By Raj Raguneethan, Asia Lead, Retail and Consumer Industries, Microsoft.
What does the future of retail look like? Will brick and mortar stores become history given the rise of e-commerce?
Many of my customers in the retail sector are grappling with a new reality today. Retailers are facing challenges coming from a myriad of directions. Disruptive shifts like the explosion of online and mobile shopping have thrust retailers, now competing in a global omnichannel marketplace, into a fierce battle for the ever-fragmenting wallet share—and mindshare—of consumers.
In 2018, we partnered with Taobao to showcase a new retail experience made possible by HoloLens. The “Taobao MR Buy” is a mixed reality environment which allows shoppers to not only view products virtually, but also interact with virtual shop keepers – who could even be popular Chinese influencers.
“Taobao MR Buy” is beyond a virtual reality offering. Shoppers can view products within physical realms, and can interact with the virtual characters through voice and gesture. With a simple pinch, shoppers can add their desired products into their shopping cart – just like how they would do so online.
Today, the rise of e-commerce and online-first retailers are challenging traditional retailer business. The demise of Toys ‘R’ Us in the States, is just one of many retail heavyweights who have become victims of the digital revolution. It is evident that the role of a store in the shopping experience is changing, further driving the need for new business models to generate growth. Evolving customer behaviour and preferences are primary catalysts for change.
According to IDC Retail Insights, 46% of consumers today are using a retail mobile app on a weekly basis. And as technology is increasingly permeating our daily lives, consumers are expected to interact with no less than 150 sensors-based devices daily by 2020. These shifts in how consumers interact with retailer digitally will ultimately require them to rethink how they will sell to customers.
Rethinking Customers Approaches for a Successful Omnichannel Strategy
Every retailer today acknowledges the importance of having an omnichannel strategy as a potential omnichannel customer spends 30% more, according to IDC. However, not all of the players are equally successful in execution.
What differentiates a leader against the rest? The answer could simply lie with having a personalized approach in customer engagement.
We speak about the “Tiffany Experience” – where a customer who buys from the famed jeweller is often pampered in-store and leaves feeling special and unique. The high-touch, personalized customer service has been a gold standard, and is also what sets this famous brand apart from others.
In the digital age, retailers can achieve personalization through strategic implementation of digital transformation initiatives. The concept is not new for retailers in the region. According to our recent study[1] conducted in partnership with IDC Asia/Pacific, 64% of respondents polled in retail Industry have a full or progressing strategy in place, compared to 57% across the whole of Asia Pacific. In addition, more than 50% of retailers in the region are prioritizing their transformation efforts on customer service and support, a strong signal on their focus to deliver exceptional experiences in the short term.
Retailers who have already embarked on their digital transformation journeys are seeing benefits that bring material contribution to their bottom-line today. In 2017, the top five benefits tracked saw 11% to 16% improvements, with the greatest growth tracked in profit margins. They expect digital transformation to drive greater gains in customer advocacy (27%) and revenues from existing products and services (24%) by 2020.
An Intelligent Retail Strategy Matters in Creating a Customer-Centric Organization
When digital transformation initiatives are done right, retailers can build a truly customer-centric, intelligent organization for the future. Here is a list of “must-dos” for retailers to transform successfully:
It is no surprise that retailers turn to embracing technology to build a customer-centric and intelligent operation. In fact, retailers in Asia Pacific are prioritizing investments in building e-commerce platforms, developing big data analytics and mobility solutions — a nod to the shift in consumption patterns among shoppers.
With the rise of e-commerce comes the increase in data volumes stemming from a variety of sources, which may include e-newsletter sign-ups, click throughs to purchase histories. Over time, these data become valuable to retailers to understand consumption behaviours.
When data is used effectively through strategic implementation of big data analytics or even machine learning solutions, it can become a valuable asset for organizations to design personalized campaigns.
It is thus inspiring to see that the industry players across Asia realise the importance of unlocking the potential of data to drive digital transformation. For close to 50% of retailers polled in the Study, data as a capital asset KPI is the number one transformative indicator of success.
Along with the focus on core technologies, Retailers commit to the emerging ones – especially Artificial Intelligence (AI) and Internet of Things (IoT) As interactions with consumers become more and more embedded into experiences, retailers are also looking at ways to harness technologies to deliver personalization across an omnichannel strategy.
In fact, IDC Retail Insights predicts that retailers that leverage on emerging technologies including AI and IoT will see 20% improvements in customer satisfaction scores, and 25% improvements in inventory turnovers.
One such example is Flipkart, India’s largest e-Commerce marketplace. It has plans to use Microsoft Azure’s artificial intelligence, machine learning and analytics capabilities, such as Cortana Intelligence Suite and Power BI, to optimize its data for powerful insights to deliver increasingly relevant and personalized experiences to its customers.
“Flipkart has always been committed to its vision of transforming commerce in India through technology,” Flipkart co-founder, Binny Bansal said. “Given Microsoft’s strong reputation in cloud computing, coupled with scale and reliability, this partnership allows us to leverage our combined strength and knowledge of technology, e-commerce and markets to make online shopping more relevant and enriching for customers.”
Becoming a true Digital Transformation Leader in a crowded retail environment
As the retail industry becomes more competitive and multifaceted due to the rise of digital players, we see four areas where organizations can invest their resources into:
- Develop a digital culture: Retailers need to embrace digital in order to address and exceed customers’ expectations offline and online, and at the same time empowering employees in a digital-first environment to improve collaboration and provide insights and recommendations to customers based on available data. This requires a structural shift across the organization. Retailers need to focus on driving enterprise-wide transformation and encourage use of data across all processes as well as customer touchpoints. Also, it is important to embrace a “Fail Fast, Learn Fast” culture, especially in this sector where consumers are fickle minded and always on the lookout for the next trend.
- Capitalize on data: Data, when applied right, may well be the tool to increase the innovation rate to drive intelligent operations. Retailers can improve upon existing supply chain processes, including optimization of inventory management. More importantly, business leaders need to embrace data as a business metric to track progress of their digital transformation initiatives.
- Embrace new technologies: Retailers need to come to terms that embracing the right technologies will enhance their competitive advantages. AI, IoT and even Mixed Reality can help unlock new scenarios, and even enable new collaboration modes among workers.
- Ensure governance: With new data protection laws in place across the world, it is important that retailers have a robust governance strategy in place.
Given the rate of innovation among Asia Pacific retailers today, I am sure the region will see the next retail giant being digital-first, while continuing to address the need for customer-centricity in a highly competitive market.
[1] Unlocking the Economic Impact of Digital Transformation in Asia Pacific conducted with 1,560 respondents in 15 markets, including 240 from the retail industry
- 15 Asia Pacific markets were involved: Australia, China, Hong Kong, Indonesia, India, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Sri Lanka, Taiwan, Thailand, and Vietnam.
- Business and IT leaders from organizations with more than 250 staff were polled.
- Industries polled included education, financial services, government, healthcare, manufacturing, and retail.
- Respondents are decision makers involved in shaping their organizations’ digital strategy.
