Amazement: Brick-and-Mortar Retail’s Biggest Threat

It seems that there are only two types of retailers today: those facing deep existential challenges and Amazon.com. This competitive landscape has caused many brick-and-mortar retailers to lose sight of the customer experience.

A new horrible term called “Amazonization” (yes, it really has got two "z's" in it) has recently emerged. Aside from the ghastly grammar, it's not the right word. While many great retail brands are thriving, many more seem to be stunned, alternating between running in the tiny circles of conflicting tactical moves and stopping altogether, scared to rack up even the tiniest costs. They're amazed, rather like Mowgli staring into the spiral eyes of Kaa, the hypnotic snake in "The Jungle Book."

Of course digital-only providers have a massive cost advantage and they win with a combination of speedy innovation, easy transactions and low prices. That’s before scalability and tax advantages are even considered.

To combat this trend, brick-and-mortar retailers need their huge cost base to be working much harder than ever to pay for itself. Shifting a physical presence from being a financial millstone to a source of lasting competitive advantage isn't easy. It takes courage, decisiveness and using Amazon’s "amazement" against it.

Breaking Free of ‘Amazement’

Great store-based retailers know that they must find ways to bring their customers all the experiences that they love when buying online, including:

• easy access to all the product information they need;
• choice;
• easy engagement as they move from one channel to another;
• competitive pricing (not necessarily the cheapest, but close to it); and
• a quick, painless checkout experience.

But customers also need the things that they can’t get from a website:

• a friendly, trustworthy face;
• the chance to touch and experience the products (vital for clothing, audio, TVs, etc.)
• instant gratification (i.e., walking away with the goods); and
• a simple omnichannel experience if the customer chooses to buy online.

All of these requirements to compete with e-commerce giants have had a significant organizational impact on traditional retailers. Unfortunately, this has led to a trend of cost cutting in the customer experience department, forcing consumers to avoid physical locations due to bad or slow service.

A couple of years ago, most retailers had a head of digital, often accountable to the marketing side of the boardroom, and an IT director accountable to the CIO or even finance. These days, almost all retailers have recognized that keeping digital and physical thinking apart is a strategic mistake, playing into the hands of the digital giants. As this thinking has changed, the role of head of digital has slowly morphed from being a marketing function to an increasingly technical job.

For many, the climax has been a boardroom showdown between the chief digital and chief information officer, with one ending up reporting to the other — or removed altogether.

The best solution can be to have a role that can become broker between the two worlds (or manage both). So what are the differences?

CIO or CDO?

Most CIOs come from a background where their primary role is that of custodian. The CIO knows to keep the company safe, secure the data and keep all the systems running. CIOs can often have the mind-set that as long as systems are working properly, they're ideal IT leaders. CIOs also come from an environment where new initiatives need big capital investments. CIOs then think long term, with a focus on security and reliability at all costs. Better to be slow than to put the whole business at risk.

CDOs come from a very different background and culture. As most physical retailers began their e-commerce activities as a skunkworks-type project, the risks and implications of a mistake were always far less. For a CDO, the worst sin is to be left behind by innovation, to look old-fashioned next to the competition. CDOs come from the Silicon Valley “fail fast” school of iterative innovation.

It can be a tale of two worlds. Digital people roll their eyes in meetings at their overcautious, negative colleagues, while the IT team stares back in horror at their reckless colleagues willingness to risk the company’s integrity on yet another unproven technology.

Scoring the Bout – Who is Right?

Both. And neither. A retail business that can’t keep up with its digital competitors risks a slow, painful death. However, a retailer that loses control of its customers’ data, or that is unable to operate on a busy weekend could be finished overnight.

Digital thinking has brought forward huge advances in development methodologies, from Agile to DevOps, making an iterative approach to delivering value mainstream.

The CIO never forgets that the business must be protected come what may, and all that messy capitalization and balance sheet stuff still adds up.

Together they hold the keys to a physical retailer’s success. Together they can make the store experience a delight, with well-informed staff providing personalized services and flexible delivery options. Together they can get the best out of the company’s assets, technology and unique expertise. Together they need never be Amazed, but they can often be amazing.

Ian Benn is a senior vice president at Ingenico, where he is responsible for sales and project delivery for some of the world’s largest retailers.