We sat down with Paola Ameduri Industry Architect at Hitachi Solutions Europe and expert in delivering modern and cost-effective technology solutions for the retail sector. She shares her views on making digital transformation success in the retail space.
Before the COVID-19 pandemic I’d have said leadership. A recent study, The DNA of Future Retail Leadership, cited 36% feel retailer leadership is not moving fast enough to keep up with consumer demands, only 27% has the required digital expertise and 56% are not diverse enough to reflect their customer base. Not exactly a ringing endorsement, especially when you consider retailers with top performing management teams are growing five-times faster than the competition. I often hear about changing customer demographics, the rise of the Millennials and Generation Z, but as with any business, change is constant and management teams need to be re-structured to inject speed and innovation and place the consumer at the heart of all decisions.
Since COVID-19, it is becoming clear that consumers intend to permanently change their shopping behaviour, including purchasing more online. This was inevitable but the pandemic accelerated this much sooner than retailers would have liked. However, the shift is likely to generate an additional £4.5bn in UK online sales this year, according to a study by Alvarez & Marsal and Retail Economics. The research also found that 69% of consumers have been unimpressed by the government’s response to the emergency, ‘driving risk-aversion towards physical retail’.
In recent months, ECommerce has proven an essential channel for shoppers who can’t get out or don’t have any accessible local outlets. Many businesses are finding their eCommerce platforms under pressure due to sudden spikes in demand, while other bricks and mortar only retailers with no eCommerce capability are rushing to build transactional sites. Regardless of the retailer, many are turning to eCommerce as a means to keep their business open and generate revenue. Therefore the most successful companies are the e-commerce players that took an early start in digitalisation. A good example is Amazon. For years now Amazon have been ahead of the game when it comes to ecommerce, with the development of Amazon Go stores, where customers may walk in, pick up the items they want and walk out without the burden of waiting in line for checkout. The system uses their mobile phone to detect who they are and directly bill their account. So far, traditional retailers are still lagging in offering similar services. Some regions, however, are catching up fast. A number of Chinese grocery chains have aggressively invested in digital technologies, to the point that over 150 stores in China are now offering a similar value proposition, versus just over 15 Amazon Go stores in the US over the same time period.
Digital technologies enable new ways of meeting today’s customer expectations, by building flexibility and accountability into their supply chain. It also allows brands to offer the transparency and traceability that Gen Z customers, in particular, are demanding. As an example, blockchain technologies provide an open source ledger that can give customers reliable information on how a product was made, from which core ingredients, using which farming techniques, etc. It also gives a guarantee that responsible transport was used, child labour was avoided, and so on.
2020 has seen some major UK retailers making new investments in automation as the global pandemic has taken hold. Amazon, Ocado, and Eve Sleep are but a few examples of large organisation who have continued their deployment of automation technology during the Covid-19 crisis. There are plenty of other example of retailers assessing the potential of robotics and artificial intelligence (AI), and introducing it within their operations in recent months.
Andrew Hoyle, head of automation at Wincanton, a logistics services provider, says greater automation can help retail warehouses deal with the recent growth in online sales, and support social distancing measures required by government.*
Retailers need to define their operating model and success will be based on retailer’s ability to adapt to rapid change. It is now clear, successful operating models coalesce around four themes: Platform, Brand, Value and Service. In choosing an operating model, retailers will need to carefully consider their target customers, where they create real value and their own strengths and weaknesses. Once defined, the retailer can then embark on a continuous programme of innovation across all facets of the business including full digital transformation. This will impact on almost every function of the business and must be led from the management team. It is important to recognise that such a deep transformation takes time and needs to be broken down into steps and driven at a pace that fits the organisation. It is therefore essential to select the right calibre of consulting partner with a full understanding of your industry and same ambitious vision of innovation, who will be able to support your company through the entire digital transformation lifecycle.