To position themselves for success, retailers need to pay more attention to customer focused initiatives
The retail industry is witnessing seismic changes due to multiple forces at play – competition from online players such as Amazon and discounters; customers expecting seamless omnichannel and new in-store experiences; advent of shopping assistants such as Alexa and Google home. Some of the key trends in the industry are:
• Time-strapped customers are seeking convenience in their shopping as well as looking for differentiated and personalized in-store experiences.
• Retailing is increasingly becoming omnichannel and customers want seamless experiences across channels. More and more customers are checking the products in-store and ordering online or are buying in-store and expecting delivery at home.
• Players such as Amazon are leading a paradigm shift in customer expectations through oneclick purchasing, offering endless choice with reviews from other customers to facilitate decision making, and the ability to return the products if they don’t like it.
Customer is still king
While everything changes, what remains constant is the fact that ‘customer is still king’ and the retailers
who ignore this fact run the risk of getting extinct sooner or later. Retailers need to think about levers which can help them win in this competitive era of razor thin margins.
Given the scale and complexity of their operations, it is easy for retailers to become more and more focused on their processes and lose focus on their most loyal and profitable customers who typically account for 80% of their sales. To be successful in future, retailers need to put the customer at the centre of all their decision making. This is easier said than done, given the existing legacy processes, focus on day-to-day execution, and not to forget the prevalent mind-set and culture.
Some retailers have started to realize the headwinds impacting their business and have started taking steps to position themselves for success. For example, Walmart recently hired its first Chief Customer Officer to oversee all customer focused initiatives both online and in Walmart stores.
Role of data science and machine learning
The role of leveraging customer data is becoming more and more important and one of the key differentiators of the “winning retailers” of tomorrow will be their ability to use data to guide their decision making. Today, retailers have a huge variety and volume of data available within their ecosystem in the form of transactional data, media viewing behaviour, location data, weather data, click-stream data on website and retailer/ third-party apps. The key is to have this data made available for decision making processes such as supply chain management, in-store assortment and operations, marketing investment optimization, managing promotions, etc., in the right format, at the right time, and to the right people with the necessary skill-sets.
Some of the key areas where data science and machine learning can help retailers include: • Generating real-time and actionable customer insights to drive personalization and enhance customer loyalty. • Optimizing in-store operations including assortment decisions, product placements, ensuring product availability, and reducing checkout time. • Shifting marketing investments from massmarketing to personalized one-to-one marketing. • Mapping customer journeys across offline and online channels and ensuring seamless omnichannel experience.
Getting ready for the future
The business case for leveraging data to become customer-first in the retail industry is clear. This will enable retailers to unlock the hidden value of data sitting in their data ware-houses. Companies such as Amazon have been pioneers in leveraging data science and machine learning to grow their business. The retailers will need to raise their game by multiple notches, to sustain and win in the omnichannel world. To be able to effectively leverage the full benefits of data science and machine learning in the future, retailers need to adapt to the big technological, people and cultural changes within their organizations. Some of the key areas that will need focus are: • Building a culture of data-based decision making and continuous experimentation rather than using intuitions or old ways of doing things.
The role of leveraging customer data is becoming more and more important and one of the key differentiators of the “winning retailers” of tomorrow will be their ability to use data to guide their decision making.
• Revamping the underlying data infrastructure to ensure that data from all sources is combined on a real-time basis to get a 360-degree view of the customer and is leveraged actively for decision making. • Hiring/ Partnering to get the right skill-sets for the future. For example, marketers who are creative as well as comfortable with numbers; data scientists/ analysts to build machine learning models and generate actionable insights. The change is already here for the retail industry and the ones who are well prepared for the future will eventually emerge stronger.