Is retail ready for a Business 4.0 future?
Retailers are striving to be future ready but how do they take advantage of a Business 4.0 future? CS Krishnan from Tata Consultancy Services explains
Personalisation and leveraging the company ecosystem is essential if retailers want to drive their digital transformation journey. Retail is in a transformative moment of its history as the relationship customers have with retailers shifts. Technology is no longer something to be considered as an afterthought, it should be at the forefront of everything retailers do.
A new study from Tata Consultancy Services surveyed senior executives in retail and other industries on their level of investment in digital transformation technologies. Key to this, are four behaviours of Business 4.0 used to identify digital transformation success: driving mass personalisation, creating exponential value, leveraging ecosystems, and embracing risk. Despite how key this is, a staggering 20% of retailers have not adopted any of these behaviours, allowing themselves to fall behind other industries such as telecoms, manufacturing, banking and financial services.
The report identified that while retailers strive to be future-ready, they struggle with bringing new innovations to life. They are slowed down by legacy processes and industry challenges such as revenue growth - with only one in five (22%) expecting more than 10% revenue growth over the next three years meaning that most are unwilling to take risks. Only 29% would use AI to develop new business models, and 39% would consider using automation to free up workers. Coincidentally, embracing risk is the behaviour least likely to have been adopted across all industries. However, failing to take risks could expose businesses to disruption by firms willing to experiment and implement new business models.
So how can companies push past these challenges and make the most of digital opportunities?
For retailers, personalisation is essential. At a time when consumers can get whatever they want from multiple retailers, it is now more important than ever for retailers to distinguish themselves from the competition by really understanding customer needs. As Adam Warne, CIO of UK retailer N Brown told TCS, “mass personalisation is probably the next evolution of real customer service. It is the thing that makes customers feel loved by a brand.” People make a purchase decision not on product alone, it is about the overall experience and if they feel like a brand is catering to them personally, they are more likely to go to them over anyone else.
Marks and Spencer, among other brands, is already trying to make the most of this. In 2018, as part of its transformation strategy, the clothing and food retailer partnered with data science company Starcount to better understand customers and provide more personalised offers and experiences through Sparks, its loyalty initiative.
Another company doing this is Nike, which has shifted from mass production to mass personalisation with ease. Its Nike By You platform invites active consumer participation, allowing consumer to design every detail of the product they are purchasing from colour to fabric.
To make the most of personalisation however, organisations need to be able to calculate offers and pricing continuously so that prices constantly reflect the product being offered, at a price that consumers will think reasonable. Another important element, is actively identifying where personalisation can be included, so not just personalising products, like in the case of Nike, but also personalising processes, making the purchasing journey simpler and more unique for each customer.
By embracing personalisation, retailers will see a rise in profitability as well as a rise in the value of customer transactions.
Retailers should also be thinking about leveraging the ecosystem that they are in. Retailers cannot stay isolated if they want to make the most of the technology and opportunities available to them. They must explore alliances and ecosystems in their own industry and beyond. Walmart has already started doing this. It has begun trials of a delivery service with Udelv, a manufacturer of autonomous vehicles. This partnership means that products, hand-picked personally by shoppers, are then delivered to their homes. This is a prime example of traditional companies engaging with new and specialist technology developers to deliver modern services.
Another illustration of this can be seen at Moleskine, where it is using digital brand platforms to engage with new suppliers and partners. The company operate an open innovation program that encourages start-ups to contribute business proposals that complement Moleskine products. Using a system like this allows companies to leverage the resources available without having to invest directly. It also leads to other significant benefits, according to the report, including an ability to develop more innovative products, higher revenues, access to new markets and an ability to act faster to satisfy customer demand.
These examples show that technology is becoming more mainstream every day; AI, machine learning and IoT to name a few. If retailers are brave enough to deploy them, they can improve their business models and become more agile, more readily able to innovate and more robust.
However, retailers need not panic to adopt all technology products and services overnight. Retailers must start to take incremental steps, exploring what works for them and their business before committing to long-term plans. Only then will real business transformation take place.