Today’s brick-and-mortar retailers are facing a perfect storm of market challenges that are forcing them to evolve the way they do business.
Three market challenges in particular—digitalisation, globalisation and increased competition, and changing consumer behaviours—have combined to create the perfect storm that could drown even well-established retailers. A foundation of operational excellence in the digital era is essential in today’s fast-paced and dynamic retail landscape.
Operational efficiency encompasses how retailers manage and operate IT infrastructure, retail networks and the entire lifecycle of stores, with the objective of enhancing efficiency and maximising availability.
Senior Vice President, Services at Diebold Nixdorf, Olaf Heyden, explains, “the retailers of today and tomorrow need to be streamlined, operationally lean and focused; the pinnacle of efficiency.”
“The obvious benefit of building a culture around operational excellence is to support digitalisation and connected commerce, to reduce costs and ultimately lead to a more optimised organisation that empowers staff to spend more time on a core business objective: serving customers.”
Digitisation and digitalisation
Digitisation is a necessary early step in establishing operational excellence, before being able to move towards digitalisation, where technology and data come together to create value with new revenue streams and transform traditional business processes.
Digitisation is more than replacing paper-based manual workflows, yet this is often one of the first activities addressed along the path to transformation. To automate workflows and processes, you first need to digitise existing processes. Processes that are leaner and smarter are also easier for retailers to adopt.
Extracting data and analysing what is useful and valuable enables both operational agility to respond to change and to impact the customer experience.
The drive for digitalisation has highlighted a technology skills gap for most retailers. To achieve their goals, retailers find themselves turning to experts who can help them digitally transform and scale quickly.
In fact, some of the reasons for digitalisation are to prepare for customer experiences of the not-too-distant future. Diebold Nixdorf’s Future Store VR experience helps retailers make smarter decisions as they modernise their retail sales channels. At the retailer’s end, it helps to drive efficiencies and optimise every aspect of store operations and, at the customer end, it provides a new way to engage with a brand, its products and services.
For the customer, waiting at a bus stop or train station could be enough time to do the day’s grocery shopping on a virtual wall, simply with the use of a smartphone. Goods can then be ready for pick-up at their preferred store, or delivered to another destination. Without a foundation of operational excellence, customer experiences like these are not possible.
To outsource, or not
It’s possible to in-source digitisation and digitalisation, but it can be a bumpy road. For retailers with legacy systems and skills gaps, in-sourcing is not usually an option due to the fast pace of the industry and customer expectations.
For this reason, many retailers partner with collaborative, end-to-end service providers to aid their journey toward operational excellence.
Retail Info Systems, an industry research firm, surveyed senior executives from national and regional US retailers to better understand their perspectives on IT outsourcing. They discovered that retailers are increasingly interested in outsourcing the management of their store IT networks.
The right partner can be the key to success as they can alleviate the burden of back-end processes and help retailers enter new markets, customise stores with digital capabilities, connect with consumers via wearables and mobile devices, gain the tools to deploy big data in a meaningful way and compete with online retailers that are a natural go-to for digital natives.
Another benefit of outsourcing non-core functions to a service provider is that they can free up critical funds while enabling retailers to focus on their core business and devote more time and resources to building better customer experiences and connecting more deeply with their customers.
Globalisation and increased competition
Strong competition worldwide is affecting both brick-and-mortar and online retailers, who are all grappling for attention on a variety of channels. This competitive market is leading retailers to search for innovative solutions, new geographical markets or store formats that can help them drive efficiencies and increase their net sales.
Australia’s weakened dollar and appetite for overseas products has seen a steady number of international brands enter the local market – with 38 of the world’s top 250 global retailers, according to Deloitte, – driving bricks-and-mortar and online competition. And with easier customer access to e- and m-commerce stores offshore, the pressure is on for Australia’s retailers.
Experiential retailing has been relatively slow to reach our shores, but local brands are beginning to see investments in this area pay off. To combat the rise of online sales, retailers are turning to in-store activities to increase interactions and engagement with their customers. While much of it in Australia can be seen as toe-dipping through campaign activations, there are signs that there will be a more permanent focus on in-store experiences, given the rise of immersive and engaging experiences being offered to customers in North America and Europe.
As the competition intensifies, Australian retailers are increasingly looking for ways to not just survive, but thrive in the future.
Retail Doctor Group CEO, Brian Walker, believes that customer experience investments are key and that, “exciting, aspirational, educational, informative, relevant retail will thrive – boring retail will not”.
What retailers are now realising is that at the heart of these customer experience enhancements is a culture of customer data and technology that supports strong operational excellence. So, whether it’s yoga classes in a Lorna Jane Active Living Room, David Jones’ newly announced entire floor of interactive space for children to play with toys, or Optus’ experiential connected home installations, we are sure to be seeing more ‘Insta-worthy’ experiences from retailers that are immersive and engaging.
These experiences are part of a feedback cycle where the customer feedback that brands receive is driving aspects of their operations that ultimately allows them to enhance the customer experience, both online and offline.
Changing consumer behaviours
Amazon, Uber and Netflix have changed customer expectations for all retailers, from large department stores to small local retailers. Quite simply, frictionless e-commerce is expected.
As brick-and-mortar retailers search for ways to differentiate themselves in an increasingly dynamic marketplace, the industry as-a-whole is searching for new technological innovations that will help them connect more closely with their consumers.
Consulting company, KPMG, which regularly generates trend barometers for various industries, found that Big Data, cloud computing, digital payments and the Internet of Things were top emerging interests for retailers. It’s no surprise that these interests are foundation building blocks on which operational excellence can be built to achieve optimum customer experience.
While retailers are playing digital catch-up across many areas, those retailers that embrace operational excellence will be rewarded with the agility required to enrich consumer experiences, build stronger relationships, optimise every aspect of store operations, and drive efficiency.
Olaf Heyden is the Senior Vice President of Services at Diebold Nixdorf.