Digital transformation has profoundly changed the way we conduct business today, and its impact is more visible in the retail sector than in any other vertical industry sector. As a society, we are becoming much more experience-centric, as opposed to user-centric, as evidenced by the retail markets. It is clear that digital transformation in retail is no longer an option but a competitive necessity. The earlier that companies begin to digitalize their operations, processes, and products, the higher their chances for survival. This article discusses some of the trends, challenges, and technologies needed in the retail industry for a successful digital transformation.
According to IDC, retail drivers include technology-centric transformation, new funding models that accelerate disruption and innovation, increased use of artificial intelligence for analytics, and machine-to-machine learning. It is predicted that by 2019, digital transformation investments will triple, drawing funds away from store capital and profoundly changing the retail industry. By 2018, 30 percent of major retailers are predicted to adopt an omnichannel, digital B2B2C commerce platform to improve customer experience, process efficiency, and inventory management. The impact of these trends is already proven by online retailer Amazon. Amazon has become the fourth most valuable company in the world by market capitalization, and the Echo, a voice-activated speaker powered by an artificially intelligent assistant called Alexa, combined with Amazon’s cloud computing business, is pushing the company’s stock to a near all-time high. This is in sharp contrast to companies like Eastman Kodak, which invented the first digital camera in 1975. Kodak failed to embrace the inevitability of the digital revolution and did not transform early enough to a new business model.
Big Data and Other Retail Trends
One of the most exciting trends for retailers is the use of Big Data. Retailers have considerable access to collections of data that can be harnessed to their advantage to predict customer behaviors, perform customer analytics, and personalize customer experiences with the goal of soliciting loyalty in the form of individualized offers, unique marketing messages, and timely promotions. In other words, precision marketing. A case in point is Huawei’s partner, Cloud4Wi, providers of the Volare family of guest Wi-Fi platforms.
The Cloud4Wi solutions help retailers to not only drive revenues, but also inspire loyalty and build strong customer relationships in ways never before possible. As more and more in-store shoppers go online, retailers that use platforms like those offered by Cloud4Wi are taking great steps toward digital transformation. Geolocation targeting makes retailer messaging more relevant and can be used to help build brand advocates. This can also create additional revenue opportunities by monetizing advertisements in the wireless stream. Retailers can add applications that provide individualized customer support for everything from navigating the parking lot to in-store guides that are designed to increase loyalty and sales.
Another major trend that we find across retail is development of multiple channels. Just having a brick and mortar store is not enough, as online stores are moving into brick-and-mortar and traditional physical stores are moving online. It was reported by Deloitte that nearly two-thirds of customers engage with a retailer on-line before going to a store, which illustrates these new ways of interacting. The major challenge for retailers is to develop a strategy that spans these multiple channels. Given current legacy IT infrastructures and their limitations, operations are currently siloed, but the expectation of customers, especially Millennials, is to have a consistent experience, no matter the channel. As one analyst put it, it is no longer about ‘bricks versus clicks,’ it is about ‘bricks and clicks.’ Retailers today need technologies that can transform the entire shopping experience into unique, personalized customer experiences that blur the boundaries between the digital and physical presence of each store.
Scalability and Security
Probably the most important digital transformation feature for retailers is the ability to scale elastically to meet seasonal demands. Pizza Hut could not suddenly reach USD 12 million in digital sales on Super Bowl Sunday without having built flexibility into their compute and storage operations. This level of resource planning necessitates the inclusion of a public or private cloud to fulfill their digital transformation strategy. In fact, IDC states, “No major digital transformation initiatives are even possible in a scaled up implementation without the cloud as the foundation.” The cloud not only offers flexibility, but also helps save money, given the reduced IT footprint and lower cost of maintenance.
Underpinning every digital transformation is a security framework. How do customers develop trust after they have gone through such debacles as the data breaches at Sears, Target, and many others? At Target, as many as 40 million credit and debit card accounts may have been compromised, with an additional 70 million people affected by the theft of key customer information, including names, phone numbers, and home and email addresses. There is no doubt that security is one of the most important aspects that must be addressed by retailers. Current best practices include two-step authentication, end-to-end data encryption, and adherence to PCI-DSS certifications for handling payment cards. Services and products should not only be secure in design but also must be ethical and trustworthy at every stage of the customer journey. A layered approach can defend against more sophisticated attacks associated with the exposures created through the use of technologies like the Internet of Things (IoT), mobile, and wearables.
Stable Technologies and Huawei Solutions
Another factor that turns off many people at shopping malls is a poor Wi-Fi experience in a high-density environment. If a customer cannot get to the retailer’s website within seconds, they may not try again. This could not only result in potential losses in revenue but also the loss of loyal customers over the long term. Studies have shown that it costs more to find a new share of the wallet than to retain an existing customer. Retailers and shopping malls need to ensure that their networking infrastructures do not suffer from issues that include poor access point performance or signal interference.
Retailers need to simplify some of their branch operations using technologies like Software-Defined WAN (SD-WAN). By implementing SD-WAN, retailers are able to control policies from headquarters for optimal application delivery and resource efficiency throughout the network. SD-WAN applications offer network visibility with actionable analytics and the ability to control network granularity to achieve the best possible performance. With this efficiency comes cost savings, especially when compared to the use of very expensive MPLS lines by retailers.
It is clear that ICT technologies within the retail industry are fundamentally reshaping the entire sector by bringing together various stakeholders in ways not previously seen. By connecting manufacturers, retailers, and consumers, digital technologies are creating change across the entire retail landscape. An ICT infrastructure can bring business agility and reliability by having 3G/4G/Wi-Fi deliver the same experience across any communication channel. The introduction of Radio-Frequency Identification (RFID) and other forms of electronic tags, plus emerging technologies like 3D printing, are helping create new services quicker and faster to end consumers. By offering ‘all-in-one cabinet’ solutions, many services can be consolidated with unified management and shorter deployment cycles.
To support digital transformation, Huawei has developed an All-Cloud Network architecture to provide retailers with the tools to become digital enterprises: ubiquitous connectivity, an open cloud platform, and an industry-specific applications framework, retailers can offer a Real-time, On-demand, All-online, DIY, Social (ROADS) experience. Other Huawei solutions, such as CloudCampus, can help reduce OPEX for retailers by over 80 percent. All-wireless access solutions are designed to bring a consistent, ultimate experience to densely populated shopping malls and similar indoor scenarios. Huawei’s Wi-Fi solutions support Bluetooth, ZigBee, and RFID, as well as bringing value-added applications to the fold using open APIs to enrich the entire ecosystem and supply chain.
A large, German-based global discount supermarket chain that operates more than 10,000 stores across Europe — and is now beginning to enter the United States market — is in the process of digitalizing its operations with the Huawei CloudCampus solution. Using CloudCampus, the grocer is seeking to consolidate multiple scenarios from automatic inventory management, self-service checkout, and mobile payment support to virtual fitting rooms, smart shopping carts, and indoor navigation. In the area of inventory management alone, they are expecting to improve efficiency by more than 25 percent — a tremendous savings given the scale of their operation. Huawei solutions are helping the retailer engage with customers throughout the shopping experience, enhancing customer loyalty and ultimately improving the chain’s brand awareness.
Retailers need to embrace digital transformation sooner rather than later, as it is not just about efficiencies but also potential revenue opportunities. CIOs must look at the various initiatives and explore the appropriate digital options for their operations and embrace them. A ‘digital first’ strategy helps retailers navigate the business transformation waters smoothly to address customer needs in the new digital society.