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Digital Transformation: This Is The Future Of Retail

When you think about digital transformation (BTW, I got a newsletter the other day where they tried to represent digital transformation by using DX, you know, like UX – not sure that it will – or even should – stick) in your space, do you think about how digital technologies have affected all of our lives, or do you see how they can be used to improve products and processes in your organization?

Let’s take retail as an example. Let’s say that you run a retail operation, like Target or Walmart or Safeway.

Most of your products are not all that special or unique, as you are mostly driving to the lowest price. The majority of your products are commodities, with very little differentiation between brands and stores. Is there a real marked difference between toilet paper brand A and toilet paper brand B, as long as they have the same characteristics. Also, does it matter if you purchase it from store A or store B? Your customer is just as likely to buy it wherever its cheaper, or closer, or if they happen to be somewhere where they remember to pick it up.

This kind of shopping, the kind I like to call commodity shopping, is typically not any shopping that people enjoy doing — it’s shopping to replenish items that they already use and are tried and true. If you buy Fairlife Milk and 2 ply Cottonelle and Tide pods, and they work, and they are at a reasonable price, then you will probably buy more as you need to. There is no need to switch. Amazon, to its credit, has instituted a subscription service for things like this, estimating your usage and shipping you more as they sense you running out. You, as a retailer, are probably thinking about bringing in more digital to track your inventory, to improve your supply chain, to hone your processes to provide these products at a better price, and in inventory when your customers are more likely to come in purchase them. You are looking to improve and refine your old model, and the “transformation” that you are seeking is applying digital technologies to drive more sales. But here is the problem.

What if I told you that your model of “retail” is no longer aligned with your customer’s expectations? We could call up a ride at a moment’s notice, the ability to have any food delivered at any time and place, and the ability to have almost any task completed for us at the tap of a few virtual buttons. Plus, when you add in the ability for our virtual assistants to capture what we need when we need it (ever added something to your Amazon cart just by asking Alexa), you are very close to discovering your customer’s new core desires, flavored by technology.

To do this, you have to reach beyond your limitations and truly understand your customer’s end goals.

  • Do they want to make sure that the product that they are looking for is on the shelf, or would they prefer that it just show up where and when they need it?
  • Would they prefer to stand in a checkout line waiting to checkout, or would they prefer to pick up what they need and walk out?
  • Do they want to spend hours and hours researching and researching a purchase, or would they prefer that you recommend something perfect for you (based on the trails of data that you’ve left behind as you maneuver around the internet?
  • Does your customer want to spend time commodity shopping, or would they prefer that it just happened?

Your customer doesn’t want a more effective way to shop – they want a more effective way to get what they need and want into their possession at the right time, place, price, and quality. They don’t want to shop; they want to have.

So how do you go from “shopping” to “having”? First, you need to discard the concept of shopping – you are not a retailer. You do not present items for purchase. You are much more than that.

You are a “wish fulfiller” – by listening to what your customer wants and needs, then going beyond those to get to the root of how to develop solutions to provide those, then take proactive steps to transform your business to ensure that in the most seamless way possible.

Once you’ve transformed your business, only then is it time to bring in the digital. Any retailer has reams and reams of customer and transaction data. Credit card companies and banks have copious amounts of customer and transaction data. Social media companies capture massive databases full of social interaction data, likes, views, etc.

The reality is that if you took all of the disparate data sources from all of these players and put them together, I would not be surprised if you could build a simulacrum of your customer, which would be so accurate that it could automatically shop for them. Creating this simulacrum of your customer will allow you to propose the offloading of the work of buying from the customer. This simulacrum could then shop on behalf of the customer.

Sure, it would not be perfect, but over time, as the customer receives order after order and tweaks the simulacra’s algorithms, that simulacra could conceivably become the customer’s shopping companion, triggering the automated research, purchase, and delivery of anything the customer desires. If it gets good enough, maybe even predicting the customer’s desire also before they understand their need for it. It’s a perfect AI-based simulation of your customers, ensuring that their core desires are met.

Many will say – well, we can’t do that – we aren’t a technology company – we don’t have an AI capability – we can’t access all of that – we are just a retailer. If you narrow your focus to “we are a retailer” instead of “we are a wish fulfiller,” then you will likely eventually be felled by a competitor who is more inclined to become a wish fulfiller.

In this age of rapidly accelerating change and revisioning customer desires, those companies who are not willing to go beyond what they are will likely not survive.

Digital transformation moves your company from its core desires (selling whatever you sell) to your customer’s core desires (giving them whatever they want and need). Once you have made that shift, then you will have a customer for life. You become more than just a retailer; you become a loyal companion to your customer.

Loyal companions, unlike retailers, are much stickier.

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