Success for retailers in the digital age requires developing completely new skills.
Rachel needs new shoes to match a dress for her date. She opens her “my wardrobe” app, and selects the blue dress she bought last week. She then searches “brown mules”. The system brings up her body outline with the dress on it and a selection of shoes from across retailers, prioritizing brands that she likes. She finds a sale on the shoes she likes. She posts the look to friends in her “advisors’ circle” on Pinterest and waits for comments.
For Rachel, tools and technologies like these are a shopper’s dream. For retailers, they can be a nightmare. Just consider the technology capabilities needed to pull off Rachel’s shopping experience: multiple databases passing customer information to each other, predictive algorithms, personalization engines, systems calling product specifications and inventory availability, all working together at near real-time.
Welcome to the world of “Me-commerce,” where retail success depends on meeting consumers’ ever-changing and increasingly demanding shopping habits. This shift to digital-enabled shopping has created massive pressures for traditional retailers. At one big-box company, for example, we calculated that a 5 percent reduction in revenue per square foot would lead to a 30 percent reduction in return on invested capital (ROIC).
Embracing the Me-commerce opportunity will not only allow retailers to navigate these headwinds but also open up significant rewards. Personalization—the foundation of Me-commerce—can deliver five to eight times the ROI on marketing spend, and lift sales 10 percent or more.
Many retailers have experimented and innovated to adapt to the demands of Me-commerce. In our experience, however, too many of these have been marginal adjustments rather than fundamental changes. Given the tremendous economic pressures building on retailers, marginal changes won’t be enough to survive.
The questions traditional retailers must ask To succeed at "me-commerce," we believe that today's retailer must fuse technology and publishing. Operating like a technology company will allow retailers to effectively use Big Data and digital touchpoints to drive growth and reduce costs. At the same time, they must act like publishers to produce and manage content in real time across multiple platforms to create consistent, omnichannel experiences for their customers.
Before navigating this transformation, every retail CEO should be asking himself or herself and the executive team these five questions:
- "How well do we really know our customers?" While any retailer will say they know their customers, the habits of the individual customer are changing so quickly that companies often don't know them as well as they think they do. Today's consumer decision journey is an iterative process of evaluation, purchase and experience that is much more dynamic than the old "funnel" model of the past.
In skin care, for example, we've found that 66 percent of consumers continue to research their brand choice after purchase. Skin care brands, therefore, need to focus more on spending and messaging post-purchase.
To capture these insights, companies need more effective tools such as "war rooms" that track social media intelligence in real time and detailed customer surveys informed by regression analysis.
"Are we a publisher?" To be relevant, build trust and capture the imagination of the customer, brands can't just publish; they have to become publishers. Customer relationships are now two-way and continuous, requiring a steady stream of original, fresh and relevant content that inspires consumers to talk about and share their experience with the brand.
Being a publisher requires managing a complex content supply chain that can coordinate millions of pieces of content across multiple platforms. Each mobile coupon, e-mail, web page, catalog, image, text message and in-store promotion needs to be created and coordinated so that messages are consistent.
Content consistency is critical, but content relevance is the Holy Grail of me-commerce. Gilt Groupe, for example, sends more than 3,000 versions of a message to customers every day. The messages are tailored to the customer based on what they shop for, what they like, even what sizes they wear–a feat that combines technology, analytics and content into a great example of "me-commerce" in action.
"Are we acting like a tech company?" Today's retailers need significant technological expertise and a commitment to information productivity. Companies need to link systems together so that the customer has a single experience, then provide tools that help the customer make a decision. Acquiring technology companies can be a quicker way to get there, and our research shows that retail leaders significantly outpace their peers by doing so.
Acting like a technology company, however, requires adopting a mindset that embraces innovation and test-and-learn. Amazon, for example, not only invests three times more in IT than other top retailers do; it also has perfected the ability to test new user experiences and constantly evolve its offerings. At any time it will have up to nine different versions of its website running concurrently.
"Are we lean enough?" Amazon is driving the next productivity revolution in the same way that Walmart did a decade ago, forcing retailers to look for 15 to 20 percent savings in their cost structure. We estimate that "lean retail" could save as much as 20 to 30 percent.
A critical look at store designs can find real savings. Mobile technologies, for example, can be a cost-efficient replacement for traditional POS systems. Retailers should also take a fresh look at their supply chains. Pickup in-store, ship-from-store and direct customer fulfillment models can improve customer service without requiring major capital investment. At one retailer we identified an annual margin benefit of $100 million to $125 million by migrating to store-based fulfillment.
"Are we building up the talent we really need?" Retailers should start by taking an inventory of the skills and roles that will be needed over the coming few years, and developing strategies to find and recruit them. With the impressive growth potential from Big Data and digital, companies are focused primarily on tech talent. Just last year, for instance, P&G announced they were quadrupling the number of business analytics staff, while eliminating jobs in other areas.
The "me-commerce" revolution shows no signs of slowing down. How retailers answer these five questions will largely determine which companies will be around in five years and which won't.
This article originally appeared on the Retail Leader website