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Why Cultural Transformation Is The Ultimate Retail Strategy

The roller coaster ride of the digital landscape is changing our world into something we’ve never seen before—and this is certainly the case for the retail industry. Amazon’s cross-industry success, the continued rise of artificial intelligence, and the evolution of e-commerce and omnichannel formats—these trends and more are convincing retailers to take a critical look at how every aspect of their business is impacted by digitalization.

One of the best perks of my job is listening to firsthand accounts from the boardroom that illustrate how retailers are deeply vulnerable to technological shifts. Recently, I met with a former executive who shared his reflections on the demise of a retail brand.

With his permission, I am sharing his story with you:

“At the start of e-commerce, we sold primarily through our physical store locations, with only 8–9 percent of our sales revenue generated online. Over time, online orders grew 50 percent year over year, but that didn’t mean that we were more profitable. Rather, we were shrinking in sales volume company-wide. Store performance was dying as consumer foot traffic dropped significantly. Store promotions and formats were routinely low performing. Ultimately, despite years of fighting to hold on to the traditional brick-and-mortar store model, we had no choice but to close our physical and digital doors forever.”

I wish I could say that my friend’s experience is unique. Unfortunately though, I hear narratives like this every day. Although not every story ends with the death of a channel or entire business, most of them certainly endure disruptions that make it difficult to bounce back and restore potential growth.

The Inner Struggle of Retail Operations

Every executive talks about the consumer shift to digital, but there is rarely any mention of the resulting turmoil within the business. The underlying story behind any retailer failure goes beyond being a casualty of changing shopping habits. Rather, it is often centered on mismanagement, misalignment, technology gaps, politics among a chain of merchants, digital marketing and commerce teams, finance processes, store operations, and sales associates.

Like many businesses, my friend witnessed a merchandising organization that wanted to proceed with its long-held role in serving brick-and-mortar storefronts. At the same time, the e-commerce team experienced exponential growth in sales revenue, even though it was treated as an afterthought. The teams were so consumed with protecting territorial boundaries that they forgot to deliver a true omnichannel experience that delighted shoppers and optimized the performance of both the retail store and e-commerce site. Any focus on the consumer was lost.

Although e-commerce volume is surging, the brick-and-mortar store is far from dead. The Association of National Advertisers survey report, “E-Commerce Insights,” reveals that 73 percent of marketers cited e-commerce as a driver of revenue; of those respondents, 43 percent indicate that this channel accounts for up to 10 percent of all sales. Meanwhile, storefronts still operate from a position of strength, even though foot traffic continues to decline rapidly. According to the PwC Total Retail 2016 Study, 29 percent of respondents prefer to research a new consumer electronics item or computer at a physical store, but 52 percent are likely to purchase it in a physical store. As delivery times accelerate and the last mile of the consumer’s doorstep gets shorter, this percentage will likely drop further and faster than many believe.

To stay competitive, retailers need to create an omnichannel environment that allows consumers to shop how, when, and where they want and enable each interaction to convert into a purchase and long-term brand loyalty. As consumers continue to rewrite the rules of commerce, the strengths of the merchandising and e-commerce teams must be combined, along with all supporting functions in the company, to understand, predict, and deliver faster than ever.

The New Mandate: A Culture of Consumer Centricity

While some improvements have been made recently, most retailers still have a fundamental culture problem. Too often, factions within the business are still fighting yesterday’s battles and losing sight of the consumer.

While not all conflict is necessarily bad, it is important to engage in a level of healthy debate that takes a critical look at data, processes, and obstacles. This is not the time for gut-feel or opinion-based decision making. A culture of organizational unification, data sharing, and vigorous discussion encourages the entire company to look towards the future, while letting go of the past and relinquishing control of conventional precepts.

With more strategic thought and data-enabled decision making, retailers can address the uncertainty of consumer behavior and rethink how inventory buys are assembled and allocated across all channels. This transformational opportunity empowers e-commerce and merchandising to assume the voice of the consumer and change the way they view their responsibilities. By shifting the spotlight away from product placement and merchant performance, the retailer can pay closer attention to what matters most to its success: the consumer.

To create such a collaborative, omnichannel business environment, retailers should overcome three considerable challenges:

1. Deliver a complete, single view of the consumer through data unification and access.

Do all of your decision makers have the same data to observe the consumer the exact same way and draw the same conclusions? Or does this information diverge wildly across your organization?

By removing the barriers to data integration and adopting predictive analytics technology, all organizations—from store operations to the supply chain—can identify, track, and understand consumers at a deeper level. The consumer experience becomes unique, engaging, and highly personalized. Social relationships are strengthened to build a loyal following. And channels find a balance between revenue generation and lower costs while opening up a first-mover advantage in untapped markets.

2. Align organizational key performance indicators.

How many people in your organization, and in which departments, have a job description or metric that is focused on consumer success?

In any line of business, goals are achieved through the efforts of multiple people—not a single person—from a variety of responsibilities and departments. Cascading and aligning goals across multiple owners creates a shared accountability that forms a foundation for performance tracking and strategic staffing and resource planning.

3. Socialize the culture strategy.

Do you have tools that are fast and easy enough to gain insight and understand potential opportunities and risks that may impact business success?

Socialization of a consumer-centric, data-driven culture helps employees readily adopt technology to access advice and contribute expertise and feedback. By training technical and nontechnical employees, from the C-suite to the warehouse, retailers can break free from legacy culture, mindset, and technology and make room for some amazing digital pure-play innovations.

It’s time to move past tradition to set a path for the future.

Traditional retailers have the opportunity to engage creative thinking for a more consumer-focused culture. Once the entire business—even merchandising and e-commerce—share the same perspective and work together, teams can quickly discover emerging opportunities and challenges such as a planned promotion that can put inventory plans at risk, an assortment that will not meet demand, or an item that will be soon out of stock.

We are seeing retailers across all retail subsegments and geographies succeed by driving a business-wide digital strategy that embraces this collaborative, omnichannel mindset. By reimagining business models based on real insights, not perceived trends, these digital winners are growing in this highly competitive landscape. But most important, their consumers are receiving a level of service that they expect—and deserve.

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