Dynatrace recently hosted a webinar featuring Michelle Beeson of Forrester, and here we continue the conversation as Michelle answered five questions from Dynatrace.
What is going to happen to those companies that don’t invest [in digital transformation] and is the demand still going to be there in five years’ time for brick-and-mortar organizations?
Businesses that have not already embraced ongoing transformation or have delayed it all together will suffer the most. For retail, in particular, the crisis has forced many to accelerate the execution of strategic plans for digital customer experience and operational excellence.
The surge in digital traffic and demand across key retail sectors during the pandemic gives a misleading impression that consumers will shift dramatically to buying online post-pandemic. Consumers may be more likely to interact more “digitally” with brands going forward, and online sales are expected to make up a greater proportion of overall retail sales. But stores will not be completely replaced. In fact, 47% of UK online adults are hoping to return to normal shopping habits. This throws an existing quandary into greater focus: how to redefine the role and number of stores a retailer has when overall growth was already driven by digital before the crisis. The value and success of stores will be measured differently as they become a key part of customer experience, customer research, and the supply chain.
What are retailers doing to ensure the online experience is the same as what you’d get in-store, 24/7?
The online experience cannot completely replicate the store – they both have different and valuable roles across the customer lifecycle. However, there have been greater efforts to use features like AR/VR to digitally replicate traditionally store-based experiences, such as “try before you buy.” One well-known example is Ikea’s mobile app allowing consumers to virtually see furniture “in-situ” at home.
Retailers also need to connect customer’s experiences and access to information across stores and digital touchpoints. Beyond product content and features supporting consumer decision-making and product selection, product availability is also key to a good customer experience. Managing inventory and orders as one pool (rather than separating online and store stock) extends product availability to customers and improves retailers’ ability to match supply and demand, in turn reducing markdowns and avoiding out-of-stock positions.
How are businesses using data in a meaningful way and how will this continue to evolve with the market?
In a hypercompetitive business environment and the post-pandemic world, successful retailers will need to be applying data and analytics at every chance to differentiate products and customer experiences. The trouble is most retailers are feasting on data, but they are starving for insight. Retailers will need to become ‘data-driven businesses’ bringing insights, not just data, into every decision. They must make data widely available, systematically convert that data into insight, and act on it in their customers’ moments of need, across the entire customer lifecycle. This is certainly not easy. Beyond supporting technology, retailers will need to change how teams work together and balance the democratization of data with appropriate governance. There is also an element of culture change required. In fact, 40% of business executives at retail & wholesale organizations highlight “changing management culture to reply more on quantitative decisions” as a key to improving the use of data insights within business decision making.
How are consumer expectations changing the way retail organizations are digitally transforming and what is the cost of that?
Forced digital behaviors during the pandemic will accelerate pre-existing digital behaviors, especially when it comes to eCommerce and digital payments. UK firms will need to catch up with shifting consumer behaviors and expectations. This, alongside an intensely competitive business environment, with reducing margins and growing marketplaces, means traditional commerce practices are untenable for long-term growth.
Retailers must cultivate their relevance to customers and adapt to new customer engagement models. They will adjust to these changes either by employing skilled team members or by partnering with vendors that have the capabilities to innovate rapidly and inexpensively in emerging channels, devices, and touchpoints. Retailers will also need to evolve success metrics they embrace new customer engagement models, to encourage and reward cross-functional working, especially where multiple functions are being asked to work together in new ways to support new customer outcomes. Retailers will need to make these changes if they are to accurately evaluate the health of their business as well as the health and value of customer relationships.
How are retailers retaining brand loyalty as they shift to a digital way of working?
Customer retention is becoming more important for many brands’ revenue streams than acquisition. This is because of the value of getting consumers to want to continue using the product or service. Focusing more on long-term customer value (or customer lifetime value) has a greater upside financially.
Retail is notorious for its focus on conversion rates, cross/up-selling, and increasing average order values. However, these metrics are short-term and often channel-specific, which no longer reflects how consumers interact with organizations across touchpoints and over time. Many brands look to customer lifetime value as the “one metric to rule them all” because it measures the health and profitability of customer relationships over the long term i.e., helping to quantify the impact that a range of different experiences have on a customer’s overall (lifetime) value. In some ways, retailers need to move beyond loyalty programs to becoming a company where loyalty is embedded in the customer experience.
Want to hear more from our guest speaker Michelle Beeson and myself? Watch our webinar on-demand here.