After meeting with many retail customers, I’ve found that a common ingredient among the most successful ones is an “outside-in” approach. Great retailers think carefully about what kinds of experiences their customers want and expect; it’s the exact opposite of the “build it and they will come” mentality espoused by many businesses (some of which aren’t around any longer).
The experience they’re all trying to get to right now in the pervasive mashup of ecommerce and retail is something called omnichannel: the harmonious and almost unnoticeable switching across the various avenues to interact with each customer.
The advantages of thinking outside-in by offering omnichannel experiences are clear across retail. This philosophy has some particularly compelling applications in specific subsegments of this market, where many players have begun to transform into digital businesses.
- Apparel-focused retail: personalized experiences
Higher-end retail businesses that concentrate on (but aren’t limited to) apparel tend to have originated in the brick-and-mortar world, and gained strong footholds by creating a brick-and-mortar brand experience for customers (they tend to think of a store when they think of the brand). These retailers have also built significant ecommerce capabilities over the last 15 to 18 years.
To make some sweeping generalizations, these businesses generally consider omnichannel as a critical new way to offer a consistent user experience across devices and to reach individuals with specific, targeted offers.
For these businesses, omnichannel improves the odds of keeping existing customers or snagging new ones (via a cool and differentiated customer experience), but it also changes retailers’ operational economics of scaling the business. They can expand with many “small soldiers”—small-footprint, small-overhead, and less capital intensive stores, as compared to the historical norm—spread over a wider geographic area.
- Malls: social and store aggregation
These trends do not just affect individual stores. They also affect collections of stores in concentrated geographic areas: shopping malls. In the United States, malls are challenged to reinvent themselves, given the demographics of aging and less-mobile populations in general, but also because of a Gen-Y population minority that is hooked on thrills and experience. They want more bargains, more sensory experiences, and more social interaction.
So, malls are both trying to repurpose their square footage to allow “one-stop life” by putting in medical, dental, and vision services, for example, and trying to redefine the mall experience. And that means—you guessed it—omnichannel. They need to ensure a consistent and smooth user experience ranging from ecommerce to in-store purchasing; they need to know when the user is on the premises (sort of the opposite of “Elvis has left the building”); and they need to deliver timely, highly relevant offers.
- Grocery retail: big data goes small
Historically, the grocery industry was one of the first to make use of data-driven retailing, both for real-time inventory tracking and placement optimization, and for rewards points systems that drew buyers to targeted items. People are buying food differently today, and the ways in which data is used in commerce is changing.
Families are increasingly shopping multiple times per week across many stores, making smaller purchases rather than holding back for a weekly “big bang.” Couple this with the fact that grocery discounters are trying to offer the best prices on everything, rather than doing promos on specific items, and the value of rewards systems that qualify repeat customers for a blanket discount is diminished. Some grocers instead are offering so-called small discounts: a free cup of coffee, for example, based on a customer’s purchasing profile.
Of course, this doesn’t mean the store isn’t collecting and keeping the data. It just means that it’s finding “smaller” ways to use it, and “smaller,” more targeted ways to incent the customer. The best usage of this shows up in how some Apigee customers are developing the ability to customize the special offers to a customer in highly targeted ways based on the customer’s known brand preferences.
For all the retail subsectors mentioned above, digital transformation is a key to successfully and smoothly combining traditional retail mores with ecommerce. Coming up, I’ll discuss some of the key dynamics that are part of successful digital transformation in omnichannel retail.
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