Among different industries, perhaps retail industry is the sector where physical presence is the most (compared to banking, insurance, telecommunications …), and so there are many doubts on the impact of digital transformation?

In this article, we will find answers to some important questions:

  • What does retail digital transformation mean? How to transform from supply chain model to digital value chain?
  • What are the 3 biggest retailers’ failures in digital transformation?
  • Do technology trends have the strongest impact on the digital transformation of the retail industry?
  • Refer to some examples of retailers globally and in Vietnam

Definitions of digital transformation in the retail sector

Let’s start with the definition of retail industry:

Retailing is the transfer of physical goods to consumers.

Due to this nature, retailers think that they will not be affected by digital transformation, or at least not yet, because until now there has been a way to transfer milk tea straight to their beds in a completely digital way? Where is the digital?

Let’s consider the following definition shared by Nikki Baird, Aptos Vice President of Retail Innovation on Forbes:

“what does digital transformation mean in retail? It’s about moving from this obsolete product-centric model to one that is customer-centric”.

Digital transformation model in retail.

What does this mean?

Traditional retail

Traditional retail focuses on products and follows the supply chain model with the goal of Buying cheap, selling expensive and optimizing the middle stages. This is no longer true.

Traditional retail supply chain (Supply chain).
  • Buy cheaply: unless being at the size and volume of Walmart, it is really challenging to buy brands cheaper than competitors. Some retailers have chosen to design and produce their own brand products, and this method also works in the short term, but is ultimately outpaced by other goods with more competitive prices.
  • Selling expensively: more expensive sales have never happened since the 2007 Great Depression. Retailers to get better prices often provide better customer service, but this is also challenging because customers are very sensitive with prices and quickly be attracted by promotions and immediate benefits.
  • Optimize the middle stages: it’s hard to compete on optimization because now your competitors are big companies like Amazon, Alibaba … See how Amazon Prime Now manages inventory by randomly arranged and optimized to deliver goods in 27 US cities (and still growing) within an hour, and so fast that the ice cream had barely melted. Not to mention the retail segment, e-commerce has funding from other businesses. No matter how hard you try, the savings from process optimization are just trivial and it is hard to beat Amazon.

As such, the way retailers operated in the past focused on store experiences. They design in such a way that customers stay in the stores for as long as possible, and by the way, while looking for what they need, they will look around and buy more, buy with other items, bring greater revenue.

Modern retail or digital retail

Digital value chain.

Modern retail, or digital retail focusing on customers and following the model of Digital value chain, is divided into 3 stages: 1) Collecting data on products, customers, locations point, then 2) Turn these data into insights and 3) Turn those insights into concrete actions. The difference and value of innovation projects lie in the speed and efficiency of data collection, and turning that data into useful insights, then into the appropriate actions. It is these actions that will bring about value and efficiency of investment, such as through creating new products and services, bringing new benefits, changing the way we interact with customers, or leveraging those insights to come closer to fulfilling our customers’ needs.

3 Big failures of retailers in digital transfer

1. Try to protect the old organization model, avoid basic changes

The first failure with most retailers is trying to protect their organizational model from fundamental changes. These are people who want to disguise bad processes, inflexible technologies and programs that oppose or compete against one another in different areas of the business. They will not succeed because there are no flexible business processes that allow continuous improvement over time.

2. No culture cultivation by data

These are companies that don’t create a data-centric culture. There is no homogeneous data strategy. Do not focus on translating data into insights. They continue to rely on common misunderstandings about what customers really want, about what works or good practices for success (based on market insights from 20-30 years ago), and there is no consistent truth for the whole enterprise to avoid falling into these misunderstandings. The process of evaluating projects based on ROI (return on investment) often underestimates the contribution from learning something new about customers or creating new ways to interact with customers because no one has explain the direct relationship in terms of revenue or cost Opposite to Amazon, it is eager to invest in processes or technologies to see what it can learn – to collect data, and then to ROI, not vice versa. The fundamental difference is the investment problem to learn where value is compared to never investing because value cannot be predicted from the start. How can you learn without even knowing it?

3. Don’t recognize technology as an available factor (enabler)

These are businesses that do not value technology as a catalyst. Different departments seek and buy their own solutions, because the IT department has been busy with technical backlog for the past few years and invested little in innovation. All of it continues to make it difficult for retailers to build a data-based organization because new processes are completely separate from business and cannot reconnect with an overall perspective on data. Discrete processes lead to fragmented pieces of data, no insights, no flexible business processes to take advantage of the next understanding.

For example some insights about customers

For example, the 2018 PWC global consumer survey found three things in the UK that are willing to pay more: 1) speed and efficiency, 2) convenience and 3) friendly service friendly, enthusiastic – a combination of technology and people. Despite economic uncertainties, they are willing to spend more than 2018 compared to 2017 and this will be more for online. About 90% shop on Amazon. More than one-third of them are members of Amazon Prime, with 82% asserting that free delivery is the main engine. Although the experience in the store is still the main shopping channel, online, computers are widely used. They also suggest that the opportunity to change in the shopping experience is wifi in fast, easy-to-use shops …

Most powerful impact of technology trends to the range of retail industry

Daniel Newman, CEO of Broadsuite Media Group, key expert at Futurum and author of Futureproof, has made predictions about the digital transformation trends in the annual retail industry in Forbes magazine.

Because many people still say, “Vietnam has a lag of about 2-3 years in technology application,” I will summarize through the trends of 2019, 2018 and 2017 for reference. Looking back at Gartner’s 10 strategic technology trends 2019, there are many similarities in the industries.

4 Retail transformation trends 2019

Forecast of the digital retail trend of Futurum 2019.

Improving omnichannel improvements

Clearly, initiatives and efforts to improve the omnichannel experience have been around for a while, but it’s hard to say that they have succeeded. You probably have situations where online ordering and going to a store to pick things up – no one knows about your order. Many cases do not even know you have placed an order. A few hours after searching, they find the goods you are ordering in the dusty warehouse? As a customer, maybe you won’t come back buying in a few years?

In 2019, this multi-channel experience is expected to be a must, as consumers move faster, requiring more from retailers. If your website is down, the product is unresponsive, customers can move to another retailer, giving them a better multi-channel experience. Multichannel experience is probably not an attractive/sexy trend in digital retail transformation, but it is definitely the most necessary.

Cognitive computing

You may have this trend as artificial intelligence (AI)/chatbot or customer support robots. The reality is that cognitive computing will continue to grow exponentially in 2019 and well-deployed companies will rise to lead the market.

It is probably hard to tell if you are dealing with a real person or robot when seeking online support through chat (at least), at least with certain knowledgeable retailers. Those seamless exchange experiences make a huge difference in retaining customers.

Hue Tran

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