What physical retailers need to do to make their digital transformation a reality

The Fragrance Foundation France brings you an exclusive article from BW Confidential’s October-December issue.

Retailers are well aware of how crucial it is to have digital technology in-store, and yet few can boast much digital integration beyond a handful of selling tools or apps. Retailers that have invested in a good digital infrastructure have been better equipped to deal with changes in consumers habits and the COVID-19 crisis, which turned the market on its head. 

For example, some retailers were able to absorb the losses of store closures by quickly putting into place new services like Ship from Store or Curbside Pickup. US-based retailer Ulta Beauty credits its omnichannel strategy for enabling it to support the big increase it saw in its online business. But revamping infrastructure to have a fully integrated digital strategy is easier said than done. For large retailers it could cost millions to overhaul their information systems, comments Adeline Çabale, ceo and co-founder of Retail Factory. Many companies are still working with separate e-commerce and physical commerce teams, even though creating a seamless shopping experience requires consistency between online and offline, says Çabale, adding: “It is not something that the brands have really truly put into place in an effective way. It costs a lot to create the software and it means investing a lot in IT programs and devices, redoing all the systems and creating the bridges between e-commerce and physical commerce.” 

Re-imagining the business

Despite new retail forecasting tools, many retailers still rely on data history or guesswork for their merchandising operations, says Carlos Casado, vp of growth at Nextail. Being able to satisfy demand all boils down to how well retailers and brands are able to align their supply to real, local demand, no matter the location or channel, he says. This is all the more pertinent given the rising number of new services like click & collect and likely evolution of the role of the store for product pick-ups, product returns and CRM. “With a digitally-enabled, unified vision of inventory, retailers and brands can leverage omnichannel capabilities, which will be essential, especially since buying, returns, and other product movements across channels will become increasingly complex,” he comments. The deployment of technology also means that retailers can avoid overproduction and develop more responsible and sustainable consumption models, he adds.

Meanwhile, if retailers want to benefit more fully from technology, they will have to re-imagine the entire business, which now encompasses much more than a store network and an e-commerce site, given the rise of new shopping platforms and social commerce. Sephora, for example has enabled the Checkout feature on Instagram for 80 of its brands, and it opened a store on Alibaba’s Tmall Global platform, both strategic moves that help the retailer ensure greater visibility, reach and sales. 

However, if a retailer is to deliver a good experience across various channels and platforms, it has to have solid processes in place. This is not easy for businesses that have not adopted a unified channel approach, comments Çabale. Many physical store retailers do not recognize what the online or social-media user has come into the store for, but if a retailer cannot supply the product, or locate a store with the product or order the product online to have it delivered, it is a lost opportunity and a lost sale, Çabale points out. “Not many retailers have access to the online inventory or offer the customer the option to check the availability of the inventory in real time,” she comments.

New tools

At the same time, retailers will have to upgrade the online experience if they want to remain relevant, experts warn. Virtual selling tools like skin diagnostics and chat help generate sales and attract new consumers, became essential during the COVID-19 crisis, prompting many brands to invest more seriously in them. 

UK-based Boots started trialing an online video beauty consulting service, while other retailers began experimenting with robotics and drone deliveries. Some players are looking at trialing contactless tools for sampling in stores or using in-store livestreaming to sell. Sonia Summers ceo and founder at Beauty Barrage comments: “Retailers will need to invest in AI to help customers test products. To deliver a memorable client experience, retailers will need to inject virtual beauty advisors to their online stores. They need to add events to their sites, including masterclasses and vendor take-overs.” 

On the other hand, it is unlikely the world is ready for a fully digitalized ‘contactless’ store, especially in the beauty category. Consumers still go into the store to see a sales assistant, to touch the product, to interact and to get advice, says Çabale. But the role of the store assistant needs to evolve. “Staff need to see the store and e-commerce as complementary, and they need to have access to a unified inventory and tools to serve the consumer better,” says Çabale. 

Digital integration is above all aimed at ensuring a more efficient and agile operation and this will also necessitate new roles for personnel. For example, during the COVID-19 crisis, some stores were able to reallocate in-store staff to fulfill online orders. Companies will also need to create new job functions, such as a consumer experience director overseeing all sales channels, to replace different channel directors, comments Çabale. It all comes down to new vision of retail, which may be hard to implement while retailers deal with the day-to-day problems and uncertainties of the crisis.

SNAPSHOT: Expert Views

Two experts share their views about what retailers need to do when it comes to digital

“Retailers that have been able to smoothly combine offline and online experiences are the ones coming out of [the COVID] crisis the strongest. Being able to dial up or down particular parts of the business as needed, quickly, is crucial. And the strategy needs to be one that transcends channels. But retailers shifting their focus to digital channels and away from stores or physical interactions is not the answer. There is no one-size-fits-all approach to doing omnichannel well without compromising on profitability, which means to do this successfully retailers need a highly flexible and agile distribution order management system that allows them to calculate multiple variables quickly and apply the best fulfillment strategy to every order. Retailers that invested in order management technology prior to COVID-19 have a clear advantage, as it enables fast and clear redistribution of goods, which in the short-term can address supply issues and help retailers to redistribute stock quickly and easily. The ability to adapt fast and without development efforts and a big budget is what is needed in today’s environment. And it can only be achieved with a hybrid approach of cloud native, best-of-breed solutions and easy customization to suit individual businesses’ needs.”

Fluent Commerce head of corporate and channel marketing Veronika Birnkamme

“Today we see the retailers that are doing better are those that adopted an omnichannel strategy some years ago. Omnichannel has been around for some years, but it is hard for companies to really implement because it means redoing everything that is in place and building new software and new teams, in marketing, in communications, in retail, and creating new job functions. The retailer has to invest in new software and create the bridges between the physical store and e-commerce so they have the same promotions, the same CRM, the same database. Everything needs to be consistent for the consumer, both online and offline and you need one single inventory. RFID tags can help brands to work with one single inventory telling them at any one moment how many articles are in the store. This is something that is developing, but you very seldom find brands doing this perfectly well.”

Retail Factory ceo and co-founder Adeline Çabale

CASE STUDIES SNAPSHOT: Two retailers doing digital well

Ulta Beauty: Digital investments pay off

The Nike House of Innovation NYC/000 in New York boasts what it calls a digitally connected journey for shoppers which the brand says seamlessly connects the online and store experience. Through the app, the company has developed a community of running lovers, and alongside this it has created a store experience that offers a host of services. In the store, all items are scannable and services include product pick-up, same-day deliveries, or custom styling. If the store does not have a product in stock, it can pull the product from other stores. Nike members can also use the Nike Plus app to access exclusive services including product reservations, private shopping reservations or for instant pay. 

Nike: Seamless online and in-store connections

During the COVID-19 crisis, Ulta said that the investments it made in its omnichannel and supply chain strategy enabled it to shift its operations to a ‘digital only’ e-commerce channel, helping it anticipate and support the increase in online demand. At the end of April, the retailer launched Curbside Pickup as an extension to its Buy Online Pickup in Store service, which accelerated the average number of orders per store, it said. The company also encouraged consumers to use its GLAMlab Virtual Try-On interactive color matching tool in the Ulta Beauty app, which is said to have gained a near five-time increase in engagement. Ulta is among the few retailers that have been getting it right, says Sonia Summers, ceo and founder, Beauty Barrage. The company also showed that it was taking care of its employees by increasing wages for its warehouse staff.

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