Digital retailing in a faster, more demanding world
Consumer expectations are increasing and retailers are keeping up—but their trading partners are lagging.
This is one of the key takeaways from the fourth annual industry benchmark survey by Retail Systems Research (RSR) commissioned by SPS Commerce. The goal of the survey was to examine the internal and external forces driving today’s retail ecosystem, an industry that has evolved more in the past decade than in the past century. That evolution continues this year, with three critical drivers at the forefront:
• Digital. For the first time ever, retailer priorities have shifted from in-store sales to e-commerce sales.
• Speed. With Amazon already promising same-day delivery in major metropolitan areas—and even one-hour delivery in some markets—the need for speed continues.
• Executive mandates. Retailers are losing patience with the industry’s omnichannel progress, making 2016 a year to watch.
These three drivers and more, were reflected in this year’s survey and indicate the wild ride we’re all on in this shifting ecosystem.
Retailers crack the bullwhip
As everyone in retail knows, communication gaps and time lags between when an order is placed and when it’s actually needed can cause wild disruptions. This is referred to as the bullwhip effect. The bullwhip gets cracked when small changes in customer demand get magnified so that the oscillations of the whip keep getting bigger and bigger.
While the term was originally coined in relation to inventory, it also applies to investment priorities. Retailers have long been in charge of determining those priorities—for themselves, as well as for their logistics and transportation providers, most of whom were willing to do whatever retailers wanted as long as there was a profit to be made.
And now, what retailers want more than anything else is to grow digital sales. In fact, 75% of retail respondents to this year’s survey ranked growing e-commerce sales as their top priority. Other top retailer priorities include improving/reinvigorating the in-store experience (53%) and streamlining fulfillment (49%), both of which pale in comparison to the need to grow e-commerce sales.
This emphasis on e-commerce sales signals a significant shift. For the first time ever, the store is no longer retailers’ top priority. This is especially true for big ticket and fashion retailers, the latter of which are focused on shipping from their stores in order to capture online orders that have typically been lost when the e-commerce distribution center was out of stock or didn’t carry the inventory.
To capture more e-commerce sales, retailers are placing a greater emphasis on speeding up the responsiveness of their e-commerce channel, in part as a response to Amazon’s relentless pursuit of speedy delivery. Even the smallest retailers can’t afford to ship merchandise a week after it has been ordered or require consumers to jump through hoops to make returns.
Omnichannel: by executive order
The entire ecosystem still has a long way to go when it comes to achieving omnichannel maturity, and progress remains at a snail’s pace. In fact, only 8 percent of survey respondents rate their omnichannel strategy and execution as advanced, though retailers are clearly feeling farther along than the rest of the ecosystem: 42 percent of them report that they have achieved moderate progress.
But while such progress may have been acceptable in the past, it appears retailers may be losing patience as 52 percent of retail respondents report having received an executive mandate to truly deliver—once and for all—on their omnichannel strategy. With Target and some other leading retailers missing their own forecasts and reporting less-than-expected e-commerce growth in late 2015, my prediction is that we’ll see even more of these C-suite mandates in the coming year.
That’s good news for those who are responsible for implementation. But there’s some bad news as well: only 20 percent of retail respondents say they are getting increased budgets for digital retail. What’s more, some of the same factors that have hindered omnichannel execution in the past continue to be problematic. Take legacy systems, for instance: 59 percent of retail respondents report that their existing systems remain an obstacle, up from 43 percent just one year ago.
Despite feeling hamstrung by inadequate budgets and legacy systems, a clear majority of respondents—84 percent—predict that 2016 will be better than 2015. Where does this cautious optimism come from? My guess is that, like so many of us, retailers see the exciting potential of the digital revolution, a revolution that will continue to get more exciting, and more wild, in the years ahead.
Peter Zaballos is chief marketing offer and senior vice president at SPS Commerce, a retail cloud services platform provider.
Dunkin’ Brands exec appointments include digital, supply chain VPs
Dunkin' Brands Group Inc., the parent company of Dunkin' Donuts and Baskin-Robbins, has promoted five new VPs to its management team.
Sherrill Kaplan was promoted to VP, digital marketing & innovation for Dunkin' Donuts U.S. Kaplan joined Dunkin' Brands nearly five years ago and has played a lead role in the development and execution of the retailer’s digital strategy and the DD Perks rewards program.
Additionally, she has overseen development of the Dunkin’ Donuts mobile app and the retailer’s On-the-Go Ordering initiative, currently in test in multiple markets. Kaplan reports to Scott Hudler, Dunkin' Donuts' VP of consumer engagement.
David Gill was promoted to VP, supply chain U.S. & Canada for Dunkin' Donuts and Baskin-Robbins. Gill joined Dunkin' Brands in 2000 and reports to Paul Carbone, CFO.
Pete Jensen was promoted to VP supply chain international. Jensen leads the international manufacturing and sourcing, logistics and service, regulatory compliance, supplier quality and food safety, new product commercialization and in-store equipment innovation for both Dunkin' Donuts and Baskin-Robbins. Jensen joined the company in 2010 as global supply chain director for Baskin-Robbins and he reports to Bill Mitchell, president, Dunkin' Brands International.
Dennis McCarthy was promoted to VP, financial management. McCarthy leads the international financial management team for Dunkin' Brands. He also oversees the Dunkin' Brands supply chain finance team and serves as head of corporate financial planning and analysis. He joined the company in 2009 and reports to Kate Jaspon, VP, finance & treasury.
Kathryn Thomas was promoted to VP, legal and managing counsel. She joined the company in 1998 and reports to Karen Raskopf, senior VP and chief communications officer.
"We are pleased to announce the promotion of these five individuals, all of whom have made significant contributions to our organization,” said Nigel Travis, Dunkin' Brands' chairman and CEO. “Each brings significant management expertise and experience to their new role and will play a key part in our efforts to further accelerate our global innovation and growth."
Evaluating Retail Technology ROI
The retail industry is abound with digital innovation, with brick-and-mortar stores rapidly adopting retail technology tools, services and gadgets in order to become a more relevant part of the consumer’s day. Emerging retail technologies are poised to make a splash among retailers in 2016, but not all serve the same purpose.
While ROI is usually the main factor behind the deployment of these emerging technologies, some also integrate other marketing goals as well. For example, Luxury retailer Neiman Marcus is investing in a variety of mobile and retail technologies to provide a seamless omnichannel shopping experience and delight its in-store customers. High-tech “memory mirrors” were recently integrated into its department stores, helping customers visualize their outfits from 360 degrees. In addition to solving a nagging customer pain — Does this outfit make my butt look big? — the memory mirror also serves as a means to collect customer emails. Shoppers can share their 360 degree memory mirror images with their friends via email, allowing Neiman Marcus to communicate additional offers.
"Neiman Marcus always puts a priority on enhancing our customer experience. The initial introduction of the memory mirrors resulted in an immediate and positive reaction, and we are looking forward to delivering this and other unique experiences to our customers," said Wanda Gierhart, CMO, Neiman Marcus Group.
Another common retailer need is that of tracking inventory. RFID, or radio-frequency identification, has been around for years, but is now seeing some interesting new applications in retail. RFID tags can give big-box retailers like Target and Zara up-to-the-second inventory information which facilitates same-day delivery fulfillments and offers faster checkout for “click-to-brick” shoppers. Online customers also enjoy peace-of-mind knowing that the item they saw online is waiting for them at their local store. When RFID tags can result in a 60% decrease in online order cancellations, the benefits can certainly outweigh the hefty price tag of the technology.
Other technologies like phone charging stations deliver powerful multi-purpose solutions that many retailers and customers need. With consumers increasingly dependent on their mobile phones for just about everything, charging stations are a practical amenity that help provide a stress-free shopping experience.
“Offering phone charging services is a great manifestation of customer centricity,” said Wharton Professor of Marketing Peter Fader. “It’s not just discounts. It’s something tangible and value enhancing, and that’s the thing that puts the customer-retail relationship over the top.”
What’s more, an independent study shows that phone charging kiosks can have a direct impact on a retailer’s sales, boosting customer dwell time by 2.5x and basket size by 29%.
Finally, what is perhaps the greatest ROI a retailer can earn from these emerging technologies is data. Data analytics from tools like beacons, virtual showrooms and even charging stations are in high demand in the retail space. Stores are increasingly turning to these retail tech tools to answer important customer demographic and behavior questions like: Where do my customers live? What is their average household income? What time of day do they like to shop? Or what’s their favorite product in our store? Gathering these essential insights will enable retailers to create marketing campaigns and offers that are tailored to the needs of their individual customers.
“Once you figure out who your valuable customers are,” explains Fader, “offer them an attractive set of products and services that may not necessarily directly impact your bottom line, but keeps them coming back to your store and staying longer so you can surround yourself with the best kind of customers.”
Forward-thinking retailers can weave these technologies into stores to increase customer satisfaction with value-added services, integrate online and offline sales channels, and collect valuable customer data. Ultimately, it’s not about what cool new technology your store is using, but what cost-effective, high ROI tool you’ve implemented that advances your marketing and sales goals for your most valuable customers.