Data-based digital transformation drives retail revolution

South African retailers are closely following global trends to reinvent their retail model through digital transformation, says JDA Software Group.

Lee Gill, group vice president, global retail strategy at JDA, said during a visit to South Africa this week that all indications from recent research and major global retail events are that traditional retail is transforming. “I think that in next 5 – 10 years, we could have 50% fewer stores and malls than we have today. But the ones that remain will be amazing – they will offer retail reinvented, with a fantastic consumer experience, and online shopping will grow dramatically.”

Gill noted that the recent CEO Viewpoint 2017: The Transformation of Retail research report carried out for JDA by PwC indicated a rapid change in priorities for retail CEOs around the world. The fourth annual JDA survey of more than 350 global retailers found that a digital transformation strategy is their number one priority in 2017; with 69 percent of executives saying they plan to increase their investment in digital transformation over the next year.

“This was somewhat surprising, considering that just last year, the top priority was omni-channel strategies,” says Gill. “Omni channel is just a matter of daily business now.”

Gill says this rapid change in focus is driven by a need to move from product-focused to customer-focused retail models. “It’s all about using the multiple sources of data retailers have, to drive a better customer experience. Many have loyalty programmes and they capture a considerable amount of data. Now, they are moving to merge this structured data with unstructured social media data to create logical segments of like-minded customers.” Gill explains that while retailers have long sought to achieve this, new technologies such as machine learning and artificial intelligence are now making it possible to move beyond broad segmentation, for example ‘value conscious consumers’, to highly targeted segmentation by attributes such as ‘value conscious consumers who only buy 2 for 1 specials”.

“Advanced new technologies are allowing for highly specific data mining that you simply couldn’t do in the past,” Gill says.

South Africa is keeping up with international trends, he says. Speaking from a retail conference in the Western Cape this week, he said “It is interesting to hear local retailers have started their attribute mapping journey, with some already piloting new software to effectively mine their data and apply AI to fully understand highly niche customer groups.”

Gill expects customer centricity will reach the top of the retail agenda soon, with retailers optimising internal data and multiple sources of external data, such as social, news events and weather (SNEW) to reinvent their models.

“Retailers are now so focused on customer experience that we already see them changing the composition of their boards and appointing Chief Customer Officers to the board,” Gill says.

JDA’s research also shows mobility is high on the retail agenda – from employee mobility to help manage work time, to mobile customer applications. Experimental areas rising to prominence include location beacons, and – to a lesser extent – ‘novelty’ technologies like  virtual changing rooms. The Internet of Things (IoT), big data, robotics, and augmented reality are also some of the ways CEOs are choosing to invest their capital in the coming year to better compete.

The survey found that retail CEOs are increasing their investment in buy online, pick up in-store (BOPIS), with 51 percent of survey respondents saying they offer or plan to offer BOPIS in the next 12 months – up from 47 percent in 2016. 

Buy online, ship to store has picked up steam in the past year with 48 percent of retail CEOs investing in this service or planning to, in the next 12 months.  Conversely, fulfillment options that are becoming costlier and less profitable are areas where CEOs are decreasing investments in 2017. These include same day delivery (reduced to 33 percent, down from 43 percent in 2016), and providing specific delivery time slots (down to 27 percent vs. 48 percent in 2016).

The rising costs of order fulfillment are also pushing executives to rethink their strategy overall. 2017 will see increased charges for online orders (57 percent plan to or will make this change in the next 12 months), a rise in minimum order thresholds for free standard home delivery (62 percent plan to or will make this change in the next 12 months) and raising the minimum order value for BOPIS (55 percent plan to or will make this change in the next 12 months).

In the online retail space, Gill notes that a separate JDA survey among consumers in Europe has reveal some surprises: “While online retailers are eating into the bricks and mortar retail environment, it was a great disappointment to find in our survey that 50% of online customers online continue to have a bad experience. Their main complaint was around problems with home delivery. The big lesson here is that online retailers need to make sure they can deliver what they promised – it’s not as simple as switching on a site.”


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