Emerging from the challenges and changes of the recession of 2008, retail is now the third-most disrupted business sector, where forward-looking companies are looking for new ways to transform their business in order to survive.
Just a few years ago, a study, Digital Vortex: How Digital Disruption is Redefining Industries, was developed by NorthState’s partner Cisco® Systems and the Digital Global Innovation Center in Switzerland. This research showed that four out of 10 companies would fail over the next decade if they could not redesign their business to meet growing digital demands. These predictions were accurate: We are now seeing these findings reflected in today’s marketplace, with repositioning of malls and store chains, mergers and acquisitions and closures, and disruptive new technical capabilities.
But funding a digital strategy can take more patience than companies want. There are five key challenges which retailers must take the time to overcome:
1. Resistance to change. The most profound problem with moving to a digital strategy has nothing to do with new technologies and processes, and everything to do with the people. At least 90% of personnel resist the uncertainty, changes to their roles, and different ways of doing things. At the same time, it should be said that many retailers do not handle change management well, and do not support their personnel through the process. It is critical to consider your people throughout your digital transformation.
2. Setting a clear vision with leadership. The demands of stockholders, stakeholders, management, investors, and the markets place great stress on leadership during the digital transformation. It is critical to understand what you are doing, where you are going; and to include all the members of the leadership team, including people you might not necessarily expect (such as your PR director and head of marketing, for example). This is not just a CIO project, but should include all the members of the C-Suite.
3. Make best use of customer data. Today, many – even most – retail organizations still rely on a large set of siloed systems containing information on customer interactions – even the same customers. Companies such as NorthState provide hosted database solutions that centralize and store information to be easily accessed via any point in the network. From this central point, this data can be utilized and reported on for more effective consumer insights.
4. Have a clear design for your new customer journey. As the line between physical and digital interactions blurs, customers’ expectations grow. Today, the success or failure of a retailer hinges on making the customer the central focus of every aspect of the business. In such an environment, stores are empowered to rapidly create and continuously optimize new products. It also makes it possible to expand from selling goods to include additional services, identify new ways to attract customers, and build loyalty.
5. Overdependence on legacy business models. Business is changing. In digital environments, you are giving away what you used to sell, selling subscription-based programs, creating new types of monetization, and building new roads to value. Those retailers that successfully adopt a digital strategy will be able to take advantage of more scale, revenue, and profit than traditional methods, but will need to take a more entrepreneurial approach – and investors and leadership are frequently uncomfortable with that.
However, it’s critical to stay the course. Consider e-commerce, which was a radical innovation 20 years ago and is now standard practice. Many leading companies, even those that made large unprofitable investments early in the transition, have been able to create profitable e-commerce strategies. Digital transformation is showing all the signs of meeting the same long-term goals.
White Paper: The Changing Face of Retail
To learn more about how digitization provides what consumers want and how to give it to them, share your email to read our most recent point-of-view paper, The Changing Face of Retail.