Retail Strategy C-level Seminar at Seoul
Grand Hyatt Hotel in October 8th.
IBM Korea hold Retail Strategy Seminar in
October 8th at Grand Hyatt Hotel, Seoul. It was an intriguing seminar from the
points of timing and context. Recently, one of leading South Korea retail conglomerate chairman
expressed his strong will on omnichannel transformation. IBM addressed this
portion of session in the morning with client CEOs and IBM was invited to pitch
"future of retail" and omnichannel. Retail Strategy Seminar at Hyatt was evening
seminar target to Korea Retail CxOs.
Keynote speaker was Jill Puleri. She is
the global leader for IBM’s Global Business Services retail consulting
practice. She was recently named by Consulting Magazine
as one of their Top 25 Consultants for her vision and strategy at IBM in the
Retail Industry.
Jill kicked off "future of
retail" presentation by saying from the points of 4 growing influencing factors:
1)
Consumer Expectations, 2) Future Customer Experience, 3) Disruption and
disruptors, 4) Big data is now broader data and shared some data points such as 80% of
all brands could disappear, 69% of US consumers order food online using mobile
phone, and top two influences of purchases are friends posts / pinterest on
social networks etc.
Future of Retail
Then shared some video clip (which I've
been deeply involved in). It actually developed to showcase the customer's
journey on shopping experience in 2020. We intended to demonstrate the future
millennial shopper's experience by showcasing sequence of event & shopping
behavior.For example, from location based push
service, to payment on smart watch, social based customer communication, turning
social media to shopping, tablet based online shopping, real-time on/off line
stock status checking, shopping at the physical store with digitized
interactions, sales assistant Pad for customer analytic and shopping
assistance on the spot, smart fitting room with cognitive computing 'Watson'
including real-time sentiment analysis and assortment recommendations etc. Reaction was awesome.
Technology is blurring the boundary between stores and online
What does 'blurring boundary' mean? Well, this means there's no online pure-play and brick and mortar exist any more. And physical stores will evolve into experience centers. Purchases will be ultimately made through online, from online site or via digital interactions at store. So finally, transparency of pricing, service levels and experiences across digital and physical channels will be getting more important than ever.
What does this kind of leading player's innovation mean?
It means they are leveraging social as a communication tool for millennial consumers and employees and creating real-time customer value using mobile as an enabler. It also implies the notion that they are providing a differentiated customer experience – anytime anywhere.
Disruptors are succeeding and directly impacting traditional retailers.
We are all observing emeging disruptors’ presence everyday. These are, #1, could be the one who sacrificed profits to be the online shopping reference, #2 investing in R&D particularly Amazon, #3, firstly broadest selection followed by
adding and dominates 1-2 categories annually, #4 simple strategy such as one click to buy, #5 strategy such as knows customers individually, #6 'all you can eat' loyalty schemes, and lastly but least, #6 disruptive offer such as same day delivery etc.
Underlying challenges in omnichannel
transformation
Lance Tyson, Sr. Managing Consultants in IBM Retail Center of Competency continued second session for omnichannel. He articulated some insights actually IBM found from the study which IBM surveyed 30,554 consumers in 16 countries in 2013 to discover their opinions of omnichannel capabilities and the impact on choice. See below Key Findings. Probably
one of most significant different challenge in Korea would be the different
price and assortment between online and offline, compare to US.
Korean customers intrinsically
have the notion that online should be cheaper than offline and online is meant
to be offer the more attractive promotions or benefits than offline. Meanwhile,
US offer consistent price and experience across the online and offline. For
example, US major retailers apply same pricing and assortment across channels with
convenience to experience items while in-store. Another words, markdown
avoidance is a top omnichannel capability in leading retailers.
From
the IBM survey, prioritization of customer's requirements of omnichannel varies
by countries. Korean customers put the "track order status" as no.1
rank, while global average put the "pricing consistency across
channels" as no 1.
So if we imagine the in-store experiences, try
different size and color in the fitting room and return back or pick up at the
store as free of charge - this could be obviously an advantage over online. But
if item is not available, sales associates should able to order online with
free of charge delivery. Many Korean retails seemed not have this kind of
transparency and flexibility and it lead us to imply the underlying challenges
in omnichannel.
Winning formula for Retail
So in order to provide consistent and transparent experience across channels, retailers should think about below winning formulas:
1. Develop relationship with your customers: The era of personalization
vs paper ads for all
2. From gut based to fact based decision making
3. Product is hero: Creating differentiation with product
4. The merchant mind set: Creating the WOW in store feel
5. Play where she wants to play: Build world class omni channel
6. The new health and wellness: Integrating Doctors, insurance
companies and grocery stores.
In order to achieve this, possible key
enablers or immediate recommendations would be;
1. Probably starting point is to visualize
agreed vision of customer experience that describes where/how to interact
customers. So customer journey map could be a key enabler to agree the vision
for customer experience across channels.
2. Changes in MD and inventory planning.
Inventory and mark down planning should be integrated across channels.
3. Given the consideration of potential key
issues in KPI such as, when online customer order claimed to in-store pick up
or return, or reverse way, online order at store - in this case, there's issue embedded
in terms of incentives for sales associates or revenue split between online and
offline. We can resolve this kind of KPI issues by using shadow P&L as KPI
management.
4. Aligning SCM: One of leading US retailer
integrates its SCM across channels/formats with allowing the ecosystem of
suppliers to be more cost efficient. This company shared SCM data with
suppliers for free, for suppliers to cut costs with better planning and
inventory mgmt. This company also plans to combine sales data for specific
suppliers with customer data, providing analytics service to those suppliers.
5. Know your customer: Major US retailer
adopted customer behavior analytics in the store. For example, IBM Presence
Zone use wifi as meduim to analyze the customer behavior since RFID make a so
much distraction if store is full of RFID signal congestions.
6. Competitiveness of store: Macy's and
David Jones attempted to make store as attractive place for shopping with
service competitiveness. US Retailers are not only put every efforts to analyze customer behavior and traffic to check
conversion of foot traffic into sales, but also empowered sales associates with
mobile to invigorate service competitiveness in store.
If you are interested in IBM Survey, please
refer to below key findings from IBM IBV Retail Survey in 2013.
1. The development of online shopping in South
Korea far surpasses global trends as such, 27% global vs 48% South Korea.
2. When IBM Institution of Business Value surveyed
the question "how much do you want to share your current location
(GPS)?'", 19% of responded yes in 2012, whereas the number went up 36% in
2013.
3. Percent of shoppers who showroomed for
their last purchase - global 8.0% vs South Korea 12.3%. Showrooming defined as
having visited a store before ultimately making the purchase online.
4. Influencers of purchase behavior is
concerned, friends posts / pins item purchased on social networks are the most
influential on purchasing behavior in South Korea (56%), while China (85%) and
Japan (41%).
5. Priority of customer requirements on
omni channel: Price consistency across channels (1), and in-store, locate
out-of-stock item and get it shipped home (2), was ranked as 1 and 2 respectively
in global average, while track order status (1), and locate item at in-stock
location and get it shipped (2), was ranked as 1 and 2 respectively in South
Korea.
6. IBM defined the 4 customer categories
based on degree of utilization of Social-Location-Mobile digital technology:
Traditional, Transitioning, Tech Intrigued and Trailblazers. The Trailblazers
want to do things themselves wherever, whenever; they need visibility and
consistency. Survey result shows that China is the clear leader for SoLoMo
adoption while South Korea and Japan consumers are waiting for a reason to
adapt.
Epilog
This kind of customer centric transformation has connotations of cultural and organizational challenges. Particularly in order to catch up unprecedented pace of customer's buying behavior, firm should be more nimble and more importantly, transparent and having mind-set put the consumer at the center of equations. Korea retail industry will experience the hard times to do this, but I think it will allow the firm to learn something to be a leader in these brave new world of competitions.
** The postings on this site are my own and don't necessarily represent IBM's positions, strategies or opinions.
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