We caught up with Saif Rivers, Retail Client Principal, HP Enterprise Services, to examine the top trends that are changing the retail world. Rivers authors an article on the topic in the digital magazine release, where he discusses five top trends:
1) Shoppers expect a seamless omni-channel experience
2) The voice of the consumer carries weight
3) Customer loyalty is fragile
4) Big data provides the big picture
5) Retailer and consumer industry collaboration will accelerate.
Rivers makes the point that retailers must embrace business models that are customer-centric and that encourage connection, collaboration, co-creation and customization.
Ken Howard: The change of pace confronting the retail industry is breathtaking. From your vantage point, what do you think are the major driving themes for this age?
Saif Rivers: I’ve been working with clients recently, presenting to them three retail megatrends: an evolving business model, technology advancements and an evolving workforce. Really throughout each of these three there have been these concepts of omni-channel, continuous channel and customer experience.
What we have seen is how all of this has changed the entire business model from the ground up. If we take these trends to their natural conclusion we could see a day where the majority of the retailers’ income is actually brought through e-commerce and the stores are literally nothing more than an experience hub. To truly experience the brand you may have to visit the store. However, when you get there, every single transaction that you participate in or fulfill is delivered to your home, or is done through some sort of digital channel. I think that at some point in the future, this model will be very relevant for certain retail sectors whilst others will retain a more classic approach.
KH: That’s interesting. I could see a bit of that future when I went into a Levi’s store in San Francisco and the emphasis was more on experiencing the Levi’s brand all the way through the store. It was a little different than going into your local department store and trying on a pair.
SR: Yes, we could reference any number of fashion brands that are going this way. They don’t carry the entire range of products or size range. But in fact, if you are actually a larger size that doesn’t work to carry in the store due to the low frequency of transaction, they’ll just push you online. And they have, of course, the reverse supply chain processes that make it easy, including free returns and free pick-ups. So if the purchase doesn’t work at home, just send it back. Other examples of this trend are outdoor outfitters such as Cabelas and Bass-Pro shops where range extension is achieved through use of e-commerce environments. That kind of range extension is one of those things we’re seeing as one of those megatrends.
To underpin that, retailers have to innovate. They have to provide new and engaging experiences for a client that is pretty fickle, who is happy to abandon their long-term relationship with a brand for another, where they do see innovation and a new means of shopping that gives them the experience they want.
KH: So how do you see technology helping retailers to address those challenges? What are some of the things that technology can do to help extend the relationship with the consumer?
SR: The key point here is that there must be deep integration at every layer of the technology stack across the business. This, in turn, enables the omni-channel experience. It is critical that retailers enable ease of transaction and fulfillment in every channel they offer to their customers. They achieve this through integration, through rationalization of tools and processes that overlap. A relevant example of this integration we see in the market place is the ability to self-scan items in grocery stores. As the consumer walks around the aisles, they scan the items with their own cell-phones using the phone camera to recognize barcodes. When they get to the payment lane, the app on their phone performs a “handshake” with the point-of-sale (POS) device to pass the basket over and complete the transaction.
Magic mirrors are an interesting example of the “softer side” of innovative IT solutions. In effect they are virtual reality display devices, where a consumer can try on different articles of clothing without removing their own clothes – the intelligence within the display screen modifies the image to represent the chosen garment in place of what the consumer is wearing.
It’s those kinds of “softer” solutions that are very innovative. Are they going to impact the retailers’ bottom line? Not in a significant way. But they are a great means of experiencing a store from a different perspective.
KH: Part of that is trying to find the “hooks” into an individual customer’s mindset - what drives their personality. It’s a matter of finding the things that particularly engage them, or that are their hot buttons, so that the retailer can continue to come back with new offers.
SR: Exactly. I see retailers performing some very intelligent analysis of customer segment, so that the retailer can offer specific applications to engage that segment. For example, some retailers might offer a wine recommendations app. This particular wine app caters to the higher-end customer. These are the customers that want more from their experience and greater insight into wines because that’s their specific area of interest and they are happy to pay for it. This model offers a more premium experience, both in the store and at home, through the use of technology.
One of our clients, Tesco, is a leading example of this “personalization of retail.” From promotions to coupons to discounts, they have been able to make the basic task of buying the weekly groceries an incredibly personal experience. Many retailers are now looking to replicate this success.
KH: Are there other things that HP does that can support retailers in being innovative?
SR: Yes, the way that we develop mobile applications enables retailers to get to a rapid deployment point. HP does that by using a waterfall or an agile type development methodology so that there is a continuous information flow between the development teams and the customer. The client is able to see very quickly how that toolset develops, so if they don’t like the way that toolset is progressing, they can very quickly change their plan and re-route the resource to make sure that the toolset is developed as they wish. We have the ability to populate data in our frameworks quickly to get a client up-to-speed and out to market rapidly.
KH: Coming off of the National Retail Federation’s The Big Show, are there any other big issues that you see the industry is driving toward?
SR: Another aspect that is quite interesting and particular to retail is about managing the cost of retail as part of a drive towards enhanced efficiency. We have recently completed a program of work for a client concerning an assessment of their application stack. We looked at the criticality associated with their operating model, what elements deliver true value and what parts are potentially overlapping and then how can they position their roadmap to remove some of the cost and functionality that is not necessary. And that’s quite a complex environment when you think about it.
Over the past 40 or 50 years, these toolsets have become islands in their own right. They house a lot of operational risk, because they handle cash, they handle transactions, they handle inventory. In addition they have significant annual cost profiles, given the size and scale of these toolsets. So where a retailer can act in a more lean and agile manner by trying to rationalize some processes or push them into the cloud, or just retiring applications where they are redundant these days, is really quite important. I can see how that is going to become more compelling for our retail clients over the next few years, for sure.
It’s a true efficiency play, recognizing that that cost for the applications and environment is not only growing, but rising faster than the revenue curve itself. That’s not a position that can continue and therefore retailers have to address it rapidly.