Digital In Retail: The Three Steps To Maturity
Before embarking on a career in retail design and customer experience in the late 1990s, I was part of a tech 1.0 startup. Back then, our marketing activities involved showing our wares at trade shows and tech conventions along the lines of CES and Comdex. This month, nearly twenty years later, I found myself at The National Retail Federation’s “Big Show” conference in New York, and the roster of participants looked eerily familiar.
The big players at the show were the likes of Oracle, IBM, SAP, Microsoft and Toshiba. The smaller booths were taken up by relatively newer brands such as Viniculum, Comqi and Sprinklr. It seemed that the whole conference—the biggest one of its kind for brick-and-mortar retailers—had become 100 percent digital. So many retailers are in the process of digital transformation that it has taken over the entire discussion in the industry.
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The traditional retail sector has reached a kind of early-maturity when it comes to digital. A few years ago, initial attempts at integrating digital into the brick-and-mortar retail experience focused on spectacle—immersive graphics pushing repurposed ad content. We also saw several attempts at bringing an eCommerce website into the store, often leaving a flashing C-prompt on a blue screen when the web connection faltered. Thankfully, we’ve moved past these early approaches for the most part. Now, most of the big players in retail have realized that the true power of digital is to get retailers back to what they do best, which is to meet their customers in a way that is personal, relevant and meaningful. The benefits of this change will be improved sales and customer loyalty for the brand, and an effortless, curated and personalized shopping experience for the customer. And the backbone of all this is customer data.
There are three big challenges that brands face as they become more mature as digital retailers–how to store and organize data, how to collect it, and how to use it. The promise of digital in retail won’t be realized for a specific brand until all three of these challenges are solved.
Let’s start with the storage and organization of the data. The big issue here isn’t capacity, but compatibility. For many retailers, creating a unified view of customer data is a difficult task, with legacy systems working out of sync with each other. We worked recently with a large retail brand, whose customer service staff would often need to access eight or nine different databases to respond to a single call, and this brand is not alone. Often, inventory data is held separately between different geos and the eCommerce team. Data from the aging POS system might not connect well with data from the CRM. Customer experience survey data might sit in its own silo, manually correlated with sales data but not as a regular practice. At some retailers, it feels like every Vice President has their own little data silo that they defend from the barbarians down the hall. And while it may be easy for people to get a small budget to work on sexy, customer-facing touchpoints, fixing the “plumbing” that allows the data to be accessed where and when it’s needed is often neglected. This was what most of the exhibitors at the “Big Show” were on about, and this is a big enough problem that it can practically hijack the entire discussion around retail. Fixing this kind of problem involves silo-busting between management teams, and a strong commitment from the top of the company to invest in a solid, secure, integrated IT infrastructure across functional groups. The brands that have an advantage here are new enough (or small enough) that they don’t have the backlog of legacy systems to deal with, and they likely built-in customer data as a foundation to their business right from the start.
So, assuming a brand is on a path to solving the storage problem, we now need a way to collect the data consistently. There are many ways to approach this, but in retail, they all come down to one principle: providing a reason (value) for the customer to identify themselves every time they connect with the brand. Whether providing a discount on a future purchase (Airmiles) or a streamlined customer experience via an app (Starbucks) or an extended brand experience (Nike Run Club), or an enhanced online shopping experience (Amazon Prime’s personalization and shipping) brands need to understand where they can provide real value to a customer in exchange for their data. In this sense, data is a form of currency—with the customer sharing it only when the brand provides a compelling value proposition to do so, and the promise to use the data responsibly. We still get approached by retailers who want to build an app without a clear customer-focused reason for doing so. Defining a value proposition and then wrapping it in a compelling experience is what retailers do best, and the brands that have been successful at data collection have leveraged their retail skills to get there.
This leads us to our third challenge, namely how we should use the data. Customers’ expectations have shifted in recent years, with “omnichannel” retail experiences becoming table stakes for most retailers. While privacy is still a concern, customers now expect their shopping experiences to be as deeply personalized in-store as it is online and expect to see no barrier between the “digital” offerings of a brand and their instore counterparts. The store, service, web, mobile and app ecosystem is simply how the brand presents itself, and it seems obvious from a customer’s point of view that they should all mesh together. One of the most powerful retail applications of digital technology that we’ve seen is to support personalized face-to-face service. Staff can access customer shopping profiles, endless aisle, product information, delivery options, event calendars, special brand experiences, product recommendations, checkout, past purchases and special discounts all from a smartphone. This application has been successful when it has been able to support the real-world needs of customers and does not get in the way of the face-to-face experience. Building a system like this requires a fair amount of sophistication on the part of the brand—touching on service design and staff training the physical design of the space and the design of the digital interface and infrastructure itself. From the customer’s side, they are simply receiving an elevated level of service. From the brand’s side, they are breaking down data silos and taking a cross-functional approach to retail experience design—and that’s not easy.
As I was exploring the “Big Show” one thing stood out for me. There will be one common thread that will tie together retailers’ long-term success: a focus on the real-world customer experience. As retailers deal with the three big challenges around customer data—storage, collection and end-use—the successful brands will design their entire brand around their customers in an effort to better connect with them. And this is what the best retailers have been good at all along.