Throwing out the rulebook
Welcome to the third instalment of our retail-focussed series exploring some of the challenges and opportunities created by the COVID-19 pandemic. The first two chapters discussed the dramatic effect that multiple lockdowns had on footfall in-store, and the subsequent impact on sales figures and confidence across the sector. The situation at Primark has been well documented, including reported losses in the region of £1 billion as the vast majority of their stores were forced to close with no ecommerce platform to fall back on. There are similar tales up and down the high street, albeit on a smaller scale, with all but a handful of organisations entering 2021 with a high degree of uncertainty about what the future has in store.
The pandemic has served to accelerate demand for omni-channel shopping experiences, rather than create it altogether. Consumer habits were trending in that direction long before COVID-19 first emerged, with forward thinking organisations and executives already leveraging technology to deploy ecommerce platforms, optimise supply chains, and build disaster recovery and business continuity plans. The pandemic has served to throw out the rulebook altogether. While customers will eventually return to our high streets and shopping malls, the numbers were already declining and it is highly likely that the pandemic will exacerbate that trend. Consumer habits have fundamentally changed, as have their expectations of the means by which retailers engage with them and court their business. Herein lies the problem and, simultaneously, the opportunity facing retail post pandemic.
Forrester predicts that it could take as long as four years for retailers to overtake pre-pandemic sales figures. While this is one of the more conservative estimates, most experts seem to agree that it’ll likely be years rather than months. However, if the sector is able to emerge the other side free from the legacy systems, practices and mentalities as a result of these changes being forced upon it, then there is an opportunity to lay stronger digital foundations for the future.
Here are 5 ways in which you can build a strong digital foundation for your organisation:
1 – Shopping at the edge
Salesforce coined the phrase ‘shopping at the edge’ to describe digital shopping experiences that happen outside of the store. This can include virtual shopping experiences via live chat, video or social media streams, digital B2C marketing, or customer support services. The whole concept focuses on increasing the number of digital touch points that allow retailers to connect, build and maintain strong and lasting relationships with their customer base. Here are a few examples:
While stores remain closed, these digital touch points are critical to creating and maintaining strong bonds with consumers. The quality, variety and success of these touch points is reliant upon the technology that underpins them. There are a handful of key considerations here. Most important of all, are your communication channels secure, including the data that is being shared across them? This is a GDPR requirement that can have severe legal, financial and reputational implications if ignored. Secondly, do you have the technical capability to integrate third parties into your network to create a seamless shopping experience for your customers? All businesses need the ability to consume new services and applications without delay or disruption to users. A SASE solution provides the security and networking tools necessary to address both these concerns.
2 – The last mile
As its name suggest, this is the final phase of the supply chain where the product reaches the end customer. The pandemic has unsurprisingly caused a huge increase in the amount of goods being delivered directly to consumer homes. Early reports indicate that this leg of the supply chain alone could be worth up to $55.2 billion by 2025. Furthermore, it is often considered the least efficient part of the whole chain, often costing retailers more to deliver the product than they can recoup from customers who are sensitive to high delivery costs.
This phase of the supply chain will continue to become more important to the consumer as they rely upon it for a higher proportion of their shopping, whether that be a new pair of jeans or their weekly shop. Domino’s pizza, for whom speed of delivery is fundamental to their service and brand, made significant investments in AI and Data Science as a means of ensuring they can deliver the 3 billions pizzas ordered with them last year. Sixteen major UK retailers, including Aldi, Co-op, Waitrose and Sainsbury’s, have all launched and subsequently extended partnerships with Deliveroo this year as demand for online grocery continues to increase at an unprecedented rate.
Whatever solution retailers pursue, it is their digital systems that will be required to facilitate these changes without disruption to consumers or business operations. Whether integrating and optimising supply chains or launching AI and data analytics tools, it is a significant undertaking that will require meaningful investment. The key enabler from a technical perspective is the connectivity component of your digital estate, something that is often overlooked. Without an agile and flexible network that allows the organisation to securely and rapidly utilise multiple cloud service providers then much of this automation and innovation will be out of reach.
3 – Supply chain optimisation
The lines between creators, buyers, and sellers will continue to blur. On the one hand, marketplaces selling goods and services from a whole range of different brands continue to thrive. On the other, independent and boutique stores offering local and bespoke products are increasing in popularity too, especially in an age where people are more sensitive to issues around sustainability and the environment.
Consumers are more demanding than ever. There is an expectation that the product or service they want will be available on demand, at a fair price, from a retailer they trust, with a delivery slot they can choose, and all with no impact on the environment. While none of these things are unreasonable, it requires a level of integration and automation between producers, vendors, warehouses, transportation companies, distribution centres, and retailers that has not been necessary on this scale before. It is critical that the underlying network infrastructure that supports these digital systems is built in a way that facilitates this degree of interoperability.
4 – Digital reward schemes
The concept of a reward or loyalty scheme is not exactly new or unique, so this is where retailers have to be particularly innovative if their version is going to provide tangible value to the consumer that they cannot get elsewhere. If utilised effectively, reward schemes offer priceless data and analytics that can assist retailers in understanding their customers better. This insight can then be leveraged to inform marketing, sales and promotional activities that help organisations secure brand loyalty. The M&S Sparks app was downloaded 240,000 times in the first 48 hours after its launch, with a reported 1 million new customers signing up over the following 8 weeks.
Chief Digital Officer, Jeremy Pee, acknowledged: ‘With a Digital First approach, it’s simpler and easier to use but also builds our relationship with customers through a more personalised experience. We’ve injected a new sense of excitement and value and made the features they love even better”.
One of the biggest obstacles for marketeers building brand loyalty schemes is the fragmentation of the retail payments landscape. Most ecommerce platforms involve multiple payment intermediaries, banks and merchants, meaning the customer data you might expect them to hold is stored elsewhere in the supply chain. An integrated and seamless payments experience is not only a critical part of the consumer journey, but for many retailers it provides them with a rich source of data from which they can tailor and personalise their rewards to customers.
A recent survey by ecommerce Guide found that 86% of shoppers would volunteer personal data for improved privacy, faster shipping and greater discounts. The survey also found that increasing the loyalty of a customer by 7% can boost lifetime profits per customer by as much as 85%. The numbers demonstrate how lucrative an engaging and effective rewards scheme can be.
5 – Performance of digital channels and assets
Organisations are now more reliant than ever on technology to power their business operations. The digitalisation of products, services and processes has enabled retailers to deliver better value to their customers through cheaper prices, improved quality, faster delivery times and better customer experiences. The performance and maintenance of an organisation’s digital estate is therefore critical to its success moving forward. External facing assets – a website, ecommerce platforms, social media channels, virtual and augmented reality apps, to name a few – are the means by which a retailer interacts with its customer base. The quality and reliability of these touchpoints can be tied directly to sales and revenue. The internal assets that the consumer does not see – CRM systems, data management and analytics tools, disaster recovery and business continuity plans, remote working infrastructure and inventory management programs – are still vitally important to delivering the overall service customers demand.
For most retailers, their digital estate has expanded into multiple cloud service providers in order to consume these new technologies and services. However, in nearly all instances there is still a reliance on legacy and on-premise infrastructure too. Connecting these physical and digital worlds without incurring extortionate costs, long lead times or disruption to users is often a problem. It is frequently taking companies longer than necessary to implement digital transformation plans, whether that be to migrate from legacy systems or leverage new cloud based services. We’ll be discussing potential solutions to this security and network headache in our upcoming ebook on the application of the SASE framework for retailers, including how Interconnection can solve capacity issues caused by seasonal spikes in activity. Check back soon!