PART 1: How to Thrive in a Digital Retail Landscape

A man and a woman in a grocery store

Part 1 of 5: The case for e-commerce and personalization

There was a time when retailers only needed to worry about meeting the needs and wants of customers coming through their physical front doors. Today, the landscape is much more complex. Amazon has grown at a tremendous pace, with its grocery-centric efforts gaining ground. Online food sales have been increasing rapidly. The number of smartphones has exploded. Digital interactions with retailers and brands have increased dramatically. New digital-enablement companies are starting every day. Customers are expecting more and more from their shopping experience. If retailers want to keep up, we find ourselves faced with complicated and seemingly daunting changes that sweep our entire business model.

In this five-part series, I’ll discuss some of the biggest challenges involved with enabling a retail business to succeed in this new world, and look at ways to overcome them.

I’ll start in this first post by stating my case. There are two major components of this new world: e-commerce and personalization , and to really thrive in today’s omni-channel world, retailers need to do both.

E-commerce: No longer an option

In many sectors, pure-play e-commerce companies like Amazon have dramatically affected the way retail operates. With so many choices, consumers today are splitting their spending across multiple retailers—fancy cheese from a specialist boutique, tonight’s dinner from a meal-kit delivery service. Shoppers are also more time-starved than ever so any increase in shopping convenience is welcomed and embraced. The millennial generation in particular expects tech-enabled service, often via their smartphones, and they aren’t shy about using those same smartphones to tell the world about negative shopping experiences.

If we choose to ignore these shifts, we risk becoming irrelevant to large swathes of the shopper universe. As the millennial generation gets older, this could prove fatal over the longer term. If shoppers want an e-commerce option, they’ll find it.

When considering the full economics of e-commerce, we need to take a holistic perspective. While the direct costs of e-commerce are significant and highly visible, it’s all too easy to ignore the lost sales resulting from not having an e-commerce offering. Also, consider the dramatically improved customer experience that e-commerce creates for the most valuable and loyal customers, and the potential for incremental sales thanks to highly targeted offers the shopper receives through the platform.

Most studies indicate the profile of e-commerce shoppers is incredibly valuable: these are high-spending, very loyal, frequent shoppers. They also tend to be tech savvy and time-starved. This is one of the more attractive customer segments for retailers. Not one we can afford to ignore.

Personalization: The next frontier is here

During the last quarter-century, we have progressed from a broad, almost generic approach to shopper marketing and merchandising to a more personalized approach.

The next step in this evolutionary process is delivering truly personalized communications and offers at the individual customer level, using a customer engagement intelligence platform to build a very deep understanding of each shopper—so they receive the right content and creative, the right mix of offer types for their engagement level, the right products and the right prices, all via the right channel.

This in turn grows our loyal customer base, increases spend per customer and value per customer, improves price perception, enhances competitive position, captures greater market share and ultimately delivers differentiated growth. The direct measurable benefits are significant: sales and gross profit increases of 4%–7% are fully attainable. Manufacturers participating in this journey also see attractive increases in sales.

But even more important than the direct, visible benefits is the longer-term payback from increased customer loyalty, improved competitiveness and enhanced organizational capabilities. These are the true rewards and they create a sustainable competitive advantage.

It takes commitment and leadership

We all have extremely valuable assets at our disposal: recognized and trusted brands, millions of existing customer relationships, a network of physical stores, strong cash-flow and a well-oiled operating model. We just need to learn some new tricks.

In this series, I’ll look at how to approach four major challenges: cost; technology; organizational structure and processes; and people and culture.

Any retailer that hasn’t already embarked on the journey to the brave new omni-channel, digitally-enabled marketplace or doesn’t have plans in place to do so can find themselves left behind. With the right vision from the top of the organization, we can be very successful in deploying e-commerce and personalization to drive loyalty and increase ROI—and truly wow our customers.