In part two, we discuss the motivations for digital transformation, some of the challenges the company faced and how to measure success.
I started by asking Teperson whether there was an end in mind when he started (such as implementing 3-hour delivery, as he mentioned in part one) or if the transformation is ongoing?
“Much like people say your website is never finished,” Teperson replied, “I don’t think the transformation journey ever ends.”
“I think by definition if you’re not going forward you’re going backward. If you’re not constantly changing and evolving with the consumer then you are going to fall behind.
“We are fortunate in so far as we are ahead of a lot of other businesses – and our competitors in the market – which is a great competitive advantage for us. But your work is never finished.
“In Australia, we have The Bureau of Statistics. Using its data, we looked at the demographic shift over the last five years and then fast-forwarded that five, 10 and 15 years into the future to get a sense of what is happening in the market.
“I don’t think the transformation journey ever ends.”
Generation Y, the largest cohort
Teperson discussed this transformation journey in the context of a changing consumer profile:
“If you look at what has happened over the last 5 years, Generation Y overtook baby boomers as the largest cohort by number in terms of the representative population in the market. That’s a pretty extraordinary statistic; it’s the first time in history that a generation has been skipped in terms of becoming the largest representative cohort in the market.
“And if you look at that from a retailer’s perspective, retailers went from a market of baby boomers which had the largest disposable income and the largest share of purchasing dollars to suddenly that purchasing cohort dropping by two generations to Gen Y who had grown up very au fait with digital consumption. They were the first generations who had grown up in which everything was digital.
“Fast-forward that behavior over the next five years and Gen Z grows in its influence in the market. Gen Z grew up with a mobile in their hand and will soon be the largest cohort in the marketplace.”
Preparing for change
Teperson refers to this generation shift as “a wonderful lens to sober you up for how much change is still ahead of us.”
“Yes, we have done a great job of building a strong foundation and we have set ourselves on a fantastic path,” he continues, “but I think the transformation that we have seen thus far will pale in comparison to the transformation we will need to make over the next five to 10 years to make sure we are relevant for the next generation.”
Challenges to come
Next I asked Teperson about what other challenges he sees on the horizon. At a high level, he admitted there are two things that keep him awake at night:
“The first is the competition that doesn’t exist today. If you are well capitalized and well-funded and don’t carry 20 years of legacy systems, you can do things differently. You can enter a market differently, you can be more nimble and you can be more responsive to a target market. So, the competition that doesn’t exist today and how those distribution models build out that is something that keeps me awake at night.”
2) What the customer wants tomorrow
“The second thing is what the customer wants tomorrow. Again, I suppose I am aware of a lot of quotes that sum this up, but one stands out: ‘It’s far easier to invent the future than it is to predict it.’
“That’s where innovation comes in. Now, click-and-collect wasn’t necessarily innovative but ship from store was, and ‘endless aisle’ is an extension of that. Then, how do we get the product to the customer faster? Well, let’s do it in three hours.
“If we listen to the customer and reinvent or re-imagine what the experience might look like, we stand a better chance of predicting what the future holds. It’s so easy to fall into patterns of saying that we have done it now, surely, we can sit on our hands – well you can’t.
“So, while it’s tempting to work on becoming more operational and efficient, the consumer doesn’t wait, and the competition doesn’t wait either in picking holes in your customer experience.
“I really do believe that one of the best competitive advantages that we have in being an omnichannel retailer is our store network. There is a lot of commentary around this – is it a competitive advantage or a weakness – and a threat? I think that we have demonstrated that we have been able to grow sales and profit by leveraging our asset base and rethinking/re-imagining how we deploy those assets in the market.
“If we listen to the customer and reinvent or re-imagine what the experience might look like, we stand a better chance of predicting what the future holds.
“Our stores are always important. They are the physical manifestations of our brand. In a retail experience, you can play with so many of the senses. You can touch things, smell things – new products, new cars – and it creates a very emotive connection. There are even examples of retail bringing sensory experiences to taste. There are ‘ice cream pairings’ with a sneaker experience. It can be a wonderful playground to connect with consumers.
“But, equally, you can re-imagine how you can utilize that asset base and that brand awareness and really flex your muscle digitally. Accent Group is the envy of every pure-play retailer that is looking for ways to engage consumers through a physical presence.
“So, we have to challenge to really continue to re-imagine what those experiences can look like.”
Customer experience benchmarks
Teperson named NPS as one of Accent Group’s key customer experience benchmarks. “NPS is certainly one [of them],” he said, “and that’s a universal measure that we look at. We track NPS across all of our businesses some in real-time, some in polls. We have some of the highest NPS scores in the market. TAF has an NPS score of an 82. The only brand who is above that is Apple.
“We also look at other measures such as the traffic to our site. What is the interest in our brand? When you have growing traffic numbers, you want to see whether your normal metrics, such as conversion rate, is in line or growing. You don’t want to see a dilution of your conversion rate.
“We also look at metrics across different devices. Some of our brands have mobile usage in excess of 70% and so looking at the conversion metrics across devices is also really critical and important to us. Also, how much revenue we generate from each visit. All the quantifiable measures around growth are important.
“From a digital transformation perspective, another benchmark that is really important to us is what percentage of sales is digital. We set a target of being able to get to 15% in the next few years. We are well on our way to achieving that. I think we will do it ahead of our target date.
“But again, going back to the original question, each of the brands performs a little bit differently. Our pure brands in market don’t have as high of a percentage of digital of their total transactions. The younger, faster brands in our stable are growing much faster and digital represents a much larger share of that wallet.
“And so those indicators actually provide us with a great decision-making lens for how fast we need to accelerate things or in what order we can roll things out.”
This is part two of a three part series on the digital transformation of Accent Group. Read parts one and three here. If you are interested in how Econsultancy can help you with your own digital transformation journey, get in touch.
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