Technology is having a profound effect on the retail industry. Technologies such as the web, cloud, mobile devices and artificial intelligence (AI) are accelerating the evolution and transformation of this long-standing, multitrillion dollar industry. One obvious example is that consumers today have far more options for shopping than ever before, including from the comfort of their homes, in front of their PCs, and on their mobile devices. Technology experts term this impact as “digital transformation,” or the application of digital technology that extends across all aspects of human society.
The good news for retailers is that they have arguably been adapting to the disruptive effects of digital transformation better than most vertical industries. Advanced retailers acknowledge that this adaptation begins and ends with delivering a new, digitally optimized customer experience that adds value to shoppers when they’re in-store. The ultra-hip experience at any Apple Store is a prime example of what's possible when retailers smartly blend the best aspects of brick-and-mortar, digital technology and strategically trained in-store “specialists.”
The Challenge of Being Tech-First: Inertia
Not every retailer can be like an Apple, of course. In fact, there are still countless retailers, including many of the big-box retailers, that are clearly struggling with their transformation as digitally enhanced businesses. McKinsey attributed this struggle to retailers maintaining their “gut-feel merchant culture” and lacking “digital fluency.”
Fancy terminology that alludes to the fact that the retailers that are struggling have simply not done enough to invest fully in their technology practices and changing their mind-sets to be able to deliver customer-centric, digital experiences in their stores. Data analytics is one such area, according to the National Retail Federation (NRF), which pointed out that many retailers aren't doing enough to take advantage of the “massive” amount of information available to them that would benefit both retailers and their customers.
Get going was the NRF’s basic recommendation, which includes investing in new platforms and hiring the right experts to lead programs internally. Leading retailers today such as Nike have dedicated analytics teams that are gathering, analyzing and synthesizing all available data into business-benefiting insights that ultimately improve the customer experience in any of their stores.
Another area where applying digital technology provides tremendous benefits for retailers lies, somewhat ironically, in the state of the brick-and-mortar facilities themselves. In the legacy retail world, maintaining and repairing facilities was a highly manual and labor-intensive process involving hundreds, if not thousands of contractors, brokers and other service providers.
Costs of these legacy approaches are high and operational visibility is severely limited, especially when retailers outsource facilities management responsibilities to outside vendors. Unfortunately, retailers generally view these challenges as the status quo or merely just another cost of doing business. The fact is that retailers are likely wasting billions of dollars every year, in excess of $20 billion a year in the U.S. alone.
With the emergence of digital technologies (e.g., modern service automation) comes new levels of operational efficiency, speed, intelligence and even self-service facilities management that retailers once only dreamt of. These new capabilities are essential for retailers to maintain “brand uptime,” a concept that argues that the state of a company’s facilities has a real and tangible impact on how a corporate brand is perceived. This brand perception has a direct and significant impact, of course, on the overall customer experience in-store.
The Future Begins Now
There's no going back to the “good old days” for retailers that insist on keeping outdated retail business models in place. Digitally savvy consumers are demanding that retailers at least keep up in delivering the type of shopping experience they want at the stores they choose to patronize.
Despite the doom-and-gloom forecasts, this future will still very much involve shopping at brick-and-mortar stores, which generate more than 90 percent of all retail revenue. Successful retailers have recognized that keeping their futures bright involves harmoniously integrating both digital and physical assets, and blending their retail expertise with the tech tools of the new digital economy. This is the only real choice they have.
Tom Buiocchi is the CEO of ServiceChannel, a provider of facility management software and contractor sourcing.
Related story: How Retailers Can Get ‘Experiential’ With New Technologies