Building Technology Powered Lifestyle Brands: Changing Role of a CIO in Retail

Anishiya Taneja, CIO, Serena & Lily

Technology is transforming all industries: the taxi and transportation industry with Uber; hotels and hospitality with Airbnb, newspapers with BuzzFeed, retail with Amazon, are a few prominent examples. These companies have disrupted entire industries by fundamentally raising consumer expectations.

“Tech trends and rising consumer demands mean that retailers big and small must pioneer a new way if they are to survive and the role of the CIO in retail must change with it”

Change is occurring within industries and making odd bedfellows through the Internet of Things (IoT). Companies that take a good hard look at where these new technologies - IoT, Big Data, Personalization, Mobile ubiquity – can add competitive advantage and increase core value will reap disproportionate rewards. Technology is moving from the back-office to the gateway to the customer.

Signals are that the change is fundamental and here to stay. The technology-enabled consumer wielding a 4.7” phone in her purse has far higher expectations even compared to 3 years ago. She is used to 24/7 ease and convenience. She demands a personalized experience. She has come to expect a shipping window measured in hours not weeks.

Retail is in process of undergoing this tumultuous change. We are still in the first act.

Many online retailers are still adapting to the rise of mobile and the movement of their traffic from desktop to mobile. While, “mobile first” maybe a stale mantra in the San Francisco, and the Silicon Valley bubble, traditional retailers are just starting to come to terms with this new reality. Retailers still struggle to decide if mobile is a fad or reality and how much to shift their investment behind the technological shift.

Change in retail has been uneven so far. Mass market brands have been faster to adopt technology. Zara has been using technology to give it an edge in its supply chain management. Walmart has significantly invested in Walmart labs. Zappos offers excellent customer and service and returns to offset not having brick and mortar stores. Amazon has introduced new convenience – Prime (shipping), One Click (ease of purchase), Amazon Now (one hour delivery) and sophisticated low pricing.

Technology-driven change has been slower to impact luxury brands as they feel protected by core differentiation of product. Technology, like a forest fire, rarely distinguishes between mass market and luxury. There is a window of opportunity, created by these new technologies, to build a new type of luxury retailer – a technology-enabled lifestyle brand.

Warby Parker provides a great example of this in its transformation of the comfortable optical retail industry. It changed the landscape by returning part of the margin to the consumer and appealing to more modern, changing tastes of their audience. Their consumer is online and on mobile and while they might stop at one of the design showrooms to test the fit of a pair of glasses, it is optional. Warby Parker mails five pairs at a time for customer to chose and return. Offline supports online, rather than vice versa. Technology enables a lower price point. At this lower price point, consumers view glasses as fashion, changing per season rather than one functional pair they wear for a decade.

Warby Parker is part of a new cohort of these technology-enabled lifestyle brand leaders. Bonobos, Net-a Porter, TheRealReal and Serena & Lily are also at the vanguard taking advantage of the opportunity.

It may look like very little has changed in retail but the transformation has been fundamental. Technology frees retail from the hard merchandizing decisions based on limited physical display space in a brick and mortar store. The marginal cost of adding more SKUs to a website to offer greater variety of product offerings is low.

Brands, such as Bonobos, Serena & Lily and most famously Apple, use stores as a design shop and marketing vehicle for their flagship web e-commerce engine. The model still includes Brick and Mortar but it has been flipped on its head. The physical stores are now the new cost center and the website and e-commerce are the new 24/7 Flagship store that define the brand.

All this change and disruption has meant that the role of the CIO in smart retail has dramatically changed. Technology, once viewed as a necessary cost center is now seen as the engine of growth. Adaptive brands will realize this quickly and ensure that their CIOs have a seat at the table.

As a retailers new 24/7 flagship store is digital – a website or mobile site/ app, expressing the brand through these channels must now be an integral part of any retailer’s strategy. Often, their sunrise customers and new users – the lifeblood and future for any retailer will first experience them on a mobile app or online before ever setting foot in a store. The advantage of digital is not just that its 24/7 but also that its footprint is global.

The result is concrete transformation in a CIO’s role, which in retail traditionally might have been viewed as managing third party vendors to automate and minimize cost of back office functions. Now, it is about innovating on behalf of the customer and being where the customer needs you to be.

Competitive advantage for retailers lies increasingly in site experience and unique features including personalization and features that emulate what their real life store experience once was but in the convenience and privacy of their homes. Smart retail has quickly grasp the value of building more proprietary and differentiating in-house technology that gives them an edge over competitors rather than generic outsourced solutions. Retailers instinctively understand this value when they think of the product being “merchandise” rather than “software”. While security and compliance remain critically important for any CIO, tech enabled retail CIOs have a new focus on using technology for revenue generation and customer value. The role expands from “do no harm” and protect what exists and also becomes an engine of growth.

Every C level executive role has been impacted by technology. Organizations that can’t change will feel the pain of Darwin’s law. Technology is no longer hidden in a server room. It is now out in the Cloud both literally and metaphorically. The faster we embrace it, the faster our customers can enjoy the benefits of big data, automation, personalization and convenience it offers.

High-end retail has not historically viewed itself as on tech cutting edge but that is rapidly changing. Tech trends and rising consumer demands mean that retailers big and small must pioneer a new way if they are to survive and the role of the CIO in retail must change with it.