Digital Transformation in Retail: Why It Is So Important Now!

It’s no secret that the retail landscape is more competitive than ever. The customer is in total control, and only a personalized, unique retail experience will capture their attention (and open their wallets). But despite this, many retailers are slow to accept that the way they do business needs to change – they must evolve with the customer, because the customer will not change for them. If they don’t, they will soon be seen as an irrelevant or “boring” – labels that can be the death knell for any retail business. So how to engage a technologically-savvy and selective customer? How can a retailer differentiate themselves from the competition, and deliver the extraordinary experiences that customers seek? Answer: Digital Transformation.

What is Digital Transformation?

According to Microsoft: “Digital transformation is about reimagining how you bring together people, data, and processes to create value for your customers and maintain a competitive advantage in a digital-first world.” This definition itself encapsulates the state of retail, and how retailers must evolve. The world we live in is a mobile-first, digital-first world – customers can buy, browse, and research anytime, anywhere, with just a few clicks of their smartphone. Customers can even broadcast their opinions about your service and products to entire social media networks, shaping the perception of your brand in the eyes of others (for better or worse). Digital transformation is about using innovative tools and technology for engaging those customers in the places they like to shop (both digitally and physically), and connecting in new and exciting ways. Because a customer’s purchase is not simply a transaction – it’s the customer’s emotional investment in that product.

The Customer Journey Begins with Emotion

The emotions behind a customer’s purchase: they desire the product; they feel they need it; they didn’t know they needed it until they saw it. For instance, why do people buy engagement rings? Is it necessary for survival? No. But what does an engagement ring mean to the customer? Love, fidelity, lifelong commitment – the engagement ring is a symbol with powerful connotations. Because of its importance as a symbol, the customer is emotionally invested in buying the ring – and their emotions drive purchases. But it’s not just engagement rings – an emotional bond is created between the customer in nearly all retail verticals. People buy clothing to feel stylish; electronics to have the latest-and-greatest gadgets; outdoor equipment to feel adventurous; exercise equipment to feel fit and healthy; and so on. People will also be loyal to particular brands, whether they like the feeling of wearing/using that brand’s products, or they like the status of being a devotee of that brand (e.g., designer clothing, luxury cars), or many other reasons. People like to be part of a group – the more exclusive or special, the better. As Jill Standish says in an article for Chain Store Age, “Consumers today do not want to merely buy from you, they want to buy into you.” Digital transformation is the modern technological platform for differentiating the brand and delivering the emotional experience. Digital transformation is about implementing the tools that help you better understand what matters most to your customers, and how you can give them an experience that stands out from your competitors. Retailers that successfully adapt to their customers are, according to Jill Standish, “living brands” – “they evolve according to the behaviours of stakeholders, staying true to their roots to retain authenticity but flexible enough to adapt.”

Tools for Digital Transformation in Retail

Machine Learning and Predictive Analytics

Creating an emotional bond between your brand and your customers is critical to the customer experience. Retailers must make customers feel valued and appreciated, as well as feel that visiting the store and purchasing is worthwhile. Machine learning is key to cementing that bond between retailer and customer by helping the retailer better understand and predict what the customer wants. As another Hitachi blog explains, machine learning is a data science that collects data from one (or several) sources, and then feeds that data into machine learning models that in turn help predict future outcomes. Machine learning data enables retailers to identify patterns in customers’ shopping and buying behaviors, and adjust promotions and special offers, personalize product recommendations, or even tweak pricing to what customers are most comfortable paying, creating forecasts based on historical trends. Machine learning can also help with correctly timing different product or promotional changes, such as customer preferences based on the different holiday seasons (e.g., Christmas shopping is not the same as Valentine’s Day shopping).

Artificial Intelligence

Customers expect answers and assistance any day, at any time – and the easier, more convenient it is, the better. Artificial intelligence (AI) is an important new way to deliver the attentive 24/7 service that shoppers now expect. For instance, AI-driven chatbots can act as an online (or smartphone) store associate, instantly responding to customer queries through texts or Chatbot messages. Chatbots can also upsell or cross-sell products, pointing customers toward merchandise they may be interested in, based on the customer’s engagement. Chatbots are a cost-effective and rapid response service tool that can help seal conversions and create new sales. In addition, chatbots deliver messages that are consistent with the brand’s voice – the chatbot says what it is programmed to say. There’s no worry that a chatbot will share something it’s not supposed to, or that it will be rude and impatient with a customer’s questions.

Unified Commerce

Shoppers are using multiple channels to share and connect – web, mobile, social media – and they expect you to be ready and waiting for wherever they want to connect. Unified commerce is the key to a seamless, Omni-channel experience. What is unified commerce? Unified commerce is a single, fully integrated software platform that manages all the different systems that a retailer uses to conduct business, from one interface. Before the unified commerce concept, retailers used different systems for managing components of their business. For example, one system would be dedicated to running the ecommerce shop, a different system would run the brick-and-mortar store, another would handle the call center, and a completely separate system would take care of the loyalty program. The problem with these many disparate systems is that they create data silos, making it difficult for retailers to spot trends or get a clear view of their overall business health. If a retailer does not know how their business is running – from both a granular and broader perspective – then they cannot determine how to effectively move the business forward, nor identify and correct problems. Trying to reconcile data pulled from multiple systems is a time-consuming, resource-draining process. In addition, when multiple systems are relied upon to work together for the functioning of the business, should one system malfunction or provide incorrect data, all the other systems will be affected. In order to keep data integrity intact and secure, data siloes must be broken down, and data from disparate sources integrated into one system. Check out this ebook to learn more about unified commerce.

Get Started with Digital Transformation

Digital transformation sounds great, and the tools may sound cool and exciting, but how do you get started? The quickest, easiest, and most cost-effective way to initiate – and successfully conclude – a digital transformation journey is with a partner. With how important digital transformation is to your business processes and people (and ultimately, your profits), you don’t want to go it alone – there’s too much at stake. An experienced and reputable partner, however, mitigates that risk. A partner with the right industry and technical knowledge will understand your business, inside and out, and will guide you on how best to implement digital transformation according to your goals and timelines. Hitachi Solutions is a world leader in retail digital transformation projects, with purpose-built, industry-specific solutions across retail verticals. Our team has deep experience around operations, relationship management, business analytics, and user collaboration. As the world’s leader in Microsoft Dynamics implementations, our team understands how critical innovation is to enabling a retailer to lead with new trends, not be left behind. For questions on how Hitachi Solutions can help your business reach the next level, please contact us today.