During a panel on digital transformation at NRF 2018: Retail’s Big Show, industry thought leaders reflected on the need for retailers to tear down the walls dividing IT business operations and declared the traditional siloed approach to retail a relic of the past.
IT “[needs] to be part of the ideation process and [needs] to be part of the planning so that we [can] build our budgets and capabilities along with what the business [is] thinking,” said Scott Emmons, direct and founder of Innovation Lab at Neiman Marcus.
Although most retailers are likely familiar with the importance of breaking down barriers, the point bears repeating because it represents an industry-wide shift towards integration and is one of the foundational elements of retail digital transformation.
What is Digital Transformation?
Put simply, digital transformation is the idea that businesses should utilize new technologies and business models to motivate their employees to be more productive and to provide value for customers. Microsoft defines digital transformation as “The realignment of or investment in new technology, business models, and processes to drive value for customers and employees and more effectively compete in an ever-changing digital economy.” Digital transformation isn’t specific to any one industry; instead, it applies to any industry marginally affected by the advent and evolution of technology.
Consider all the ways digital transformation manifests in the retail industry:
- Retailers require a strong online presence to stay relevant;
- Customers can access stores from anywhere in the world in just a matter of moments via a mobile device;
- Social media has become a primary form of advertisement;
- Cutting edge technologies such as AI, augmented reality, and virtual reality have become an active part of the shopping experience;
- Retailers use data analytics and machine learning to inform major business decisions.
It’s easy to see how vital digital transformation is to the retail industry, so it’s important that you, as a retailer, understand how to implement its basic tenets in your business strategy.
In a previous series of posts, we introduced the four pillars of digital transformation: customer engagement, employee empowerment, optimizing operations, and reimagining your product.
The first of these four pillars, customer engagement, is at the heart of everything the retail industry does. As you know firsthand, retailers depend upon a satisfied customer base to increase their bottom line, and the key to maintaining a satisfied customer base is to provide customers with quality service and a unique customer experience. In fact, 68 percent of customers are willing to pay up to 15 percent more for a product or service if they’re guaranteed a good experience, according to Podium’s 2017 State of Online Reviews report. And existing customers are a renewable revenue stream, with loyal customers five times more likely to repurchase, four times more likely to refer, and seven times more likely to try a new offering.
Technological advancements like mobile computing and data analytics have made it easier for retailers to communicate with and understand customers than ever before. You can take your business and your customer relationship to the next level with a customer relationship (CRM) system. CRMs are designed to analyze customer data-acquired through various means, such as social media and by tracking web activity-and provide granular insight into customer demographics based on behavior and preferences. You can then use the insights generated by the CRM to develop more strategic, targeted marketing and selling campaigns in the interest of creating a higher quality, more personalized customer experience.
In keeping with the theme of the role of integration in digital transformation, any CRM worth its salt should integrate with other business solution software-such as enterprise resource planning (ERP) software and business intelligence (BI) software-and should provide cross-channel insights to paint a more comprehensive picture of your business’s operations and your customers’ needs.
Retail has acquired something of a reputation for being a “dead-end” job, largely because only 33 percent of the American workforce is adequately engaged at work, according to Gallup’s 2017 State of the American Workplace. It’s imperative that you address low employee engagement wherever possible because employee engagement correlates directly to the overall success of your business: According to Gallup, companies with high employee engagement rates are 21 percent more productive than those with low engagement.
One way to significantly improve employee engagement is to focus on the second pillar of retail digital transformation: employee empowerment. Employee empowerment is all about instilling your employees with confidence by equipping them with the knowledge, skills, and tools necessary to do their jobs well. In addition to providing insight into customer demographics and behavior, a CRM is a powerful tool for boosting employee morale.
A CRM enables employees to access a wealth of detailed customer information, which they can use to upsell, make informed customer recommendations, and more, all through a single, easy to use management interface. Again, it’s best practice to use a CRM that integrates with ERP and BI and to invest in training to help your employees better understand how to use the technological resources available to them.
As a retailer, you know how important it is for your business to run smoothly both from the front line and the back end. Taking the time to create a unique, positive customer experience and assembling a team of empowered employees who provide quality customer service are two ways to improve your business’s front line-now it’s time to focus on what happens behind the scenes.
The third pillar of retail digital transformation, optimizing operations, emphasizes rapid, data-driven decision-making, streamlined workflows, and greater operational visibility across channels. Once again, integration is paramount: In the age of ecommerce, organizations operate on a multi-channel playing field. In order for your business to provide the seamless omni-channel experience customers expect, you need operational consistency.
Consider the following: According to a 2016 Internet Retailer survey of online shoppers, 57 percent of respondents indicated that they had picked up an online order in-store in the past year. Let’s say one of your customer chooses to pick up an online purchase in-store, but when he arrives to pick up his order, it isn’t available. One of your employees tries to assist the customer but can find no record of the order, and the item is no longer available in-store. Thanks to a lack of operational consistency between your web store and brick-and-mortar storefront, you’re left with an unhappy customer and an employee who looks foolish, which retroactively destabilizes the first two pillars of digital retail transformation.
To avoid this and similar issues, start by implementing an ERP system. ERP systems consist of multiple integrated applications-often including BI software, which gathers data, and CRM-that share a single data base and user interface. ERP breaks down the barriers between these applications to provide a more holistic view of cross-channel operations, including inventory, customer transactions, purchases and returns, customer service, and more.
Reimagine Your Products
You’ve probably heard the proverb “The shark that does not swim, drowns” at least once before; the same can be said for businesses in the retail industry that refuse to change with the times. Technology has irreversibly altered the retail landscape. Big data, IoT, and machine learning are quickly becoming the norm in retail, with 73 percent of retailers rating big data management as critical to their operations, according to Zebra’s 2017 Retail Vision Study.
To keep up with the pace of innovation, you need to actively keep an eye out for ways to incorporate the latest advancements into your offerings, which is why the fourth and final pillar of retail digital transformation is to reimagine your products. The process is easier than it sounds and, like the other three pillars of retail digital transformation, simply requires the right software and tools.
Prioritize software and systems that feature predictive analytics to achieve the greatest ROI. Certain systems combine insights gained through ERP, CRM, and BI with machine learning to detect potential failures before they can occur and automatically take preventative or reparative measures and leverage digital intelligence to identify new revenue sources and growth opportunities.
If you eliminate the barriers between business and IT by embracing the latest technological innovations and assessing how they can benefit your business, you’re on the right track. To learn more about the pillars of digital transformation in the retail industry or about the tools and software necessary to transform the way you do business, reach out to one of the implementation experts at Hitachi Solutions today.
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