer shepherds all culminate in these three touch points. From a retail perspective every step along the way from product conception through the post sale experience is most effective and efficient when it operates as an integrated orchestrated part of the whole.
Commerce and fulfillment are two of the biggest technology investment areas for retailers today. Establishing programs and capabilities that enable customers to interact in as many potential moments of influence as possible is the first omni-channel order of business, of course calibrated for each business. In 2014 we will see retailers continue to stretch the boundaries of their interactions with consumers, adding capabilities such as location based marketing, integrated mobile POS and virtual instrumented shopping. Retailers will explore and test location based marketing schemes that are actually synchronized with loyalty programs with very transparent and clearly communicated program benefits.
The second order of business, fulfilling customer needs, is potentially even harder to accomplish because it requires optimizing and orchestrating product availability and product movements to align with customer demand to receive goods anywhere and anytime, while being ever mindful of cost. An efficient and effective supply chain will need to address additional complexities that omni-channel retail presents including the following:
• How to factor online sales that are picked up in store in forecast and replenishment models
• How to recognize sales that are impacted by assets, people and systems, in multiple channels–for example store and ecommerce
• How to ramp up for ship from anywhere including same day delivery without being crushed by increased costs while waiting for demand for these services to scale
• What policies and processes need to be created to manage the returns flow of goods
• How to obtain a holistic and deep understanding of the customer that incorporates in aisle shopping behaviors as well as those online
• How to measure and manage marketing success, and optimize budget to omni-channel programs In 2014, retailers will evaluate new ways to fulfill consumer need, and we expect supply networks and collaborative relationships to significantly improve their ability to do this profitably. Retailers will need to maintain an omni-channel war room, or at least an omnichannel task force, in order to keep pace with the strategic moves of the competition.
Underlying these needs is a need to have common core customer and product demand analysis among channels. Analytics platforms can now access more data and perform analysis in a fraction of the time required previously, essentially making real time or at least closer to real time analysis possible. This is revolutionizing a retailers' ability to integrate analytics into core processes that directly impacts how well they perform customer specific marketing, assortment and supply planning, and even brand development.
We reached a tipping point in 2013 in "doing omni-channel", and this has created higher demand for prescriptive roadmap development and packaged and/or tightly integrated solutions. By that I mean retailers, particularly those that are not omni-channel leaders, progressed far enough to realize that omni-channel is not a matter of simply adding mobile POS or enriching eCommerce. In fact, serving omni-channel customers requires that retailers not repeat patterns of the past, but instead create brands that integrate mobile, social and analytics into everything they do. The retailer of the future will allow cloud, big data, mobile and social to facilitate and enable a technological transformation that is truly built for these times.
Retail organizations will also change the way that they consume IT services. New positions including Chief Experience Officer, Chief Omni-Channel Officer and Chief Digital Officer, along with preexisting Chief Operating Officers and Chief Marketing Officers will bridge the divide between IT and the business. These individuals need to work together to develop strategies to serve the customers well, enabling new levels of interaction. But these leaders will also need to navigate the new technologies and services available, and in some cases, take giant leaps forward in order to succeed.
The questions that arise and the opportunities to improve everything from brand perception to business process and very specific tactical decisions are seemingly unlimited when retailers can get past the notions of what worked in the past.