At a recent conference, Mike Schlotman, the CFO of US grocery chain Kroger, responded to Amazon’s recent purchase of Whole Foods and what that would mean for the grocery retail industry. He said, “Part of me refuses to believe that everybody is just going to sit at home and everything is going to be brought to their doorstep and nobody is ever going to leave home to do anything again.”
What happens when the top executives at an organization fail to understand the vast, far-reaching changes that digital transformation can take and its impact on the customer experience? What happens when doing things the same old way becomes corporate strategy?
Digital transformation regrets
Here’s a cautionary tale. Mickey Drexler, the CEO of US apparel retailer J.Crew, has admitted to being surprised at how quickly technology has brought change to the retail industry. “I’ve never seen the speed of change as it is today,” he said. “If I could go back 10 years, I might have done some things earlier.” Sales at J.Crew stores have fallen for the last 10 quarters — indicating a pretty poor record of performance.
It used to be that fashion was a very gut-driven business; its winners were the people who could predict — seemingly out of a hat — what people would want to buy a year from now, as that was how long it took to get clothes into stores. This is no longer the case. Today, Wall Street Journal reporter Khadeeja Safdar says, “Competitors with high-tech, data-driven supply chains can copy styles faster and move them into stores in a matter of weeks.
Online marketplaces drive down prices, and design details such as nicer buttons and richer colors are less apparent on the internet. Social media adds fuel to the style churn.” Logistics, supply chain, and ERP integrations are as important to the success of retail businesses as the right product or right store location, and retailers neglect them at their peril.
The scary thing for many traditional retailers is that Amazon has the ability to operate stores much more efficiently and effectively because the company is driven by data and powered by software. Using data analytics, endless APIs, and other intelligent tools, Amazon can monitor its online and physical stores to perfect its online-offline strategy.
The Whole Foods purchase provides Amazon with even more personal data about customers and their shopping habits which can then be used to create an optimal customer experience. This is a reality that every business (not just in the retail industry) has to face.
Lessons grocery stores —and other retailers — can learn from J.Crew
Mickey Drexler’s experience is a cautionary tale for the grocery world reeling from Amazon’s purchase of Whole Foods. The question isn’t whether people will want to buy online or buy in a brick-and-mortar store, or, in the case of Kroger, will they want to get their groceries delivered or not. The answer to those questions is, quite simply, Yes.
Yes, people will want a great customer experience. They will want groceries delivered, and will want goods in beautiful shops where you don’t need to pull out your wallet to pay; they will groceries in kiosks and pop-up shops and everywhere that makes sense for their lives. In other words, customers want a unique experience; they want their retail goods to be conveniently purchasable according to their time and schedule, not the retailers’.
And that also means that purchasing patterns and consumer demands are going to change faster than ever. So the trick for retailers of any sort — apparel, groceries, FMCG, travel, etc. — is to cultivate the capacity for change and to get good at understanding exactly what our customers want from their experience, then develop the technological infrastructure to give it to them.
Ross Mason, our founder, notes that retailers “need to deliver a seamless customer experience across channels, and they need the agility to keep in step with the changing needs of consumers. This added level of complexity requires online systems and in-store software to be connected so retailers can provide an uninterrupted customer experience wherever people shop.”
It’s this infrastructure that makes agility possible and makes change possible that is so important to success in today’s world. The secret to success isn’t necessarily developing new channels, it’s developing the capacity to spin up and down new channels to meet the demanding customer.
Advice for today’s retailers
If we may give you a bit of unsolicited advice, Mr. Schlotman, it’s this; plan for everything. Kroger customers will want to get their groceries delivered to their homes, they will want to go to Kroger stores, and they’re going to want to purchase their groceries in ways you might not have even thought of yet.
To do this properly, Ross says, “you’ve got to bring information out of the depths of their applications and to the forefront of the business, where the information can be leveraged to figure out who the customers are and what the customers might want based on their history.” To do that, you need a robust technical infrastructure centered around APIs.
For more on how retailers can succeed in an increasingly omnichannel era, take a look at our whitepaper, Omnichannel Strategy and APIs. For an example of a retailer taking advantage of an API strategy to capitalize on changing customer behavior and improve the customer experience, check out our upcoming webinar Creating Omnichannel Brand Experiences with NY and Company.