The digital revolution is underway

This article is brought to you by Retail Technology Review: The digital revolution is underway.

By Martin Smethurst, Managing Director, Retail, Wincor Nixdorf UK & Ireland.
 
Interactive kiosks, touch-screens and other multi-touch touch interfaces increasingly appear in our stores on a daily basis. But what do they add to the shopping experience and what is the impact for retailers? With the rise of e-commerce, many stores have embarked on a digital journey to counter the lightning advance of pure play internet retailers. This has meant that the traditional store no longer simply supplies goods. It has evolved into a space to be "experienced" and has thus been transformed into a showroom. Digital technologies offer marketing teams unlimited possibilities. The retailer's objectives are critical in determining the correct digital strategy: the retailer may be striving to encourage the customer into the store, decrease waiting times or offer more choice, or a combination of the three.

You said digital strategy?

Digital is the new frontier for retail brands. Digital strategies are emerging and as new digital directions are created "community" managers are hired. What happens within the Marketing Department? The buzz that has formed around the digital channel is generating many creative ideas. New applications are constantly emerging. However, crucially, these digital projects are rarely linked to real needs of customers. "We need iPads on the sales floor," is one of the requests received by the CIO of a large textile group. "It is like we have gone back 10 years, to the days when we launched projects with no real strategy or metrics in place to measure the customer benefits," confessed another executive. Clearly defining the digital strategy, objectives and communication plan is essential for success. Digital is just another part of the marketing mix, alongside more traditional means such as in-store merchandising, catalogues or poster campaigns. The aesthetics of digital are obviously attractive but on their own are not enough. A digital project will only be effective if it adds real value to the customer. Customise an offer, inform the customer, dramatise a product, communicate on social networks - these are now achievable goals with the latest generation digital tools.
 
There has been a paradigm shift it used to be the consumers 'living' in the retailers' world going to the stores to shop, not having all the information available to compare and make an informed decision. Today, the retailer has to survive, prosper and differentiate in the consumers' world where the consumer has more information to hand than the retailer to make the right decision. 

Measure, measure, measure

Implementing a digital strategy is far from painless. It requires the buy-in of the stores to the business value (e.g. innovation, customer recruitment, brand loyalty, POS, staff training, corporate communication). The return on investment must be understood and be in line with the expectations placed in these technologies. To achieve this, a single word is all important: measure. Without this it is impossible to judge the success of a digital project. Indicators can be of various kinds but they must all meet three criteria: that they can be readily understood, that they are easy to measure and that they are relevant. Turnover is generally the best indicator, but the number of customers, conversion rate and average basket size often prove to be equally important metrics. As a guide, approximately 3% of the marketing budget should be devoted to measurement activities. These indicators should be used to adjust the strategy throughout the project. My advice: start small, evaluate the results, adjust and improve and try again. Once the strategy is paying off, scale it up and deploy your solution. 

Digital what role for the store?

With a growing number of customers visiting the web before coming to store, rethinking the store experience is no longer an option if retailers want the consumer to make a purchase on site. The rise of smartphones has made it possible for everyone to be constantly connected: to consumer review sites, social networks, but mainly to the competition through price comparison sites. M-commerce, although representing a new opportunity for many, can quickly turn into a nightmare. Consumers have a myriad of information available in one click and can easily compare prices, services and product features. The retailer has to adapt to this new environment and successfully differentiate its offer. This is why the store is so important the in-store experience is a huge differentiator. Re-energizing the point of sale should be the new motto of retailers. The store offers a unique opportunity for the customer to touch the products on offer and enjoy an immediate purchase. It is critical that retailers use these benefits to maximum advantage. The role of the store is becoming more critical and a point of differentiation high street retailers should be buoyed that the most recognised pure play internet retailer, Amazon, is rumoured to be opening their first 'bricks and mortar' store this year. 

The emotion comes first

The real challenge lies in the emotional factor associated with these technologies on the sales floor. "Nothing is worse than a black screen in a store" is the observation made by customers entering shops where digital tools are abandoned. And even when active, the consumer pays little attention to these screens unless they offer real benefits. Here is the challenge: to find the digital mix that will make the difference. Prenons, a French fashion chain, is using holographic displays to attract customers to its stores. It's an example of how the most successful retailers are creating a 'wow factor' to differentiate their offering. Given a positive first experience, the evidence suggests that sales will follow. 

The connected store

Other applications connect the consumer to social networks. The Diesel store in Madrid is a great example. Thanks to a kiosk installed in the store, customers can take pictures and publish their fittings on social networks, directing traffic to their page and increasing the number of "fans" and "likes" of the digital signage. This gives the double advantage of creating a playful atmosphere in the store while collecting customer information. This last point is fundamental. Knowing your client has become the Holy Grail for marketers. The day of mass marketing are numbered. Today's consumers are demanding highly targeted offers tailored to their specific needs. Consumer segmentation becomes more precise: purchase history, socio-demographic or family situation are now part of common criteria. The acquisition of such information may seem intrusive, but this type of process is becoming more widespread. Applications such as "Facebook Connect" will allow consumers to connect to a website through Facebook, saving time by sharing all the information that Facebook has about them. Not just basic details such as name and age, but also more personal information such as political views. The issue of protection of privacy will become an increasingly hot topic in the future. 

One channel that is sneaking up on us

One channel to 'watch', and one rarely mentioned in retail, is the interactive TV (iTV). The Brits spend over 4 hours per day in front of their TVs. The use of iTVs with internet connectivity is growing rapidly in the UK and smart retailers are exploring the power of this new medium. Domino's have already surpassed 1m in sales of pizzas ordered over the TV with average order values actually increasing this is due to HD pictures and video making the pizzas look irresistible! A recent study showed that 25% of people who had iTV will shop via this medium by 2014. How can retailers take advantage not only associate their brand and goods with the latest films and celebrities, but also give the people the ability to buy immediately on line? 

Seamless operation across channels

The need to establish a digital strategy is unquestionable. But knowing where to start is difficult. Digital must be an integral part of an omni--channel strategy that can require a radical overhaul of Information Systems. The proliferation of sales channels over the years has resulted in heterogeneous systems. It is common for each channel to be built independently. There is now an obligation to integrate them into a coherent, integrated architecture. And in these difficult times, when budgets are under pressure, considering such an overhaul may seem dangerous to some retailers and hard to justify. It is however a necessary investment for retailers looking to meet the needs of an increasingly sophisticated customer base, where "digital natives" require a higher level of service anywhere, anytime and via any channel.