A view from the CFO Practice at Green Park
20th April 2017 3 minutes read
There’s no blueprint for transforming retail and there are many different ways of winning. That could explain why most retailers are very much at the beginning of their digital transformation journeys – or have not even left the station.
The retailers we talked to at this year’s World Retail Congress in Dubai that have built successful digital businesses have followed completely different strategies. Some, like Lululemon have a clear focus on their own people and trust that great customer experiences follow on from there. Others, like Ocado, apply smart analytics and technology to their processes to drive efficiency and speed.
The problem is the pace of transformation. Customers have changed their behaviour and won’t be going back to their old ways. Retailers know they have to take action, but they are often not sure what to prioritise or how much to invest.
Retailers listed on the stock exchange have the further worry of providing dividends to investors. Yet this could be misplaced. Anyone looking for a return on investment in a retail brand will expect to see a ramp-up in spending on new technologies, including data analytics and robotics, and we truly believe that valuations of retail brands will begin to take this spending (or lack of it) into account.
As well as needing the funds to fully digitise operations and improve their understanding of how, when and where customers want to shop, retailers need the right people to make it happen. That doesn’t mean throwing the baby out with the bathwater and getting rid of experienced retail people, but it does mean casting the net wider to ensure that optimum skills are in place.
Increasingly, this will mean having people in place who know how to make transformation happen. In Phase One of our DNA of the Retailers of Tomorrow report, we outlined the building blocks needed to adapt to the new retail paradigm. The next stage is to apply those blocks to your own situation and think about the ‘how’ rather than just the ‘why’ and the ‘what’.
The ‘how’ will inevitably involve a change in culture. You can have the best strategy in the world but without the right attitudes, energy and communications it will be difficult to enact. That’s a huge task in itself and easier said than done when you’re a retailer with 200,000 people around the world.
Another fundamental decision much discussed at World Retail Congress is what to do with retail space. It’s no surprise that organisations with their roots in catalogue shopping, like Germany’s Otto Group or the UK’s Shop Direct, have quietly undergone digital transformations – they don’t have too many stores to worry about and they are used to delivering goods efficiently to customers.
Over the next few months, we’ll be engaging in further discussions with our partners and panel members to work on Phase Two of The DNA of the Retailers of Tomorrow. It’s clear that what’s needed now is pragmatic advice, case studies and examples of best practice to help retailers chart their path through some turbulent and unknown waters.
Why is it so important to focus on the ‘how’? While we were out at WRC in Dubai last week, three retail brands went out of business in the US alone. It’s time to be brave and face up to the fact that change is not just on its way, but it’s very much here to stay. There will be no prizes for being in the bottom half of the table in the years ahead.