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Author: Ronojoy Guha | 12/01/17

The New Retail Frontier

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Very few experiences help you connect to the big picture you have been piecing together in your mind. My recent one was around my passion, Retail, and the implications of the Digital world to it. My 12 year old daughter who is in the 7th grade received an assignment to review a book. And, what was interesting to me was the fact that in addition to reviewing the book on paper, she had to video record her book review and post it on Flipgrid. It goes beyond this. She was additionally required to get her classmates to review her video, review her classmates’ video, incorporate the feedback she received into her review and eventually upload a new and edited video review. This simple experience of hers, truly brought to life what the new world is about. This experience hence illustrates that the new world is about,

  • Personalization - Record a book review and give it personality
  • Engagement and Collaboration - Leverage your peer network to improve the quality of the review and then repost a final version on the app
  • Changing the way things are done - Download the assignment from Google Classroom, buy the book from Amazon and possibly get it delivered to home
  • Leveraging Technology - Use your phone to record the video, use Flipgrid to collaborate

But, how does this example relate to “Retail”?

Retail is at the threshold of stepping into a newfangled “Digital Frontier” and we call this Retail 3.0. The new retail Digital Frontier will be one in which the advanced world of digital marketing will merge with the old world of merchandizing to “Own the Customer” (Personalization). In order to deliver to the promises, they make Retailers “Reimagine the Store” (Engagement and Collaboration), “Transform the Core” (Changing the way things are done) and like never before focus and “Drive Innovation” (Leveraging Technology). These are the fundamental tenets that we believe will drive transformation and will be core to Retail 3.0. This two-parts blog sets out to provide a point of view on the tenets and how we see them transforming in the new frontier.

Reimagine the Store

A perfect way to illustrate this is by walking you through a transformed grocery store experience. Let’s begin by splitting the physical store into two logical parts - “Centre Store” and the “Perimeter”. The center store which essentially deals with packaged, GM and bulk items, would transform into an experience center. A shopper can interact with the SKU’s and make his/her buying decisions, but does not really need to put anything into a shopping bag. The new shopping bag at the store is an order placed at the store and delivered to their doorstep, ideally before they are back from their shopping trip. The perimeter however, remains old world, largely driven by the innate human desire to experience the products before they buy them and then ensure that they are selecting and bagging the best.

This may seemingly remain very much like the world we are used to, but will get transformed by IOT, sensors and AI which will aim at dramatically increasing availability, product freshness, quality and reducing shrink. The reimagined store is therefore one which houses two different stores in one physical complex, yet is significantly smaller in size, hyper focused on experience and requires a radical rethink of the entire value chain and the technologies that support it.

Transform the Core

If we could extend the example of the grocery store experience to deliver to the promise of the new store, the grocer will need to transform its supply chain, merchandising and other core processes. Essentially, the grocer would need to restructure the physical supply chain networks, how they source and deliver goods. Here are some examples of the changes we see –

  • Build smaller and more flow through DC’s to fulfill Centre Store orders
  • Rethink the entire supply chain planning processes – move the nodes of the entire network onto a single server to get an integrated supply chain view and then forecast, plan, order, fulfill and replenish significantly faster with shorter lead times and increased accuracy.

So, it is still a consumer-driven supply chain, but on a single network with end-to end visibility, which then allows an organization to truly use the supply chain to differentiate.

The same example holds good for merchandizing and transformation of that function. With the shrinking of the Centre Store and reduction of volume complexity, retailers can focus on truly assorting to customer/neighborhood preferences, making planograms relevant to each store, fulfilling to the promise of dynamic pricing & promotion and increasing the effectiveness of execution at the stores.

Fundamentally, a Retail 3.0 retailer, can now

  • Assort each store differently
  • Deliver on consumer centric pricing and make it dynamic
  • Run promotions thoughtfully and extremely effectively across all channels
  • Move away from a paradigm of volume complexity to that of razor sharp focus on relevance and value

Other elements of the core that will go through significant change will be around engagement of employees and suppliers. Like everything else, retailers will attempt to bring these stakeholders into a single network and find ways to connect, engage, motivate and provide single point visibility. As the “Core” is transformed and we gradually move to a Cloud version of the world, which will principally put everything on single networks making it visible to everyone who is party to it, there will be a radical shift in the way the issues around product data and master data are handled. This is the difference between an area around which retail has spent billions of dollars without any real tangible returns and one which, in the new transformed Digital world, has the potential to truly deliver an ROI.

In my next blog, let’s link these transformations to the implications on technologies that support it, technology domains that will truly help differentiate and the role innovation, needs to, and can play. If you want more information about the digital solutions in retail industry, send an email to info@mindtree.com and we be glad to assist.

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