A Framework for Retail Transformation

Transcription

1 INDUSTRY REPORT A Framework for Retail Transformation An objective, actionable roadmap for retailers to enable their business transformation. The democratization of retail has decisively transferred control of the user experience from the retailer to the consumer. Disruptive and transformational forces are forcing retailers to acquire new currencies critical to success. Retailers need to analyze these hitherto foreign skill-sets and capabilities to transform their business. This point of view delves into each of these currencies and provides a detailed, prescriptive set of actions for retailers to focus on. Research Partners

2 Retail Democratization: From Path to Purchase to Stream of Engagement The evolution of the traditional path to purchase is a global phenomenon. The traditional metaphor for a consumer s path to purchase Awareness Familiarity Consideration Purchase Loyalty was applicable at a time when retailers enjoyed the benefits of information asymmetry (of pricing, product availability), and controlled the primary means of communication and commerce (stores, direct retailer websites). Over the next few years, customer engagement and commerce will increasingly occur on platforms not directly controlled by the retailer 3 rd party mobile apps, social media and messaging platforms among others. This democratization of retail has decisively transferred control of the user experience from the retailer to the consumer. The consumer is more complex than a 5-step process. She is emotional, intelligent and irrational. She is not in your store; your store is in her world. And, her world is an ongoing, continuous, participative construct a Stream of Engagement more than a path to purchase. You re welcome to join, but cannot control it. Commerce and Engagement Converge Retailer synchronizes real-time product, price, and inventory data off-site Transaction seamlessly embedded in channel or retailer interaction Consumer researches and discovers with peers via off-site channels Consumer accesses retailer's brand via off-site channel interaction Commerce Engagement Store POS Social Networks ecommerce Search Contact Center Mobile Apps Voice/videos Mobile Wallet Social Commerce Messaging Commerce

3 EKN Retail Transformation Maturity Framework Most retailers are ill equipped to thrive in this new world order. They need to acquire new skills at a pace faster than they are used to. To help retailers prioritize investments, we are introducing an assessment framework for them to benchmark their current maturity and identify areas where they need to focus their efforts. Through a mix of quantitative analysis and qualitative input from retail executives, we focused on uncovering the different characteristics and capabilities that leaders display and deploy across six core transformation areas. Based on their relative maturity across these transformation areas, retailers can be categorized into 4 distinct maturity bands that are reflective of their competitive positioning in the industry. RETAILER MATURITY Follower Average Joe Best in Class Industry Leader Behind the Industry Better than Breakthrough Times Parity Most Performance NEW CURRENCIES OF RETAIL Immediacy Frictionless Authenticity Flexibility Personal Organization Fiber

4 6 New Currencies Of Retail *: 1 Be where the customer is. Respond quicker to consumer expectations. Immediacy Retail Transformation Areas: Inventory visibility Extend to 3 rd party apps and channels Quick system response time Relevant data (e.g. inventory) accessible by customers 2 Reduce friction from the customer experience. Make it easier for them to engage; reducing their time & effort. Frictionless Retail Transformation Areas: Channel integration Stores designed for ease (e.g. space for buy- online pickup in-store (BOPIS)) Ease of payment and checkout Commerce capabilities embedded in engagement platforms (i.e. Pinterest buy button, WeChat commerce) 3 Speak in a voice that is genuine and respects customer privacy. Authenticity Retail Transformation Areas: Institutionalized voice-of-customer program Clear and transparent privacy policies Customer brand ambassador program User-generated content shared across community Note*: this is a non-exhaustive list of capabilities

5 4 Give customers options regarding customization and fulfillment Flexibility Retail Transformation Areas: Mass-customization Last-mile delivery Stores as delivery hubs 5 Deliver relevant and contextual interactions across touchpoints Personal Retail Transformation Areas: Dynamic personalized content Customer insights/analytics tapped across the enterprise Digitally enabled stores extending the online experience Store associates as brand ambassadors 6 Move from a product-centric to a customer-centric organization Organization Fiber Retail Transformation Areas: Break organizational structure silos Move to customer lifetime value measurement Changing the incentive/bonus structure Design the organization and technology together Note*: this is a non-exhaustive list of capabilities

6 Follower - Behind The Times A generation behind in core technologies and processes from the majority of the industry, the distance between you and the pack will slowly widen unless a preemptive initiative is underway. Followers are faced with a strategic choice between investing in capabilities to achieve parity with the industry and investing significantly in transformational initiatives. Average Joe - Industry Parity At par with the industry and growing at the average industry rate, these retailers risk missing the bus. Retailers in this band need to shrug off complacency and focus on outmaneuvering competition by investing in strategic foundational capabilities (e.g. single view of the customer) to increase the velocity of growth. Best in Class - Better Than Most Ahead of the industry pack and leading their formats, they have excellent supply chain operations and fulfillment flexibility. While this will help them drive growth and market share in the short-term, legacy organization structures and the rising cost of fulfillment will reduce profitability. In this stage retailers need to institute a more customer-centric organization design. Industry Leader - Breakthrough Performance Significantly ahead of the industry, they are raising the bar for customer experience across industries. Industry leaders may not necessarily excel across all transformation areas, but do so at those that matter most for their business. Retailers in other bands must look to Industry Leaders as case studies in terms of prioritizing investments.

7 EKN RETAIL TRANSFORMATION FRAMEWORK Mobile s Next Killer App: Payments ORGANIZATION FIBER MATURITY Structure Collabora on Metrics Incen ves Siloed Minimal Channel-based Channel-based Follower: Behind the Times NEW CURRENCIES OF RETAIL Immediacy Fric onless Authen city Flexibility Personal Inventory Visibility One view of inventory Inventory-level updates: Sporadic Mobile Focus Clearly defined customer mobile strategy ecommerce site not mobile enabled Channel Integra on All channels exist in silos Integra on of core retail systems (product, price, inventory): Minimal Integra on of customerfocused systems (loyalty, customer informa on and promo ons): None Payments Branding and Marke ng Relevant content is generic and sta c Crea vity process is solely directed by the retailer and replicable Consumer response is passive Fulfillment Innova on & Last Mile Execu on Stores can fulfill online orders Stores can manage online returns Use of lockers for delivery Use of third party services for delivery Customer Insights No customer analy cs Digi zing the Store No digital ini a ves Legacy architecture and technology stack Mobile app Standard tenders accepted Partnerships with other mobile pla orms

8 EKN RETAIL TRANSFORMATION FRAMEWORK ORGANIZATION FIBER MATURITY Structure Collabora on Metrics Incen ves Siloed Average. Driven top-down by the execu ve team Channel-based Channel-based Average Joe: Industry Parity NEW CURRENCIES OF RETAIL Immediacy Fric onless Authen city Flexibility Personal Inventory Visibility One view of inventory Inventory-level updates: Daily Mobile Focus Clearly defined customer mobile strategy ecommerce site is not mobile op mized Mobile app: Basic func onali es Partnerships with other mobile pla orms Channel Integra on Some level of integra on between web and physical channels Integra on of core retail systems (product, price, inventory): Minimal - Moderate Integra on of customerfocused systems (loyalty, customer informa on and promo ons): Minimal Payments Standard tenders accepted Branding and Marke ng Relevant content invokes brand iden fica on Crea ve inputs from some external influencers Consumers respond with curiosity Fulfillment Innova on & Last Mile Execu on Stores can fulfill online orders Stores can manage online returns Use of lockers for delivery Use of third party services for delivery Customer Insights Basic segmenta on is done at an aggregate level Customer profile and service informa on are not integrated across channels Digi zing the Store Digital ini a ves driven by corporate Legacy architecture, but systems can support current volume of sales, including the holiday season

9 EKN RETAIL TRANSFORMATION FRAMEWORK ORGANIZATION FIBER MATURITY Structure Collabora on Metrics Incen ves Chief Omnichannel Officer sets the strategic direc on but doesn t own the en re P&L Good. Execu ve leadership of each channel ac vely contributes to the strategy. A project management office (PMO) coordinates core processes Channel-based. Proxy metrics used to measure impact of collabora on Channel-based Best-in-Class: Be er than Most NEW CURRENCIES OF RETAIL Immediacy Fric onless Authen city Flexibility Personal Inventory Visibility One view of inventory Inventory-level updates: Hourly Mobile Focus Clearly defined customer mobile strategy ecommerce site is mobile op mized Mobile app: Advanced func onali es Partnerships with other mobile pla orms: Exploring Channel Integra on Moderate level of integra on between web and physical channels Integra on of core retail systems (product, price, inventory): Minimal - Tight Integra on of customerfocused systems (loyalty, customer informa on and promo ons): Minimal - Moderate Payments Mobile payments accepted across most stores Branding and Marke ng Relevant content elicits emo on Crea ve influences are refreshed frequently and rarely recycled Consumers respond with interest Fulfillment Innova on & Last Mile Execu on Stores can fulfill online orders Stores can manage online returns Use of lockers for delivery Use of third party services for delivery Customer Insights Able to do Micro- Segmenta on & use complex analy cs to drive contextual communica on, promo ons and services Customer profile and service informa on is integrated across channels Digi zing The Store Limited digital ini a ves: New technologies (mobile, payment technologies, video analy cs) being explored or used SaaS looked at as a viable op on for applica on deployment

10 EKN RETAIL TRANSFORMATION FRAMEWORK ORGANIZATION FIBER MATURITY Structure Collabora on Metrics Incen ves Single execu ve leads sales across channels Seamless. Cross-func onal team drive all processes Focus on omnichannel execu on and customer lifecycle value Execu ve and associate performance ed to overall growth Industry Leader: Breakthrough Performance NEW CURRENCIES OF RETAIL Immediacy Fric onless Authen city Flexibility Personal Inventory Visibility One view of inventory Inventory-level updates: Real- me Mobile Focus Clearly defined customer mobile strategy ecommerce site is mobile op mized Mobile app: Advanced func onali es Partnerships with other mobile pla orms : Well established Channel Integra on All retail channels (physical, online, mobile, social) are ghtly integrated Integra on of core retail systems (product, price, inventory): Tight Integra on of customerfocused systems (loyalty, customer informa on and promo ons): Tight Payments Mobile payments accepted across most stores Digital receipts are available across all stores and channels Branding and Marke ng Relevant content s mulates ac on Crea vity process always draws on mul ple sources of unique inspira on Consumer respond with explora on Fulfillment Innova on & Last Mile Execu on Stores can fulfill online orders Stores can manage online returns Use of lockers for delivery Use of third party services for delivery Customer Insights Able to use predic ve analy cs & social media to effec vely communicate and market to customers Customer profile and service informa on is available in real- me across channels Digi zing The Store New store technologies: Improve CX Reduce cost & ecological footprint Well integrated into the exis ng store ecosystem Ac ve customer-store interac on using the store infrastructure with strong privacy and security controls

11 Cheat Sheet: So Where Does One Focus? Given the laundry list of technologies and capabilities that retailers need to track and adopt, it can be difficult to prioritize. With the caveat that some of these differ across format and size of retailers, below is a prescriptive guide for retailers to focus on in the short-term: Execute Test & Explore Immediacy Transition to being mobile-first, making it the focal point of your digital customer engagement strategy. Allow inventory visibility and access across channels. Connected device extensions (Amazon Echo, Dash, Samsung, etc.). Frictionless Build a unified commerce platform to form the backbone of a seamless user experience. Re-invent the store checkout & payment processes. Integrate with messaging and social network platforms. Flexibility Use stores as warehouses & distribution centers. Focus aggressively on ship-from-store and BOPIS. Integrate with last mile delivery providers such as Uber, Instacart and Postmates. Authenticity Secure and encrypt all customer data. Create consistent brand guidelines across channels. Enable rich user generated content production. Personal Build a single customer profile that spans across all channels and can be exposed to core systems. Voice & other sensory inputs both natively and via the mobile (voice recognition, facial recognition, etc.). Organization Fiber Redefine KPIs from store teams to merchandising teams to be focused on overall growth vs. channel attribution. Use channel influence as a proxy for measuring channel effectiveness. Tweak store associate incentive model to factor in digital sales and store fulfillment.

12 EKN Retail Transformation QuickScan Retailers are constantly re-inventing their processes, organization structure, and systems and technologies to transform themselves. Not many tools are available for business executives to monitor and assess the performance of their organization versus the industry. EKN has partnered with Demandware to develop an industry standard framework for assessing the state of a retailer s transformation roadmap across various faculties, such as inventory management, commerce, personalized engagement, and fulfilment. An abridged version of the framework is available as a short quiz for executives to quickly assess how their retail transformation strategy compares with the industry. Take QuickScan

13 Our research agenda is developed using inputs from the end user community and the end user community extensively reviews the research before it is published. This ensures that we inject a healthy dose of pragmatism into the research and recommendations. This includes input of what research topics to pursue, incorporating heavy practitioner input via interviews etc., and ensuring that the blend of research takeaways are oriented towards a real-world, practical application of insights with community sign-off. For more information, visit us at EKNinfo@edgellmail.com Demandware, the category defining leader of enterprise cloud commerce solutions, empowers the world s leading retailers to continuously innovate in our complex, consumer-driven world. Demandware s open cloud platform provides unique benefits including seamless innovation, the LINK ecosystem of integrated best-of-breed partners, and community insight to optimize customer experiences. These advantages enable Demandware customers to be market leaders and grow faster. Disclaimer: EKN does not make any warranties, express or implied, including, without limitation, those of merchantability and fitness for a particular purpose. The information and opinions in research reports constitute judgments as at the date indicated and are subject to change without notice. The information provided is not intended as financial or investment advice and should not be relied upon as such. The information is not a substitute for independent professional advice before making any investment decisions. Copyright 2016 EKN Registered Office: 4 Middlebury Blvd. Randolph, NJ Ph: (973)