Technology: The Key Driver to Success in Today’s Retail Industry
It's an age-old truism of the retail industry: The most successful retailers are those that provide the best customer experiences. That has always been true, and it always will be. But the means by which retailers are able to provide that 'best' customer experience is rapidly changing. Technology has become the key driver in providing the retail experience that today's customers seek and demand.
Technology, in fact, has radically altered the landscape of retail. In only a few short years, the methodologies and tools that customers employ in seeking and obtaining the products and services they need has forever changed. Technological advances have empowered customers with more choices, more flexibility, more freedom, and more information than ever before.
Data is the fuel that powers the technology revolution. Retailers that grasp the sustainable competitive advantage that data coupled with technology offers are achieving unprecedented success. Many more will follow down that same path to success. But many retailers - including huge, household brand names - have, to their own peril, ignored the technology revolution. These retailers have paid fearsome penalties in declining market share, and in some cases, complete obliteration. And many more will follow that same path to failure in the coming years.
The Retail Industry: Ever the Same, Yet Ever Changing
No matter the goods and services involved, the dynamics of the retail industry have contributed both to the rise and collapse of countless societies since the dawning of human civilization.
And just as the retail industry itself is ancient and ageless, so are many of the tenets of retail. Selling goods for a profit and providing a pleasing customer experience, for example, always have been and always will be foundational components of retail success.
But though the bedrock principles of retail may be unchallengeable and unchanging, many aspects of the retail industry have undergone dramatic changes in recent years. One particular change has created both chaos and unprecedented opportunity in the retail industry. That change is the recent technology enabled shift of power to the customer
Age of the Customer
The average consumer, for example - smartphone in hand - can instantaneously compare prices from a plethora of retailers for a given product. They can compare and contrast consumer experiences, both complaints and kudos, for any retailers with whom they're considering doing business.
And they can shop for, and purchase, virtually every product they might need from cradle to grave, all from the comfort of their favorite easy chair.
In only a few short years, the dynamics of customer interactions with retailers has undergone astounding change. For consumers, the recent changes wrought by technology have been an empowering gift. For quick-toadapt retailers, also, the changes have offered unprecedented opportunity. But for many slowto-change retailers, the results have been devastating.
Retailers Must Adapt
Retailers alert to the sea change have trimmed their sails appropriately, riding the momentum of change to extraordinary levels of success and profitability. Other retailers, not quite so alert and considerably less visionary, have been swept into history by the winds of change.
Major retail brands - household names - have failed to adapt, and have foundered: Blockbuster and Borders, for example. And many retail brands such as Netflix and Amazon have become household names by capitalizing upon the opportunities that technology now offers.
More and more, technology is becoming an integral component of consumers' lives. Retailers must adapt to remain relevant.
Consumers' use of technology currently extends far beyond simply browsing the Internet for products. Smartphone apps such as RedLaser, for example, can provide consumers with instantaneous price comparisons after they've simply scanned a barcode with their phone.1
Many major brands are already making proprietary mobile apps a part of the shopping experience. These apps use data such as location and customer history to provide consumers with product information, promotions, and store-specific ads. It's a move that's paying off. Twelve percent of WalMart's mobile sales currently take place while customers are in a brick-and-mortar store.2
And consumers are increasingly using technology to choose companies as well as products. Social media postings, online product reviews, and sites like Yelp have given consumers the power to share positive and negative retail experiences with millions of consumers - all it takes is a few keystrokes. Accordingly, companies that excel in providing customer satisfaction will enjoy unprecedented levels of consumer goodwill. And the reverse, of course, will also hold true.
Walmart Goes All-In
Walmart leadership understands the importance of evolving with the times. That's why the retail giant has set up shop in the world's epicenter of technology: silicon valley. That's where they've established @WalMartLabs, their "think tank" for maximizing the benefits of technology and data. according to Walmart cognitive scientist om MarWah, the company is using data science to increase the personalization of their customers' experience. "It's how to use data to strengthen the customer experience," MarWah said. "It's a human centered approach. Combine cognitive science and geography to identify the context that is impacting customer behavior."3
Data is Key
According to a McKinsey report, "Retail’s share of overall consumer spending has been in decline, falling from 50 percent in 1990 to 42 percent in 2009. And the sector’s profitability is under intense pressure, squeezed both by suppliers, who have been capturing an increasing amount of surplus, and by customers, who are putting pressure on prices. For every $1.00 of operating profit on consumer goods in 2008, retailers collected approximately $0.31, down from $0.60 in 1999."1
Data analytics is the key to taking a larger slice of a shrinking pie, and to providing the consumer experience that today's customers seek and demand. According to the McKinsey report referenced above, a retailer taking full advantage of the potential offered by Big Data and analytics can reasonably hope to increase operating margins by as much as 60%.1
The most successful and progressive retailers are utilizing data analytics to survive and thrive. According to an IBM study, "65 percent of leading retail merchandisers feel Big Data analytics is critical to their business." The utilization of data analytics seems to be paying off. The same study reported that in a given time period, the stock prices of retailers using data analytics increased in value three times faster than less progressive retailers.4
Men’s clothier brooks brothers is the oldest clothing retailer in the united states. founded in 1818, the company has proactively evolved to successfully weather two centuries of change. It's a challenge that never ends. But just recently, the challenge to evolve has been a bit more, well, challenging. it's because of data. Like most other companies, brooks brothers has been deluged in data in recent years. But it's in brooks brothers' dna to adapt, and they've done so aggressively. Data analytics is now at the forefront of the company's efforts to maintain its reputation for unparalleled customer service, and in making the most of marketing opportunities.5
An All-Encompassing Change
Certainly mini-cataclysms have occurred with great frequency throughout the history of retail, each focused upon a specific niche. A wealth of examples abound: Buggy whip makers that failed to adapt to the advent of the horseless carriage is an oft-cited example. Or companies like Eastman Kodak that failed to anticipate a massive shift in consumer preference - from film to digital, in Kodak's case.
But the changes that technology currently imposes upon the industry are pervasive and all encompassing. It impacts every single retailer, from the smallest to the largest. No retailer can ignore these changes; those that fail to adapt will do so at their own peril.
Yet these same changes offer historically unprecedented opportunity along with the urgent need to evolve. And that opportunity is also available to every single retailer, both large and small. Perhaps it's a fair balancing of the risk vs. reward scenario that now faces the modern retail industry.
1. McKinsey Global Institute. Big data: The next frontier for innovation, competition, and productivity. 2011. PDF file.
2. Costa, Tony. "Apple + WiFiSLAM = Game on for Indoor Location" Forbes. 29 Mar. 2013: n. pag. Web. 25 Sept. 2015.
3. Bloomberg, Jason. "Driving Ecommerce Innovation @WalmartLabs" Forbes. 5 Aug. 2015: n. pag. Web. 25 Sept. 2015.
4. Petro, Greg. "The Retail Tipping Point" Forbes. 7 July. 2015: n. pag. Web. 25 Sept. 2015.
5. Ravindranath, Mohana. "Brooks Brothers, national retailers analyze 'big data' from sales to adjust marketing" The Washington Post. 22 Sept. 2013: n. pag. Web. 25 Sept. 2015.