It is a tough time for most retailers. Mostly all of them have been forced to close their business doors and leave or lay off workers to stop the pandemic attack spread of coronavirus and maintain social distancing.
The modern and digital economy has been built on the Industrial Revolution’s foundations with its core roots in the scientific concepts of deductive reasoning and the economic logic of maximizing self-interest.
Digital techniques have helped build a parallel narrative of inductive doctrines where the focus is on looking at the convergence between the sectors, breaking down the functional silos within organizations by focusing on the customer-centric, opportunities to collaborate even with the competition by developing a co-opetition mindset/strategy, co-ownership of the investments through franchisees and alliances for scalable growth with the low levels of asset intensity, and building relationships with the new generation of interconnected customers who are involved in the co-creation of products/ services and a long term orientation of continuous learning through feedback to improve the customer delivery better
model.
Retailers always have had two options in the way they have to respond to digital opportunities. A vast majority of them have seen the digital world as an enabler of better customer service or greater operational efficiency and have implemented many digital technologies to improve their performance on these parameters.
This approach is an incremental response to digital opportunities. It is primarily driven by a low-risk propensity to allocate scarce resources to a fundamental disruptor to retailers’ business models. However, many retailers have truly awoken to the possibilities presented by the digital world. They have genuinely seen the digital transformation as an opportunity to shape a long-term sustainable business model, which is a departure from the past paradigms.
Integral to this digital approach is the retail eco-system view as a network of suppliers and the franchisees supporting the central player (retailer) in orchestrating the business model with the long term goals and objective of maximizing the customer lifetime value and not just focused on a transactional approach.
This approach’s fundamental tenets are a collaborative mindset where the retailer is the first among equals on the broader network that invests in building the entire network’s capabilities to be agile and responsive to the consumer needs.
Attracting and retaining shoppers is common, and mostly a shared objective of the entire network and digital technologies helps understand consumer needs (e.g., cognitive).
Provide more splendid assortment (e.g., Visual merchandising), help shoppers decide (e.g., Virtual Trial Rooms), lower cost(e.g., robotics & process automation), increase loyalties (e.g., blockchain), and enhance customer service (e.g., AI base self-learning systems). However, the risk is to view digital-only through this prism of technology investments.
However, the positive and good news is that online retailers, especially retailers with significant digital footprints, find success as consumers move most of their shopping online. Brick-and-mortar retailers are following their lead.
Bringing digital marketing services to brick-and-mortar retail
According to an article in, “The new coronavirus pandemic is continuously deepening a national digital divide, amplifying the gains for businesses that cater to the customers online, while businesses that are generally reliant on the more traditional models are fighting for the survival.” But that is changing as well as the brick-and-mortar brands evolve.
Before coronavirus, the shift towards the digital world for brick-and-mortars was instead a “slow-motion trend.” Although prognosticators for more and over a decade have speculated that all shopping would move online, the truth was more nuanced. Even younger generations’ shopping habits included showrooming and other preferences that relied on actual stores.
The shuttering of hundreds of stores nationwide has made those conversations irrelevant for the moment, hastened the move to online for many brick-and-mortar retailers, and many speculate, leading to changes that are likely to be a permanent return to the new normal.
Digital models often provide retailers with opportunities to acquire new customers, engage better with existing customers, reduce the cost of operations, and improve employee motivation and various other benefits that positively influence a revenue and margin perspective.
For this report, digital has been defined as a technology-enabled combination of various resources (can include instruments, devices, bots, tools, teams, protocols, processes, networks, methodologies) which enables the availability of content (can be data, information, expert/social reviews, reports, analysis, games) for the user (employee or customer) to make more productive (can impact cost, time or service level) decisions and satisfying choices.
The ability to gather and collect, process, and share large quantities of data has led to some fundamental disruptions in business models’ design. The key factors impacting this change include:
- Convergence: The traditional boundaries between sectors are collapsing. Innovation at the edges of industries such as the payment systems (Financial Services & Telecom), or e-commerce (Retail & Telecom), and Industry 4.0 (ICT and Manufacturing), etc. is fundamentally disrupting businesses. Any disruptive digital transformation approach for retail needs to factor in a multidisciplinary view of implementation with a mix of analytical and creative capabilities.
- Customer Centricity: The organizations’ functional boundaries are also being dismantled to align the structures to customers’ needs. The process has been further accelerated through digital policies as the big data is now making it possible to analyze the shopper’s behavior in great and qualitative detail and customize the delivery format to individual consumer requirements through personalizations.
- Co-opetition: This is a revolutionary mindset that usually combines competition with collaboration. Many suppliers and retailers are no longer competing for limited resources but are now working together to profit from the enhanced customer value that is being delivered.
There have been various instances of collaboration between the retailers even from an Indian context (e.g., The Future Group and Flipkart)
- Co-ownership: From the retails context, digital has helped monitor and control the quality in franchising agreements to achieve the greater alignment of the business model to the shopper’s requirements presenting an enhanced opportunity for the retailers to drive scale at a fast clip without compromising on the value and brand promises and sharing the investment burden with their original partners.
- Co-creation: The new digital consumer/shopper is highly interconnected with his social peers and is more willing than ever to share the experiences and let others profit from his/her interactions with the products/services. Consumers also help co-create the value proposition based on their willingness to provide feedback, which helps refine the delivery models on an ongoing real-time basis.
- Continuous learning: Self-learning systems through AI and cognitive modeling have enabled feedback from past experiences to optimize the shopping experience for consumers, impacting satisfaction, and loyalty to be enhanced.
This report focuses on the impact of digital on three critical elements of the retail business & operating model:
- Strategy – includes elements of segmentation, positioning, operating formats, and business models (location, assortment, size, pricing)
- Front end – Customer-facing operations including storefront, Merchandising & Promotion, Customer experience including Loyalty, Marketing and Communications, Pricing & POS Solutions
- Back end – Supply Chain, Logistics & Warehousing, Digital Procurement & Vendor Management, Assortment mix & planning, People, Finance Automation.