Digital transformation has accelerated at unprecedented speeds within the Australian retail industry since the COVID-19 pandemic first began. Retail businesses were forced to fundamentally reassess how they do business to survive and recover. Building an adaptable, composable business model has been critical for them to scale and be resilient.
The crisis has also made clear the importance of technology to the industry. In a recent Gartner survey, nearly two-thirds of chief information officers (CIOs) in the retail sector believe their relationships with their CEOs have been strengthened during the past year, as CIOs have helped guide their businesses through significant disruption.
Capitalising on the momentum of transformational activities, especially in physical locations, will be critical this year to building and maintaining the flexibility that is demanded of doing business today. Changes in consumer behaviour will have a greater impact on value in retail than any other single factor for the foreseeable future.
To provide excellent customer experiences and solidify their trust, Gartner has identified seven key trends to inform retail technology investments and other strategic decisions moving forward. To some extent, these trends were in evidence prior to the pandemic, but have dramatically increased their importance to meet and exceed customer expectations.
1. Touchless interactions
“Touchless” experiences are “safe,” physical-contact-free interactions across the customer’s entire shopping process. Consumers now expect retailers to include sanitisation processes in their operations along with convenient and hygienic ways to research, purchase and consume goods.
Touchless interactions extend beyond contactless payments to include capabilities across all major customer processes, such as scan and go, virtual experiences and more. A level of personalisation must be delivered that makes customers feel that you’re being loyal to them. Take the time to understand their needs to deliver satisfying customer experiences.
2. Fulfilment execution
This enables excellence in fulfilment operations across your physical and digital assets through real-time analysis and reconfiguration of inventory, labour and processes. In turn, optimised inventory, unified commerce experiences and increased customer satisfaction are all made possible, which then contribute to profitability for the business.
Many retailers are already working to remodel physical locations by reducing selling footprints and increasing onsite fulfilment and curbside capabilities. This prepares them for the post-pandemic demands of greater online purchasing with the timely acquisition of goods.
3. Algorithmic merchandising optimisation
Inventory is typically a retailer’s largest single expense. Escalating operational costs driven by shifting customer expectations are driving a renewed focus on merchandise assortment and pricing accuracy. No longer can retailers afford to spread inventory evenly across all store locations. Algorithmic approaches help to increase precision when planning assortments, pricing and promotions, as well as the resulting inventory investments across all touchpoints.
Algorithmic merchandising optimisation enables retailers to more precisely determine items that need to be displayed and stocked, as well as how they should be priced and promoted to maximise sales, margin, inventory and customer satisfaction across touchpoints. A key element is the use of sophisticated data and analytics tools to enable better performance and decision making.
4. Associated enablement and effectiveness
A great customer experience hinges on a great employee experience, and this makes retail store employees key competitive differentiators. They must become one of your most significant investments. After years of under investment, many retailers are now playing catch-up by placing staff efficiency and enablement at the top of retail strategies this year.
The ability to flexibly perform work duties, optimise costs and deliver excellent customer experience is now more critical than ever. Investments in retail digital workplaces, particularly those in physical store environments, have been shown to grow sales and increase profits, creating significant competitive advantage over time.
5. Collaborative ecosystems
Significant changes in customer behaviour and purchase patterns over the past 12 months have exposed weaknesses in traditional retail business models. Engaging in a collaborative ecosystem through partnerships with other retailers, technology platforms, marketplaces or other innovative partners will enable you to extend existing business capabilities, support new business models, offer new products and services, and ultimately satisfy evolving customer needs.
6. Cost optimisation
Cost optimisation is a business focused, continuous discipline that works to drive spending and cost reduction while maximising business value. It has become an increasingly important imperative to manage the extreme economic uncertainty that the pandemic introduced.
When developing cost optimisation strategies, Gartner recommends considering four critical elements: fulfilment execution, merchandising optimisation, labour efficiency and organisational transparency. Short and medium-term fixed cost measures will prove unsustainable in the long run.
7. Values-driven consumption
Customers expect retailers to act with honesty, integrity and transparency, delivering products, services and experiences based on their values. The pandemic has forced an anxious society – including businesses – to re-evaluate and reprioritise their values.
Meeting value-based demands will require tight alignment among the internal players in the various functions and channels within your organisation, as well as building and maintaining solid relationships with the external stakeholders. Invest in constant vigilance to understand your customers’ changing expectations and adjust your sourcing and governance policies accordingly.
Kelsie Marian is a senior director analyst at Gartner.