The three senses of retail

There is much talk about the so-called retail apocalypse, but some retailers are very much bucking the trend through commitment to digitally transforming themselves.

Do retailers really need bricks-and-mortar for people to truly experience shopping? It would appear so. According to a Forbes study, the vast majority of shoppers prefer to see and touch their products before they buy.

So why are so many traditional retailers going out of business? There is a lot of talk about a so-called retail apocalypse, but in reality there are successful retailers around the world. For example, Walgreens Boots Alliance Inc recently replaced GE, one of the longest standing members in the Dow Jones Industrial Average.

About four years ago, Walgreens Boots Alliance made a firm commitment to digitally transform itself to be agile enough to not only optimise its current business, but also able to rapidly exploit new revenue-generating opportunities. This commitment – to digital transformation and a Dow Jones listing – is unlikely to be a coincidence.

The financial impact of digital transformation can be immense. Research conducted by Forrester, of some of Software AG’s customers, has shown a 324% return on investment and a payback in less than 6 months - this is staggering by any measure.

Despite the outliers, bricks-and-mortar retailers are still under a tremendous amount of pressure from online-first competitors, despite their inability to provide touchy-feely customers with a more hands-on experience. The answer to the traditional players’ conundrum may lie in partnerships.

There is a blurring of boundaries between the industries taking place, with supermarkets joining up – or competing - with meal kit providers such as Hello Fresh and Blue Apron. For example, Woolworths, is now offering innovative meal kits that customers can pick up and carry home.

Others are offering what is called ‘experiential retail’ where they create an environment for customers go to learn, play and experience rather than just transact. The Apple Store is a great example of this, but others have also followed this approach. This experiential retail trend is also why are seeing more grocery stores opening cookery schools within their walls, and even restaurants. For example, the Spice & Tea Exchange stores all participate in product and recipe sampling, cooking classes and in-store events.

‘Coopetition’, a collaboration between business competitors in the hope of mutually beneficial results, is also becoming a retail strategy. Spanning the globe, this trend offers intriguing possibilities. For example, Abercrombie & Fitch are now placing pop-up stores in hotels, Google are investing about $550 million US in Chinese e-commerce powerhouse JD.com to expand in Asian markets and take on rivals including Amazon, and, Kroger and Sobeys are outsourcing their e-commerce grocery sales to Ocado.

Something else that that digital transformation can enable is differentiation. Here in Australia, Catch is one of the most profitable deals and coupons websites. It now also sells its own range of products by directly enlisting merchants on the website, adding pre-paid mobile phones to its long list of products.

Kogan, one of the most well-known e-commerce sites in Australia, started out selling televisions and has now moved into groceries, toiletries and confectionaries online.

What all of these success stories have in common is that retailers are agile and able to exploit new channels and revenue generating opportunities. A few years ago, omni-channel was the new retail opportunity, now we are seeing new offerings including subscription retail and retail ecosystems starting to emerge.

These new models are not yet supported by out-of-the-box software solutions (innovative things never are until they become mainstream) so to compete, and innovate retailers need to ensure their technology framework is flexible. Their approach needs to be able to support an innovation at scale by being able to orchestrate new processes across multiple existing systems, whilst being flexible enough to utilise emerging technologies such as artificial intelligence (AI) and the internet of things (IoT) when appropriate.

Digital transformation means making organisational changes and leveraging new technology to enable business change; it enables you to exploit new business models and revenue generating opportunities.

As analysts Forrester advise: “Digital transformation is not elective surgery. It is the critical response needed to meet rising customer expectations, deliver individualised experiences at scale, and operate at the speed of the market.”

Oliver Guy is Global Industry Director at Software AG, specialising in Digital Transformation and unified commerce technology strategy, Oliver advises retailers across the globe on their technology strategy and decisions. Learn more at www.SoftwareAG.com/retail