George Millard
Technology has been the main driver of business and the economy in recent years and will be more and more. In 2010, of the five largest companies in the USA, three were traditional and two were technology companies. In 2019, the top five are technology. In China, three out of five are technology companies, and in 2010 there were none in the sector among the top ten.
Technology is fundamental, but it does not solve it alone if there is no continuous strategy, which shows the path of the best opportunities to add value. We cannot leave out a crucial step: execution. Extracting the best results from technology, with the execution and implementation of a chosen strategy, is the real challenge for most companies. Thus, the technology, strategy and execution triad must go together. Otherwise, they are just dreams.
So how did “brick & mortar” become “brick & mobile”? As was inevitable, technology found its place in the sun. As we become more and more dependent and connected to our cell phones, we want them to do everything.
This is where things get a little complicated. How to get the “human touch” in the digital experience? How to take the leap to transform the digital experience, the customer experience in the “consumer journey” into a digital ecosystem?
Sometimes it is obvious to make a purchase with just one click to make payment via smartphone. Other times it is more complicated because it requires the accumulation of a lot of information from the customer, the company, the channel, the processes involved and the products and brands. To make the “consumer journey” a pleasant experience, a lot of technology enters the field. First capture information about the environment and products / brands with sensors such as RFID, BLE, NFC, for example.
Then the customer data, through various systems that integrate previous shopping experiences and that, subsequently, use a lot of data analysis and artificial intelligence to understand all of this. The task is not easy, as many technologies, processes and information must be integrated to make sense, be reliable and add value to the customer and retailers.
Many retailers are unsure about which technologies to adopt, after all they are not the “main business” for them. If I have a shoe store, isn’t selling them my business? Shouldn’t it be like that?
It is a fair question. Good technological solutions are not cheap and going the wrong way can be very expensive and bring few results. A good way is to study what’s on the market, understand the value propositions well and, after choosing your digital strategy, implement it in stages.
The “good is the enemy of the great”: it is better to do something, even if it is not perfect, than nothing. Start with a Minimum Viable Product (MVP), a pilot. Start small, test and correct, along the way, what is not good enough. Remember to set metrics and a timeline so you can move on and reap the benefits of a large-scale implementation, once you’re confident. Otherwise, flying is a waste of time and money.
But how to do all of this in Covid-19 times?
The CEO of a major manufacturer / retailer recently told me: “The pandemic is not an event launcher, it is an AGENDA SPEED”. More reasons to move forward.
And what are the challenges of smart retail?
Consultants and retail experts have been talking a lot about omnichannel as “O” the way forward, especially for retailers with many brick & mortar stores, as a defense strategy against the “Amazons” of the digital world. In other words, take advantage of both physical and virtual worlds to obtain a competitive advantage over pure internet players. I partly agree.
Anywhere-Anyone
“Trade anywhere – anyone” is more adherent to a future in which the consumer is once again the king and the center. In this line, the consumer’s journey must also be a comfortable one. Increasingly, retailers will be encouraged to add services and not just sell a product. Thus, the focus tends to shift from Products and Brands to Experience and Channels.
Physical stores can always help with User Experience (UX), using concept stores, but retailers should be concerned not just with marketing. They should take the opportunity to collect the largest amount of information, in real time, to anticipate the customer’s needs. Again, analytics tools are working together with IoT sensors, such as RFID, to play important roles.
Another challenge is logistics. The coronavirus has made a long list of retailers suffer from stockouts. One answer may be a larger inventory, with associated capital costs, or a longer but smarter supply chain, which would mean considering more vertical integration. Longer supply chains and vertical integration should increase the need for smart supply chains. That means visibility across the chain.
Some clothing manufacturers, for example, have realized that dealing directly with end customers is more profitable, as they do not depend on an intermediary (retailer). More manufacturers will integrate vertically and launch their own stores and marketplaces. This movement should increase the risks and also the costs, but the returns tend to be higher.
Technology, through automation and process improvement, should play an important role in reducing costs, increasing control and optimizing supply chain performance. Key technologies such as RFID, AI, Analytics must be increasingly adopted, as the focus should be on integrating the supply chain and not treating physical stores separate from online ones, with separate processes and inventories. Systems and processes must be integrated to optimize resources and reduce costs.
Reverse logic
With the expansion of electronic commerce, e-commerce platforms and direct online purchases reinforce its dominant position acquired in times of social detachment. As a result, we missed that opportunity to touch and feel the products in our hands. A disadvantage of this is that the fashion retailer, in particular, may start to have a much higher rate of return than in physical stores, especially in the footwear sector.
The supply chain must prepare for this increase in returns with process optimization / automation and improved reverse logistics. Done with care and respecting your customer, the experience (UX) should not suffer. People can continue to have a great shopping experience, even if they need to return an item, as long as they are well informed about the process, that the delivery forecasts are not too long and that the return on money is available, if desired.
In 2020, the World Trade Organization (WTO) predicts a 10 to 32% drop in world trade. GDP is expected to shrink by 3 to 5%. For the USA: -4%, Brazil: -5%, EU: -7%., China; + 1%. In the short / medium term, Covid-19 signals difficult times ahead; therefore, the focus on cash flow should be a priority not only for retailers, but for all companies.
As always “cash is king”, this year more than ever. Ultimately, retailers must make a profit or not survive. As interesting as the technological innovations of the “front desk”, providing a lot of information, such as recognition of client patterns and behavioral analysis to anticipate trends and keep the client interested, the processes and activities “behind the desk” will be even more crucial to maintaining margins, especially in tight sales markets.
In this sense, the priority will be to invest in technologies for improving operational performance, which guarantee visibility with reduced costs, more productivity, speed, precision and less manual work.
The supply chain must be adjusted and intelligent in order to have visibility of the entire supply chain. This will make all the difference and result in competitive advantage. Walmart has long demonstrated the importance of efficient operations. In fact, in these times of crisis, Walmart’s on and offline integration strategy has proven to be correct, with its actions rising, even in the middle of the pandemic.
The good news is that new technologies are increasingly accessible. Even small retailers can deploy good solutions like BI data analytics and analytics; visibility, accuracy, control with RFID, automation and productivity with AI.
Right now, the tip is to focus on increasing productivity, better operating performance, doing more with less. Optimized operations and smart supply chains are among the winning strategies for the next two years.
George Millard is CEO of Mozaiko, a Stefanini Group company. Mechanical engineer graduated from FEI and MSc from London Business School – Sloan Program.
