“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.

Next gen personalisation: let customers play?

A key challenge of personalisation (the application of analytics by retailers to identify patterns of customer behaviour to create recipes such as targeted marketing or product recommendations) is how to gather the right data about an individual customer effectively in the first place.

Understanding what really makes an individual customer “tick” – what kind of personality he or she has (as defined by using Carl Jung’s Psychological Types that categorise how an individual perceives, interprets, thinks and feels about the world around them for example) can enable a retailer to create unique, specific recipes for that individual customer that competitors can’t imitate. For retailers carrying millions of products like Amazon, applying such deep, meaningful insight could help encourage a customer to explore a far greater range of its offerings and drive stronger loyalty.

Yet gathering data for these recipes is typically an implicit activity in the customer experience, produced by observing customer behaviour such as product browsing or buying history, social media feedback and often combined with other external factors like customer location, weather or time of day. Even the more disruptive forms of engagement – such as eBay’s “emotional recognition technology” prototype that observes a customer’s physical reaction to being shown different products to identify potential connections – is arguably a passive activity. Ideally to get a better understanding of someone’s personality involves proactively asking a series of self-reflective questions for an individual to answer privately – something totally unacceptable to the retail customer experience. So, could there be a different approach retailers could apply that gives similar valuable insights without the risk of appearing intrusive or insensitive?

One response is to let customers “play” with products before they buy them, including dynamically shaping this presales engagement based on observable behaviours. When someone buys a product online or even in-store a retailer has limited (if any) opportunities to observe how a customer reacts to it – an indicator that could help determine targeted recipes that excite, motive an individual’s exact personality. Encouraging customers to play, experiment with a product before purchase could however capture similar insight.

A non-grocer retailer may already have the tools in place to encourage such structured playtime with their products such as digital mirrors or augmented reality in store, or even have digital assets of product samples for 3D printing by a customer at home. Combined with capabilities like “emotional recognition technology”, these presale activities could become critical drivers for effective personalisation as well as offering exciting, differentiated customer experiences in their own right.

Such an approach is emerging from big retailers such as Toys R Us that is looking to transform itself into an experiential destination – the retail shopping experience as participatory theatre – so why can’t the grown-up customers have just as much fun?

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

Ways to turn around poor customer experience using personalisation

Personalisation – the application of data analytics to identify patterns of customer behaviour to improve their engagement or retention – traditionally focuses on enhancing positive experiences such as browsing and buying. Yet could personalisation be used to turn around a seemingly unchangeable, negative customer experience that also benefits the retailer? Here are some ideas…

Personalising the complaints process to drive better customer engagement

Making personalisation effective is challenging – it requires a high level of data integrity and can be costly to implement. When it goes wrong it can irritate customers or worse, make them feel like a retailer doesn’t know them at all – for example, consider the negative impact on customer experience of repeatedly receiving the same unwanted product recommendations when shopping online.

Could this failure be caused by a retailer’s approach to personalisation that arguably only focuses on purchasing and other positive behaviour? Whereas what is also required is a complementary understanding of an individual’s dislikes and pet hates about its brand.

For instance, rather than using a generic approach a retailer could personalise its complaints process. This could involve asking the customer who is making the complaint specific, personalised questions about the totality of this experience with the retailer (e.g. pricing, quality, service) to better understand what this individual really feels about its brand – i.e. use this moment of catharsis to gain a deeper, more rounded understanding of a customer’s expectations. The retailer can then use these hard to reach insights to dynamically inform its future engagement with this individual – complaints as a source of brand loyalty and advocacy.

However, this disruptive approach arguably feels counter-intuitive and commercially risky; it will require new types of behaviour from (and greater trust between) customer and retailer alike to be successful.

Incentivising a customer to keep an unwanted item

UK retailers are losing billions of pounds a year from managing reverse logistics costs for returned items across their physical and digital channels. Because of the multiple touch points involved margin can often deteriorate to a point where writing off the item as a loss is a better outcome than resell.

A retailer could lever cloud big data analytics to make an on the spot personalised counter offer to a customer alongside the standard return via a returns app. This could draw from the customer’s buying history and social media behaviour. The counter offer could ask the customer to keep the item in exchange for a future discount, special cross sell opportunity or third party offer (so eliminating the return cost and refund while driving future sales).

However, this disruptive approach to returns will need additional safeguards to mitigate risks of customer fraud or ‘gaming the system’ for unintended benefit.

Sharing insights with competitors to deliver unfulfilled customer orders same day

With the growing threat of digital disruptors like Amazon offering same day delivery on everything including groceries, customers are increasingly becoming more disappointed when other retailers can’t match such an experience. One example is Sainsbury’s acquisition of Argos was in part driven by a desire to access Argos’ supply chain capabilities that offer fast track delivery.

To combat this challenge, high street retailers could use a cloud-based platform to share local inventory information, fulfilling orders immediately for each other when the chosen retailer is out of stock – a faster, more convenient personalised customer experience than their online rivals. This approach to supply chain collaboration would also enable retailers to potentially increase the range of products they physically offer in store without needing to carry additional inventory.

However, for this form of coopetition to be successful it would need to have clear bottom line benefits for all participants given the risks to their market share involved.

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

Personalisation of the retail returns experience: a new form of competitive advantage?

UK retailers are losing billions of pounds a year from managing reverse logistics costs for returned items across their physical and digital channels. Because of the multiple touch points involved margin can often deteriorate to a point where writing off the item as a loss is a better outcome than resell.

A key area of risk is online women’s fashion retail where customers may order multiple sizes or variations of the same item and then return those that don’t meet requirements. It’s estimated on average a returned clothing item costs a retailer an additional £15 to process back through its supply chain regardless of channel – extra cost that significantly reduces margin at full price (and much worse when further price discounting is applied).

But could personalisation (the application of big data analytics to pro-actively meet an individual customer’s changing needs) deliver a better outcome for both customer and retailer? Could such an approach incentivise a customer to self-manage the reverse logistics process or even be persuaded to keep the unwanted item (so reducing, or even eliminating, the additional £15 cost)?

For example, rather than a customer filling out a paper form using a nondescript reason code for a return, he or she could use a loyalty card smartphone app that captures their reasons as spoken voice text. Not only would this be more convenient (and user friendly) than form filling, it also provides the retailer with richer data about a customer’s preferences to enable better targeted personalised offerings in the future.

Secondly, the app could lever cloud big data analytics to make an on the spot personalised counter offer to the customer alongside the standard return. This could draw from the customer’s buying history and social media behaviour. The counter offer could ask the customer to give the item to charity in exchange for a future discount (so eliminating the return cost and refund while driving future sales and positive brand reputation). Alternatively it may make a third party offer for a ‘no return’ outcome (so driving cross- or up-sell opportunities with little cost impact).

Fundamentally, the counter offer approach is primarily driven by the need to preserve and, ideally, grow a retailer’s margin – the economic case. In addition, by gathering better data about an individual enables greater personalisation to build and retain their loyalty and reduce the volume of unwanted items (for example, future purchasing of clothing items online may include specific recommendations for an individual customer about size and colour based on this gathered insight). The app could also utilise a retailer’s existing core systems (e.g. databases) and new digital technology (such as cloud analytics or machine learning) together successfully – the opportunity to use the best of both worlds to create disruptive competitive advantage.

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

Convenience, Integration, Context: the retail store experience 2020?

As retailers exploit the opportunities offered by digital technology and ways of working to innovate their in-store customer experience; what might this look and feel like in 2020? Here are some ideas…

Convenience: The way customers physically purchase products will be as seamless as any digital channel experience and critically will encourage them not to use their smartphone (a distraction from the real world in-store environment that also brings competitors’ offerings within easy reach). In 2020, a customer can simply touch a button on the product itself or its point of sale display to purchase it instantly – like a biometric version of Amazon’s Dash Button technology that carries out the transaction authorised by the customer’s fingerprint. This simple, convenient process also means a customer doesn’t have the hassle of queuing up at a till – freeing up their time to explore the physical retail space further.

Integration:  Delivery of purchased in-store products will rival any experience an online retailer can offer. Content such as films, music, books are downloaded immediately to the customer’s device of choice. Large and small physical goods can be dispatched from a warehouse and delivered direct to a customer’s home the same day (a service available today that is rapidly growing in scale led by retailers such as Argos). And because items can be sourced direct from distribution; the Retailer can lever greater supply chain efficiencies (such as reduced in-store inventory costs) to drive competitive, dynamic pricing to continually challenge competitors.

High Street retailers are already using cloud-driven big data analytics to accelerate and rationalise their own supply chain operations (for example, Zara levers such capabilities to achieve product lead times as short as two weeks from catwalk design to store). Further application of this “tech company” approach to achieve deeper supply chain and channel management integration could enable a fully converged physical and digital retail experience in 2020 that constantly exceeds customer expectations.

Context: Relevance with be a key way the in-store experience differentiates itself from digital-only channels in 2020. Whereas online personalisation arguably means funnelling a customer to a specific area of interest, a High Street retailer can also use other dynamic data and insights to enrich and contextualise this experience to create unique moments of delight only possible in the physical store environment.

By a customer choosing to share data (such as transmitting their location via their mobile’s Bluetooth capability to in-store beacons), the retailer can identify what product ranges he or she is browsing to trigger nearby interactive display screens that present more in-depth information about those items, share social media content such as user reviews or allocate a sales person to provide advice. Because the customer is in the physical retail space they are in complete control of their personalised shopping experience – moving to areas of interest based on their emotional reaction to the world around them without the limitations or constraints of a smartphone user interface. Nike’s emerging Fuel Station interactive store concept, where customers can choose to engage in different contextual situations (such as having their running style analysed when using an in-store treadmill to identify the right running shoes to enhance their performance) is one example of the potential power of in-store contextualisation that can’t be replicated digitally.

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.