Rebooting retail

In retail, is digital transformation all about automating existing business processes or creating new business models and revenue streams?

All of that, and that is why it is very difficult to pin down what people mean by digital transformation. The keyword that we need to remind ourselves of is digitalisation, which means anything that is running in your business on to which you can apply digital. It is not just about online marketing. For example, if you take a process that goes across the channels – you buy something online, and you pick it up in store. That is also a digitalised process. In the olden days, you’d go to a store, look for something and then pick it up off the shelf. Now, we have substituted that research part online. You need to think of digital business as digitalisation of business processes.

What are your thoughts on the so-called retail apocalypse?

I think it has been blown out of proportion by the media. While it’s true that there have been some big-name closures and bankruptcies in retail, more stores are opening than closing globally. So, it is a fallacy and myth to think that online shopping is killing brick-and-mortar retail. What is actually getting reduced is the amount of space -a large retailer will close a big store and open up two small stores. Stores are growing, but retail space is becoming less.

Among the new crop of technologies, which one could change retail forever?

What we are seeing is that there is more adoption of AI because you can actually do something at both backend and frontend with AI. For example, if you are a retailer with a call centre, you can use AI and chatbots to deal with customer complaints quickly, and on the frontend, if you are trying to improve customer experience, you can deploy chatbots there as well. It is not about any particular technology – you can’t say it is going to be AI, blockchain or IoT that will be more transformational. Furthermore, these technologies work together, and it’s meaningless to talk about them in isolation. If you look at AI and machine learning, you need data – some of the data will come from databases, some of it will be unstructured data such podcasts, videos, blogs and also from things that ping, which are sensors. That is IoT, and already you have a connection between AI and IoT.

Most of the retailers seem to be focused on transforming the front-end. Wouldn’t they need a corresponding digital back-end to make a difference?

Actually, they are focusing on the back-end, and you may not see it. One of the biggest discussions we have at the moment is the automation of labour – replacing people with machines. For the most part, the back-end discussion tends to be about cost optimisation while on the front-end it is all about revenue generation and enhancing value for customers.

Bridging the gap between physical and virtual worlds is a daunting challenge for many retailers. How can they go about it?

What we have found from our research is that retailers who have been successful in gaining traction know how to bring the two together. It’s about very simple things- you need to have the same pricing across channels, and the same thing applies returns policies and promotions, which will lead to channels syncing up with each other even in the very basic things. But, then you start to offer buy online, pick up in-store services. So, whatever processes you have online should be extended to offline. If you have customers who purchase online and want to pick it up in store, the integration between the two in terms of customer, product and order data should be a smooth process.

What is your advice to retail CIOs?

Whatever technologies retailers are using, they really have to make sure they do three or four things: make people’s lives easier, better, safer and simpler. When retailers start to talk about AI or some other new technology, our simple question is this: does it make your customers’ experience simpler and easier? If it does not, then why are you doing it? By that I mean not just the front-end but the back-end as well.