As part of our Knowledge Partnership with World Retail Congress (WRC), AlixPartners EMEA Head of Retail, Matt Clark, was invited to present back our findings on Transformational Retail, and how a Digital-First approach can benefit retailers.
Understanding the potential is key, but what are the true levers to unlock value for retailers on their Digital-First journey?
Profit Destruction and Digital Disconnect
The cost of serving multiple channels, rising customer expectations, and price transparency is proving a monumental challenge for most retailers, effectively destroying profit. As digital penetration increases and new technologies emerge, this profit is continuously eroded – and when retailers attempt incremental improvements to escape this profit trap, these strategies can often fall short. To break this cycle, retailers must embrace transformation, take risks, and address the capability challenge head-on.
Also, a significant disconnect exists between the expectations of retail executives (C-suite) and digital practitioners. Our survey, conducted among these two groups, revealed divergent opinions on digital capabilities and the effectiveness of digital teams. Bridging this gap is crucial for digital initiatives to deliver value to the organisation.
The Question of Measurement
Measuring the profitability of digital investments also poses a large-scale challenge for retailers. While digital practitioners generally perceive digital as a profitable addition to retail businesses, the C-suite remains less convinced. This discrepancy stems from differing perceptions of what digital means to the business. Is it merely another channel, or is it an enabler of an ecosystem that drives a fundamentally different business model? Aligning these perspectives is essential for setting appropriate KPIs and incentivising the digital teams effectively.
Despite historically showing mixed results, retailers are increasingly eager to invest more in digital. A considerable percentage of our survey respondents expressed confidence in achieving a significant return on investment (ROI). However, this optimism must be balanced with a clear understanding of how to attain the desired ROI and make informed investment decisions.
Unlocking the True Value of Digital
Our research on Transformational Retail provides insight into how to avoid the pitfalls and capitalise on the opportunities to pursue. Here are the four key areas retailers can focus on to unlock the true potential of digital:
Customer: Attracting, retaining, and maximising the lifetime value of customers is critical. In the face of privacy changes and evolving consumer preferences, building sticky customer relationships is essential.
Omni-Channel Journey: Ensuring a seamless end-to-end experience across channels correlates most strongly with profitable growth. Retailers should invest in strategies that enhance the omni-channel journey to drive customer satisfaction and loyalty.
Products and Promotion: Developing product offerings and promotional strategies that align with the customer needs by channel is crucial. A cohesive approach to products and promotions across channels can drive sales and profitability.
Network and Fulfilment: Balancing convenience and cost-effectiveness is key to building a successful network and fulfilment strategy. Retailers should focus on providing the right level of convenience for customers without overspending on fast delivery options.
To effectively navigate these areas, retailers need to adopt a Digital-First mindset and operating model, supported by the right people, processes, and technology.
A Digital-First Retail (DFR) approach allows the challenges to be unearthed and addressed, and presents immense opportunities for growth and innovation. By understanding and avoiding common drawbacks, retailers can position themselves for success.
Read how CEO’s from JD Sports and Ocado Solutions are embracing a Digital-First mindset here: Embracing Digital Transformation in Retail: Insights from Industry Leaders
Our latest research, in partnership with WRC, offers detailed advice, case studies, and frameworks to assist retailers in unlocking the value inherent in their digital journeys.