Much like the hospitality industry, digital transformation in retail has been a huge driver of change.
One important fact is getting lost among all of the talk of “the retail apocalypse” and myriad stories about increasingly empty shopping malls: there’s a lot of money to be made in retail. In fact, the retail market was expected to grow by more than 3 percent in 2018, unemployment is low, and wages are at least stable.
In short, there’s money to be spent. Now, where are shoppers spending it?
Coming into 2019, consumers are in control when it comes to retail. Choices are abundant. According to Deloitte’s 2018 Retail, Wholesale and Distribution Industry Trends Outlook, “consumers have been conditioned to expect fast, convenient and effortless consumption.”
This is arguably the result of the degree of digital transformation in retail that we’ve seen in recent years.
If you want to survive in retail today, you need to make it easy on your customers. That means meeting their needs across channels, fulfilling orders quickly and accurately, offering competitive prices, and not sacrificing quality in the process.
Even in a world where Amazon has changed the retail game, Walmart just announced that it had its best holiday season in years. According to a recent Fortune article, “Walmart’s e-commerce sales rose 43 percent during the quarter, belying another myth: e-commerce and store sales are in competition with each other.”
Retail has always been a very fickle industry, with the right product mix and the right appeal to the right customers being crucial to success. But digital transformation in retail has seen the map change. You’re no longer competing with the store across the street; you’re competing with the store across the globe.
Retailers are putting every aspect of their businesses under scrutiny to help them remain relevant. Four areas in particular are getting a great deal of attention:
Customer experience: In today’s need-it-fast, need-it-now, need-it-right world, customers expect the ability to make purchases where they are, not where you are. That means via the Web, mobile devices or in a store. And all of the information about those orders needs to be tied together, so that if there is a problem, it can be resolved quickly via any channel.
Competitive differentiation: Appealing to retail customers used to mean appealing to all of your customers as one group or like-minded block. But customers are individuals, and today they can be targeted with personalized messaging and products that are likely to appeal to them, not to everyone.
Supply chain: Having the right products in the right place at the right time is part of the supply chain strategy. But moving them efficiently and cost effectively from any number of suppliers to warehouses and stores can make or break margins.
Partnerships: Among the smaller players in the retail space, partnerships with industry giants like Amazon can help reach a global audience that simply isn’t otherwise available and also reduce complexity. Larger players also recognize that partnerships can be mutually beneficial in the retail space.
Enabling each of these strategies is data – and lots of it. Data is the key to recognizing customers, personalizing experiences, making helpful recommendations, ensuring items are in stock, tracking deliveries and more. At its core, this is what digital transformation in retail seeks to achieve.
But if data is the great enabler in retail, it’s also a huge risk – risk that the data is wrong, that it is old, and that it ends up in the hands of some person or entity that isn’t supposed to have it.
Danny Sandwell, director of product marketing for erwin, Inc., says retailers need to achieve a level of what he calls “data intelligence.” A little like business intelligence, Sandwell uses the term to mean that when someone in retail uses data to make a decision or power an experience or send a recommendation, they have the ability to find out anything they need about that data, including its source, age, who can access it, which applications use it, and more.
Given all of the data that flows into the modern retailer, this level of data intelligence requires a holistic, mature and well-planned data governance strategy. Data governance doesn’t just sit in the data warehouse, it’s woven into business processes and enterprise architecture to provide data visibility for fast, accurate decision-making, help keep data secure, identify problems early, and alert users to things that are working.
How important is clean, accurate, timely data in retail? Apply it to the four areas discussed above:
Customer experience: If your data shows a lot of abandoned carts from mobile app users, then that’s an area to investigate, and good data will identify it.
Competitive differentiation: Are personalized offers increasing sales and creating customer loyalty? This is an important data point for marketing strategy.
Supply chain: Can a problem with quality be related to items shipping from a certain warehouse? Data will zero in on the location of the problem.
Partnerships: Are your partnerships helping grow other parts of your business and creating new customers? Or are your existing customers using partners in place of visiting your store? Data can tell you.
Try drawing these conclusions without data. You can’t. And even worse, try drawing them with inaccurate data and see what happens when a partnership that was creating customers is ended or mobile app purchases plummet after an ill-advised change to the experience.
If you want to focus on margins in retail, don’t forget this one: there is no margin for error.