When people come across the term digital transformation, the first thing they think of is creating a website, or a mobile app. This is a tiny step towards a total digital transformation. To improve the processes of your retail business, a digital transformation can help in almost everything from cloud utilization to improving the overall customer experience.
A recent study of around 1600 small businesses revealed that 42% of SMBs have taken a holistic view of digital transformation and 82% of small businesses have adopted it. A majority of small businesses believe that digital technologies impact every aspect of the business. They make sure that the digital technologies integrate with the organizational strategy.
While digitally transforming your retail business is a great way to have an edge ahead against your competition, retail industry business owners face considerable challenges. The rise of e-commerce giants like Amazon has fundamentally impacted the way you do business and how you sell and interact with customers. However, with digital transformation, you can optimize your business model and expand to other revenue streams.
Technology is an enabler, revolutionizing every step of business. Implementing without planning and execution can have long-term adverse effects on overall customer satisfaction. So first, it’s essential to understand what exactly digital transformation means.
What is Digital Transformation?
Digital Transformation is technology based solutions that are connected and optimized to fundamentally change the operations of a business. You may have also heard the term digital disruption. Often, an immediate comparison is drawn between digital transformation and digital disruption. This is because of companies such as Uber or Spotify, where the adoption of technology radically impacted the market.
However, this doesn’t mean digital transformation is limited to digital disruption and technology alone. Factors like consumer behavior, customer expectations and societal, industry, and economic shifts also play a role in digital transformation. Keep in mind that digital transformation involves a vast number of; processes, internal and external factors, interactions, transactions etc. Consider this when analyzing your digitization reports.
Why Digitization of Retail is Important
When it comes to retail, a digital transformation should bring a shift in the entire business model. For a long time, retail has been a product-centric industry. Business owners have focused more on how to obtain inventory and how to sell it to the customer, without much focus on anything else. Everything between buying low and selling high was optimized. There’s just one problem: the buy-low sell-high method hasn’t proved profitable since before the Great Recession.
Buying low is near impossible when competing with larger brands. Even if you’re selling something you designed at a higher price, it won’t be long before others create knock-offs and sell them cheaper. Retail must adapt.
Consumer change has effected the need for digitization in the retail space as well. Customers have become more price-sensitive and seek out short-term profits. When you can’t compete on the price of the big brands, your business will have to shift to a customer-centric model. For retail, that means focusing on the data and value you can bring.
Most retail business owners do not collect any data in their physical store. It’s up to you to change that, collect data on everything that comes into and leaves your store, i.e. customers, products and money. Use this data to draw insights and implement them. Remember, the one aspect of retail that can never be digitized is the actual physical product. Almost everything else can and should be.
Drivers of Digital Transformation
The key drivers of a digital transformation in retail are:
- Evolving expectations from omnichannel shoppers
- The disappearance of borders between online and offline for customers
- An appetite from customers to have an engaging, personalized experience with a business.
- Supply chain challenges
- Competition in overall customer experience
What Areas of my Retail Business can be Transformed?
A retail business can advantage from transforming in several areas. These include:
- Business activities and functions
- Business processes and models
- Business ecosystems
- Business asset management
- Organizational culture
- Ecosystem and partnership models
- Customers, workers, and partners approach
All of the areas mentioned above are connected and overlap. The steps on how to digitally transform in these areas can help you achieve the most for your business.
8 Steps to Digitally Transform your Retail Business
The steps to a transformation are not the same for all industries, yet there are some technologies and ideas that retail business owners can implement for success.
- Collect Unlimited Data: Your retail business should have unfettered access to real-time data about customers, products and inventory. This applies to both the physical location of your store, e-commerce, customer service and your main office.
- Create a Digital Connection with Customers: Engage with your customers consistently on the media platforms they use. Customers sometimes switch channels even for the simplest of tasks. Use email marketing, social commerce, promotions, inquiry forms, and click-to-talk chat boxes to encourage two-way communication with your customers. It’s crucial to monitor these channels and record all data generated. The information, speed, tone of voice, and delivery should be the same throughout.
- Establish a Robust Offline and Online Strategy: A great offline and online strategy can encourage customers who visit your page online to visit your physical outlet. Those who visit your shop can also be driven to check out more of your products and what you have to offer online. For instance, you can offer coupon codes at your physical location that can be applied for online purchases, or conduct contests that drive people to visit your store. Omnichannel customers who shop both online and in-store have a 30% higher lifetime customer value than those who buy through any other channel. Hence, having a complementary online and offline strategy can prove to be incredibly valuable.
- Use a Single Customer View (SCV): An SCV allows your business to track customer communication and engagement across every channel. The benefits include improved service, better customer retention, higher conversion rates, and improved overall customer lifetime value. The SCV also lets you collect all customer data and interactions in one place. Organizationally, this leads to a more aligned effort for customer service.
- Digitally Enable Customer Insights: Every interaction your customer has with your business, whether online or not, generates data that can offer valuable insights. It doesn’t just have to be transactional. Even analyzing the items in cart or discontinued purchases can help you better understand your customers. Collect data such as; who your customers are, where they come from, their preferences, other shops they regularly visit (this can open up event partnership opportunities), how they found your business etc.
- Measure your Customer Experience (CX): The objective of measuring your customer experience is to close the gap between your intended customer experience and the actual customer experience. It’s defined as the sum of the experiences a customer has with your business in their lifetime. It includes touch-points like; product awareness, social contact, transaction etc. You can invest in a customer experience management tool to help focus on customer interactions and their needs.
- Use these Insights for Marketing: Personalize your offerings based on the customer data you’ve collected. Creating a performance-based marketing strategy based on individual shopper’s preferences can open up exciting opportunities for your business. For instance, you can create targeted e-mail campaigns based on shopping preferences and location. You can also generate personalized content based on items that may have been abandoned in the shopping cart.
- Test, Learn and Repeat: A business that focuses on giving their best to customers doesn’t stop learning. Apply a DIAL methodology, Data-Insights-Action-Loyalty system to your retail store can keep your business growing and adapting.
Digital transformation is a journey with intermediate goals. This journey requires a proper road map. The end goal is to achieve continuous optimization across processes, divisions and the entire business ecosystem.
Retail Digital Transformation Tools to Use
Unified Commerce: Unified Commerce is the key to a seamless retail experience. It’s an integrated platform that integrates your tech together. Before unified commerce, each channel (the physical store, website, customer service etc.) was handled by individual software programs. Combining and studying the data from all programs manually takes up a lot of time that you, as a business owner, don’t have. Unified commerce integrates all systems, and gives you real-time access to data.
Artificial Intelligence (AI): One of the best ways to keep customers, is to keep their attention. Customers want to message on any platform at any time of the day, and AI is one of the best ways to deliver that 24/7 service for them. AI-driven chatbots can respond to customer queries and act as a store associate. In seconds, they can pick up on the history of the customer’s business with you and react accordingly. Since chatbots are programmed, you can also be sure they would be consistent in tone, and only say what they’re supposed to say.
Machine Learning: Machine learning cements the bond between your business and the customers. Machine learning is a data science that can collect data from various sources, feed them into a machine learning model and predicts future outcomes. Machine learning identifies patterns in customer behavior and spending. It can then adjust promotions, create personalized recommendations and create forecasts based on past trends. This can also change according to the season, and what customers will spend money on during which times of the year.
Despite these technologies, a human differentiation is the key to digital transformation on all levels. Humans will always value face-to-face interaction and communication over a robot. An offline element can help in the stages of collaboration, culture, empowerment, ecosystems and skills.
Future Trends of Digital Transformation
While digital transformations in retail like; mobile shopping, e-commerce and data collecting have been big in 2018 and 2019, it’s important to keep up with the future trends of digital transformation:
Improve Omnichannel: While omnichannel has been around for a while, it’s not been successfully implemented by most businesses. Going forward, becoming omnichannel will be a must for all retail businesses as consumers demand faster and more from their retailers.
Cognitive Computing: Chatbots, AI and robotic customer assistance and making headway, and businesses that use cognitive computing well are certain to lead in the future. The everyday improvements that cognitive computing can provide make shopping quick and easy and the customer is certain to feel valued.
Proximity Marketing: The advancements made by Google Beacon technology are certain to put smart beacons at the forefront of digital transformation. It’ll also help us understand how far customers are willing to be marketed to.
Cashless and Cardless Checkout: This is an unsung hero of digital transformation, but cardless and cashless checkouts will see a huge push forward for retail in the future. People always have their phone but sometimes forget their wallet. With mobile checkout or virtual money transfer software, they will always be able to purchase what they want from your store.
Data collection and mobile apps will continue to rise in popularity. Customers are also slowly getting app fatigue. This is caused from having to download many different apps to buy things. There are great opportunities for retail businesses that will centralize the customers’ app usage. The Internet of Things (IoT) has always been used by businesses for data collection, but will take a backseat when it comes to retail businesses. At the end of the day, customers are more concerned about their shopping experience than the technology the business uses.
How can a Retail Business Afford Digital Transformation?
Retail business has to make a shift from being product and store-focused to being customer-focused. Many retail business owners that focus on day-to-day expenses and overhead costs of running a business see digital transformation as an expensive effort. A retail business financing option can help your business digitize and explore more revenue channels. Existing processes, strategies and technological advancements can only help take your business so far. However, a holistic digital transformation can ensure longevity for your business.