The steady drumbeat of store closings has made one thing apparent: retailers must
have a clear perspective on their customer and a compelling vision of where the
company needs to play — and, increasingly, define the role of technology in delivering
on that vision.
Three technology trends
Three technology trends in particular are converging to change the future of retail: omnichannel, artificial
intelligence and mobile pay. To remain relevant in an increasingly competitive market, retailers
must prioritize the most critical areas for investment based on their positioning and ensure that they
have the right technology leadership to take advantage of the most important technologies. Otherwise,
they risk quickly falling behind.
Omnichannel
Omnichannel is the future of retail, as traditional brick-and-mortar retailers grow and refine their digital
presence and some internet retailers build physical stores. The challenge for all is to determine the right
mix of physical and digital channels for their customer and to develop unique and compelling customer
experiences, regardless of channel. Omnichannel is powered by the wealth of customer data retailers that
retailers can use to improve targeted marketing, tailor assortments at the store level and anticipate
changes in customer traffic patterns, as well as real-time inventory data and smart tags that enable retailers
to adjust pricing and inventory based on changing demand. The in-store experience also is being
refreshed; new technologies allow store associates to interact with customers in new ways. For example,
Sephora equips associates with iPads so they can track inventory, check-out customers without having to
wait in a line, and access detailed product information to make more personalized recommendations.
E-commerce company Warby Parker is recreating its online shopping experience in the new physical
stores it’s opening, allowing customers to try out glasses in an in-store library.
Artificial Intelligence
AI-powered services such as chatbots and “personal
shoppers.” are enabling retailers to learn customer preferences
as they interact with digital channels and make
personalized product or service suggestions. Examples of
AI’s uses abound: 1-800-flowers uses GWYN, an
AI-enabled gift concierge that asks questions to learn
customer preferences and suggests gift ideas; Starbucks’
“My Virtual Barista” allows customers to speak into their
phone to place an order, and alerts them when a nearby
location has created their drink; Kohl’s has launched a
“connected clothes hanger” that displays product information
on a nearby screen and can suggest how the piece
might be paired with other pieces to create an outfit; and
Macy’s “On Call app” “combines IBM’s Watson’s cognitive
computing with location-based software to answer
shoppers’ in-store questions, such as where to find a
brand they’re looking for.
Mobile payment services
While consumers and retailers have been slower to
embrace mobile wallets than the early projections, some
analysts believe this technology is on the verge of broad
acceptance, and its use will grow quickly in the year
ahead. Already, Samsung Pay can be used at more than
10 million U.S. stores, Apple Pay at more than 3 million,
and Android Pay at more than 1 million, according to
Consumer Reports. And some retailers — Kohl’s, for
example — are launching their own mobile payment
services. For consumers, these services promise faster,
more secure checkouts. For retailers, mobile pay
services provide another opportunity to connect with
customers through loyalty programs and personalized
recommendations based on past purchases.
Defining the path forward
In an environment where missing or arriving late to a
phenomenon can be fatal, retailers face an urgent task:
defining their technology priorities based on their positioning.
Technology can no longer serve merely a support
function for retailers; it must be a competitive differentiator.
Understanding the role technology needs to play in
the business depends in part on where the business is
today. A retailer that already provides a great in-store
experience will likely want to invest in building a worldclass
digital experience, or vice versa. Many retailers are
having to entirely rethink their strategy and rebalance
their mix of physical stores and digital channels.
Macy’s, for example, announced its commitment to an
omnichannel strategy that includes increasing investment
in its better-performing locations to elevate their
distinctiveness and enhancing its online shopping and
mobile apps. While the company is closing under-performing
stores, it will focus on providing in-store events
and technology-infused experiences designed to give
customers more reasons to visit the remaining physical
locations. At the same time, its digital strategy will focus
on capacity-building on its websites and apps, improving
natural language search, faster page loading and
smoother and faster order fulfillment.
Technology leadership needs
As IT moves closer to the customer and becomes a
center of innovation, IT leadership is changing.
Organizations still need back-office expertise in ERP and
point-of-sale systems, but the breadth of IT leadership
skills has expanded to include digital and online, omnichannel,
data and analytics.
But which capabilities are most important depends on a
company’s strategy as well as its current technology maturity.
Depending on their size and technology priorities, some
organizations are creating an IT leadership team with two or more
senior IT executives specializing in different technology areas.
Teams could include roles such as a chief information officer, chief
technology officer, chief digital officer, chief data officer and/or
chief information security officer.
There is no one “correct” formula, structure or person for
addressing IT leadership in this dynamic retailing environment. In
some organizations, we see a new partnership among the CTO, CIO
and CDO, where their responsibilities are divided in a traditional
way, but they have established a highly collaborative culture. In other
companies, we see the emergence of a “mixed blend” technology
leader, who has experience in both product technology and
information technology, and is highly digitally literate. We regularly
work with retailers to think through the pros and cons of the
different organizational approaches based on their needs and
provide insight about the technology leadership talent pool.
Rather than ensuring candidates check all the typical boxes,
retailers need to focus on finding technology leaders with strong
strategic thinking capabilities who are able to manage complexity
and make decisions with incomplete and ever-changing
information. They also need to be magnets for the technology
talent that is required to translate and execute an ambitious
technology agenda. In many cases, retailers will have to look
outside the sector for leaders with specialized expertise, especially
financial services and high tech.
Looking ahead
Technology is at the forefront of the most critical strategic issues
for retailers, whether the goal is to improve the in-store experience
for customers or expand and enhance digital offerings. Succeeding
in retail today means articulating a compelling strategic vision —
including the role of technology in delivering on that vision — and
building a technology leadership team that enables the organization
to take advantage of the most important technologies.