"Buy, move, sell." That has been the essence of retail since the beginning. But that view put the item at the center of the retail universe. Today, a revolution is taking place. The retailers that will thrive are those that put the customer at the center, and design processes and systems around him or her.
That requires a new three-legged stool of retail: Leverage Big Data, create compelling consumer engagement, and achieve flawless execution with integrated best-of-breed back-office systems. Why a three-legged stool? Because without these triple elements, your business will topple over. With all three in place, however, you'll be sitting pretty-and well-positioned to outcompete your rivals.
The key is to understand all legs of the stool-and develop the legs in a complementary manner that optimizes your return on investment while yielding the outcome you want: customer loyalty leading to greater revenues and higher margins.
The Forest or the Trees
The first leg is a current hot topic: Big Data. Big Data has always existed in retail. Trouble is, retailers have just been throwing the data away.
Point-of-sale systems generate huge amounts of data, and have done so for years. With the recent proliferation of Web shops, mobile apps, and social platforms, an order of magnitude more data is generated, every second of every day. Retailers are awash in details not only of who purchased and what they purchased but also what they looked at but didn't purchase, what offers they used, what they think of your products, what they're saying about your brand, and much more.
You need to leverage this data. You need to combine structured and unstructured data in ways you can analyze it. Just as important, you need to be able to show the results of that analysis visually and deliver that visualization to the people who need it, wherever and whenever they need it. That way, you can start to understand past events, stay on top of your business in real time and, with recent technologies, predict future consumer behaviors and desires.
That brings us to the second leg of the stool: consumer engagement. A key reason for investing in Big Data is to better understand and engage consumers. And engagement is what consumers want.
Naturally, consumers want quality products at a reasonable price. But they also want speed-of responsiveness, service, and delivery. They want personalized attention with individualized offers and direct contact when they need it. They want to enjoy all these benefits consistently across your store, Web shop, and mobile channel. Finally, they want an "experience," often as part of a "community"-from the community of health-conscious foodies at Whole Foods to the community of outdoor enthusiasts at REI.
Consumers have come to expect this experience because they know that if you don't give it to them, someone else will. Of course, you can think of consumer engagement as a necessity resulting from growing competitive pressure. Or you can embrace it and approach consumer engagement as an opportunity to differentiate yourself and get closer to your customers.
Behind the Scenes
Big Data and consumer engagement are the new necessaries, but you won't get anywhere with them if you don't have the third leg of your stool: flawless execution with integrated best-of-breed back-office systems. If you're not flawless in things like inventory management and replenishment, if you're not effectively managing your suppliers and employees, all your new personalization and customer-engagement strategies will fall short.
I can go on the Web site of a leading home-improvement retailer, search for any item, and instantly find out its exact quantity as well as its aisle and bin location in any store I select. If I then go to the store to see and touch the product before I buy, as many consumers do, it had better be there. To enable that, you need to have your back-office ducks in a row.
How do you know when you're getting all three legs underneath you? The KPIs haven't changed. When you start noticing things like decreases in stock-outs and capital invested in inventory and increases in key customer metrics of recency, frequency, and spend, you'll know you're getting it right. Ultimately, you will see greater revenues, and higher profits. And that's a three-legged stool any retailer would want to find itself sitting on.