2020: Retail as a Service?

Digital disruption is typically seen as a form of “waterfall innovation” – where a new entrant unseats legacy players by adopting a radical new approach to service delivery using technology (like Amazon leveraging its own cloud based e-commerce platform capabilities to beat incumbent Retailers on convenience and price). Yet a challenge to this view is that such disruptors are actually applying a form of “agile innovation”, where through incrementally developing their own live services they gradually transform and re-shape a market – a detailed look at Amazon finds its approach to customer service improvement is not disruptive but iterative; where over the last ten to fifteen years it’s used its own net revenues for R&D activities (not for short-term profit) to continually drive massive grow.

The implication is that a Retailer can exploit the competitive advantages of digital disruption by using an iterative service delivery approach – so what could be the benefits and challenges of this “Retail As A Service” model? Here are some ideas…

OpEx Funded Innovation – A major blocker to Retailers investing in digital transformation is that it can involve significant upfront capital expenditure to deliver a return in investment that is difficult to forecast and realise. Applying an “as a service” approach, an alternative could be to deliver small, incremental improvements using a portion of Retailer’s margin earned during the same financial year. No big financial risks, the Retailer can only invest what it earns from the market with the added benefit that such OpEx funded innovation can rapidly pivot to changing customer demands. Yet any slicing of margin will impact a Retailer’s profitability – its owners or shareholders would need to tolerate a different form of financial risk to make this approach acceptable; reduced, variable short-term profit for potential significant long-term gains.

Zero Physical Asset Operating Model – Could the application of a service-based approach to delivery be extended beyond the traditional areas of IT and back office transformation into other parts of a Retailer’s operating model? For example, a Retailer could run a “zero physical asset” business; where front-end services like stores, supply chain management, even sales staff resources are provisioned on a pay-as-you-go basis. A key benefit would be that the Retailer doesn’t run the risk of owning fixed term assets like property or technology that may become commercially unviable or obsolete. However, this would create new risks – a key one being that the Retailer becomes wholly dependent on other service providers’ availability and ability to innovate to meet its competitive needs.

If you would like more information about how digital transformation can benefit your retail business, leave a reply below or contact me by email.

AI Empowered retail roles: the new competitive advantage?

A Retailer can potentially use Artificial Intelligence (AI) to empower its people to analyse, transact and crucially sell faster and smarter to customers than its competitors. So, what might these jobs look like? Here are some ideas…

“Fixers” – Retailers are always looking to optimise their supply chain costs while improving the customer experience. A key pain point is last mile logistics – the need to offer increasingly timely, flexible delivery of goods to individual customers while maintaining the right economies of scale on distribution to achieve margin. A Fixer – possibly a third-party platform service provider – bids for and delivers instant solutions to solve these daily challenges. Their unique ability to use AI to continually optimise delivery routes and facilitate the sharing of local stock between Retailers (often competitors) to satisfy customer demand 24/7 places them at the heart of the Retail Sector in 2020.

“Instore Experience Trainers” – AI doesn’t innovate by itself; this advantage comes from people teaching or training it to deliver delightful and compelling customer experiences on any channel. An Instore Experience Trainer is someone who spends their working day testing different AI driven experiences from different Sectors and then uses this emotional insight to teach an Artificial Intelligence capability new ways to better engage customers instore – rapid human innovation scaled to differentiate thousands of individual customer interactions with a specific Retailer.

“AI Scanners” – As Artificial Intelligence grows so too does the opportunity for competitors to use it to analyse a Retailer’s offerings for strengths and weaknesses. An AI Scanner is monitoring daily how customers are engaging a Retailer’s Artificial Intelligence to identify such behaviour and its source to enable a proactive response to protect market competitiveness.

If you would like more information about how artificial intelligence can benefit your retail business, leave a reply below or contact me by email.

Intelligent personal assistants: an opportunity for retailers?

Alexa is arguably the tipping point for intelligent personal assistants; with Amazon’s open source approach to sharing its app (“skill”) development capabilities the sky’s the limit for this new, disruptive form of natural language driven customer experience. But what could retailers make of this opportunity? Here are some ideas…

It’s not the hardware but the cloud analytics that matters

Critical to any retailer using an intelligent personal assistant to innovate their brand is that these use cases should primarily focus on the business outcomes from using its cloud analytics capabilities, not the front-end device itself.

A retailer, for example, could use Alexa to provide instore guidance to shoppers to help them find items or make simple queries, physical customer browsing behaviour captured in the cloud that when combined with online experiences enables deeper, more contextual forms of personalisation across all this retailer’s channels.

An opportunity to simplify (and risk of complicating) customer journeys

A unique strength of an intelligent personal assistant is that it has the potential to smartly rationalise customer queries and transactions – an opportunity to turn chatbots into compelling conversational experiences a customer would have a preference for using over engaging a person or using a digital channel.

But there remains a significant user experience design challenge for its natural language driven interface – at what point does the buying journey become too complex for this channel and risks increasing friction for a customer? Any form of customer experience that requires a customer to look at detailed product information or make comparisons between products could be difficult and hard to follow through spoken voice generated content alone.

Alexa’s use of APIs could enable a retailer to combine this channel with its mobile e-commerce site (or in-store tablets) for example to create a seamless, holistic experience where complex information is shared visually driven by a customer’s voice commands and smartly informed by Alexa’s AI.

Bricks and mortar as a truly experiential destination

Perhaps the most exciting thing about Alexa (and intelligent personal assistants in general) is the potential for them to create unique, personalised experiences instore – a direct, deep relationship between a customer and a retailer’s brand. And because its cloud driven this enables interconnectivity (IoT) with other instore technologies such as targeted digital signage, interactive mirrors, social media engagement and mobile point of sale.

If you would like more information about how digital transformation can benefit your retail business, leave a reply below or contact me by email.

Shopping with Artificial Intelligence: The frictionless family customer experience?

With Amazon, Facebook and Google all adopting an open source approach to development of their artificial intelligence (AI) services, what could this innovation mean for a family shopping on the High Street? Here are some ideas…

An end to Saturday morning parking mayhem – having to spend half an hour queuing to get into a shopping centre car park only to find out the only spaces left are on the hundredth floor can be a miserable start (and end) to a Saturday shop for the whole family.

An AI personal assistant could reduce the friction of this inconvenience by reserving a suitable car parking space at the shopping centre in advance, based on the family’s store preferences, accessibility requirements and other factors, like forecast weather. It can then send the reserved space location to the family’s in-car GPS and automatically pay for its ticket. The more an AI can effectively integrate or communicate with other systems the greater the convenience for customers.

No more bored kids looking at their mobiles – the family have spent hours traipsing from store to store failing to be engaged by any of these retail experiences. The kids are just itching to get their phones out to start socialising with their friends, and mum and dad are getting the feeling they are better off buying online.

An AI could transform the friction of this irrelevant customer experience by giving in-store products ‘personality’ –  a product can introduce itself using spoken voice to these customers (via a store branded mobile app for example), talk about its unique selling points and answer potentially any question about its suitability – all personalised using buying and social insights the AI has about the family. The more an AI can effectively apply analytics to create experiential, contextual shopping experiences, the more compelling and delightful bricks and mortar stores become for customers.

Empowered shopping without added wrinkles – So the family have found things they need and discovered lots of things they want, but mum and dad aren’t comfortable with uncontrolled spending across their bulging wallet of bank cards.

An AI could help remove the friction of this uncertainty by acting as a single channel for these customers to manage their disparate bank services in one place, giving on the spot advice about saving and spending to enable the right purchasing decisions and provide a secure, easy to use payment system using customer voice recognition (biometric authentication). The more an AI can create a platform that combines and simplifies a range of complex services; the better mobility customers have on the High Street – experiences that rival anything offered by online retailers.

If you would like more information about how digital transformation can benefit your organisation please contact the Sopra Steria Digital Practice.

 

“More is More”: Why retailers need to get even bigger to succeed in The Digital Age

With Tesco’s recent acquisition of the wholesaler Booker and Sainsbury’s buying the Home Retail Group (parent of Argos) last year, key UK market players are using inorganic growth to rapidly expand their physical retail channels. Yet given the ever-growing threat from digital disruptors like Amazon, and discounters (notably Aldi and Lidl), why would any retailer be looking to increase their bricks and mortar liabilities given this channel could be in long term decline? Here are some ideas…

The IKEA experience – perhaps ironically it is a pre-digital retail format that may offer the right approach to combining the unique strengths of the physical store experience with the choice, availability and (critically) lower prices offered by online channels. IKEA’s gigantic stores across the UK combine a compelling in-store experience where customers can physically explore a range of products with the convenience and price competitiveness of a wholesaler’s warehouse. In comparison, Amazon offers price and choice but it can’t replicate the tactical experience of interacting with a product, nor the instant fulfilment.

Sainsbury’s wants to exploit the supply chain capabilities of Argos – not just in terms of same day fulfilment, but the warehouse capacity its stores carry on the high street – physical retail as an unbeatable customer experience Amazon can’t imitate.

Best of both worlds – Arguably a challenge for both Aldi and Lidl is that their focus on lower prices constrains their ability to innovate their supply chains to deliver personalised, contextual experiences to individual customers. In response, not only can Tesco lever the supply chain capabilities provided by Booker to drive greater efficiencies across its operating model to drive stronger competitive pricing, the additional store capacity it now has available means offering greater customer convenience for its digital offerings (such as hundreds more Click+Collect points across the UK). This will enable Tesco to better blend its digital and physical customer experience together while delivering competitive pricing to rival the discounters.

If you would like more information about how digital transformation can benefit your organisation please contact the Sopra Steria Digital Practice.

The power of NLP: when David becomes Goliath

“Perhaps the biggest threat and opportunity organisations face is Natural Language Processing (NLP); where ever increasingly smart robots simplify transactions for customers.”

Yet the user experience of such intelligent personal assistants can at times feel underwhelming because they lack a sufficiently broad range of services versus other digital channels. Facebook M for example relies upon human trainers to complete more complex customer service tasks requested by users and Alexa utilises ‘skills’ – tailored apps such as Spotify. None of them appear to offer the same level of complete user freedom as using traditional web browsers to access any available content.

“Any organisation regardless of its size able to master NLP can potentially compete in previously unreachable or unscalable markets.”

One way these robots could overcome these limitations is to “learn” how to use NLP to access any digital service through its front-end without the need for any technical integration or human touchpoints. All transactions could then be consumed or simplified into one customer experience accessed by a single AI.

The implication for competitive advantage is that potentially any organisation regardless of its size that can effectively master these “platform on platforms” cloud capabilities will be able to compete in previously unreachable or unscalable markets

“In this “open season” competitive environment, NLP can enable an organisation to transform its relationship with an existing customer and steal new ones from competitors.”

One such service could be an AI that searches and buys the best priced goods from competitors from their own customer-facing channels (without their co-operation or collaboration) so empowering a customer to create their own “perfect basket” free from the constraints of only shopping with one brand. These competitors would still get revenue from these purchases but critically won’t have direct access to this customer relationship or loyalty – NLP is disrupting their competitive advantage by reducing their market power.

In this “open season” competitive environment, where switching costs are practically nil for customers, NLP can enable an organisation to radically transform its relationship with an existing customer and steal new ones from competitors – David becomes Goliath.

If you would like more information about how digital transformation can benefit your organisation please contact the Sopra Steria Digital Practice.

The no stop checkout: what could be its impact?

With the launch of the concept store Amazon Go – where customers can walk out of the store with their chosen grocer items being automatically charged to their bank account – the age of the no stop checkout customer experience is emerging. But what could this mean for retailers if such an approach is adopted wholesale across the bricks and mortar shopping experience? Here are some ideas…

Implementation Challenge – from what insight has been shared about Amazon Go it is understood to have taken four years to develop this unique store experience that involved integrating a range of technologies such as machine learning, image recognition and mobile. The solution looks innovative but would it be feasible for a retailer to implement across potentially hundreds of its stores? Furthermore, what kind of ROI should a retailer expect from this substantive investment in cloud and physical digital capabilities?

Threat Of New Entrants – By removing checkouts means added convenience that could be exploited by existing or new competitors. For example; a disruptor could offer a platform service that compares the price of the same products across different local completing stores to enable a customer to “optimise their shopping basket”. This indirect competitor could then buy and deliver these items for a customer removing any direct engagement with the retailer.

New Forms Of Customer Experience – An opportunity and a challenge is that no stop checkouts eliminate a touch point directly with the customer physically within the store itself (even if that process is self service). The opportunity is that this enables retail staff to engage with customers in different, delightful ways such as product demonstrations or marketing promotional events – retail as an experiential destination. However, by removing this interaction also risks diluting further the unique experience of being in-store by making customers focus more on specific products and prices than the retailer’s brand.

If you would like more information about how Sopra Steria can help your organisation benefit from digital transformation please contact the Sopra Steria Digital Practice.