Retailers need to focus on integrating digitalization into all aspects of the business – from channels, processes, and data to the operating model, incentives, and culture. This journey to digital nirvana needs a visionary leader who can leverage technology to drive transformation in customer experience as well as back end operations and help the retailer differentiate itself from its competitors.

The Rise of the Digital Avatar

Digitalization has proliferated businesses significantly over the past 15 years, both in terms of what organizations have been able to offer customers as well as in the way it has become a significant value driver for the bottom-line – both in cost savings and revenue uplift. Consumer-facing businesses are experiencing waves of disruption while trying to address changing consumer behavior and in keeping up with the steep competition from digital natives. This has necessitated a steward who could lead the innovation and transformation initiatives across the organization and seamlessly interweave business strategies with ever-expanding digital strategies that not only address the web but also mobile, social, local, and other innovations around the corner.

Traditionally, digital was positioned as part of the marketing function within the business, responsible for driving the organization’s online presence. The last two years have seen the rise of the Chief Digital Officer, a senior executive who sits next to the CEO and is deemed instrumental to the future of the organization. For many companies, especially those in the retail and leisure sectors, digital is the fastest growing revenue stream, and a CDO is extremely important in driving that growth and transformation through digitalization.

Retailers Need to Evolve with Changing Trends

The emerging megatrends in the consumer landscape are compelling the retailers to transform digitally at a very high velocity.

• Rise of the millennial consumer: $200 billion is the expected spend by millennial consumers in the US alone in 2017
• Widespread adoption of digital technologies: Rapid decline in technology costs along with growth in skilled workforce
• Booming growth of ecommerce: 23% growth in global ecommerce sales expected in 2017 to reach $2.35-trillion
• Evolution of disruptive retail models: New models such as Retail Lockers, Amazon Go, and Virtual Stores are disrupting the way consumers shop
• Rising economic pressure on retailers: 17 top US retailers are closing stores with rising costs and stagnating sales
• Increasing competition from tech firms: 4 out of top 5 US tech companies, viz. Apple, Microsoft, Amazon, Alphabet have retail presence today

CDOs Driving Disruptions across Retail Value Chain

Retailers need to pick up these trends at an early stage and continuously evolve themselves to stay alive and ahead in the game. The ability to harness customer data to derive insights and accordingly lead the way in shaping consumer journeys and behavioral patterns, would be a true differentiator between the winners and laggards. Equipped with big data & analytics tools and capabilities, the CDO needs to anticipate emerging trends and give a direction to the organization to transform itself from being ‘customer-aware’ to ‘customer-leading’ and become a trendsetter by delivering disruptive service experiences.

Urban Outfitters announced the appointment of its first group Chief Digital Officer in August 2016, who will be working with all of the group’s brands to drive digital growth and carve out that digital strategy. The position involves working alongside IT to help the entire business understand the importance of owning technology and how digital impacts the whole of the retail journey – from sourcing and supply chain to marketing and ecommerce, and everything else in between. The CDO's job is to break down the silos between the different departments and ensure they, and the retailer's board, understand that technology is no longer the sole responsibility of IT.

Transforming Shopper Experience

Most retailers today recognize the importance of customer centricity and are rethinking their business processes to place the customer at the center of their universe. However, defining, building, and implementing new consumer-inspired digital user experiences that truly personalize the way they interact with customers is no easy task. Like I highlighted in my earlier blog, mobile technologies can play an instrumental role in orchestrating shopping experience across the entire customer journey for pre, during, and post-transaction stages. CDOs have the task of connecting these engagements to systems of analytics that enable deep customer-leading insights, which help drive actions and create value for the consumers. Some of the experience-driven use cases, where digital technologies have been widely adopted, are:

• Immersive shopping: In-store customer experiences with modern technologies such as virtual mirrors, enabled by AR/VR
• Mobile-led in-store shopping: Smartphones assisting the physical store shopping experience with dedicated mobile apps and other solutions, enabled by Mobility, IoT, NFC, Bluetooth
• Online shopping experience: Online commerce/mobile apps for anytime-anywhere shopping with custom recommendations and user reviews, enabled by Commerce Platforms, Analytics
• Socially influenced buyers: Brands influencing purchasing behavior through social media and increasing social buying, orchestrated by Social Platforms, Mobility, and Analytics
• Robotic store assistants: Robots at stores replacing sales executives to meet and greet, guide, and recommend shoppers, powered by Robotics, NLP/NLG, ML
• On-demand 3D-printed products: 3D-printing of personalized/custom products, out-of-production parts, cloning items, facilitated by Additive Manufacturing
• New-age checkout systems: ‘Just walk out’ by Amazon Go, self-checkout digital payment kiosks, and scan-as-you-shop mobile apps, enabled by AI, ML, Payment Systems
• Next-gen after-sales support: Delivery/fulfilment of items unavailable at stores, digitized receipts, and loyalty integration, fueled by Mobility, Analytics

Orchestrating Distribution & Operations

While reimaging shopping experience in the front-end is important, it has to be powered with corresponding capabilities in the enabling processes to make it a truly holistic transformation. Many retailers are leveraging digital technologies to transform their traditional supply chains — creating models that are connected, intelligent, scalable, and rapid. CDOs are realizing that reimagining the supply chain as an integrated digital supply network is essential for generating higher levels of value. Sample use cases include:

CDOs are realizing that reimagining supply chain as an integrated digital supply network is essential for generating higher levels of value

• Data-driven decision making: Big Data and Advanced Analytics could be leveraged in
  • Production planning based on real time sales data
  • Lean inventory planning for optimum resource utilization
  • Merchandising planning to ensure best product mix and placement
• Connected warehouse: Robotics, IoT and Automation have multiple use cases such as
  • RFID for contactless identification and tracking of products inside warehouse
  • RTLS for identification and navigation inside warehouse
  • Robotics technologies for automated warehouse operations
• Smart logistics: IoT, Telematics and Drones have seen successful applications like
  • Real time fleet tracking to manage product delivery as well as optimize routes
  • Tracking inventory condition during transportation to ensure safety of products
  • Usage of drones for automated delivery of products to end customers

Incubating Pilots through Digital Innovation Labs

CDOs must continuously invest in a blended portfolio of mature technologies to support today's customers while simultaneously nurturing emerging technologies to attract future customers. Retailers such as Lowe’s, Macy’s and Sephora are investing in "retail innovation labs" with the aim of modernizing stores and operations to reflect the digital revolution and carving out new digital experiences for their consumer base. It’s a goal that encompasses a variety of still-unfolding initiatives that are quickly becoming as essential to retailing as the buyers who pick the merchandise that lines shelves.

The proliferation of these retail incubators come as stores seek to keep pace with — and anticipate — the technology-driven trends reshaping retailing and shopping behavior today and in the years to come. This necessitates CDOs to wear the hat of design thinkers and incubate lean startups by adopting an agile ‘test & learn’ approach to design mobile and online innovations, new apps, and Omni-channel shopping solutions, while collaborating with technology partners and developing digital enhancements for in-store shopping experience, among other things.

• Online Commerce
  • Building ecommerce platforms
  • Simplifying retail disruption workflow
  • Gaining access to real time data from remote locations
  • Improving SCM efficiency and inventory management
• Mobility
  • Mobile website development
  • Building mobile payment platform
  • Enabling shopping on-the-go with deals through mobile apps, e.g. Cartwheel App by Target
  • Targeted marketing using interconnection of devices
  • Delivering seamless in-store and online shopping experience
• Cognitive/AI
  • Leveraging data in real time to drive decision making
  • Creating single customer view across the organization
  • AI-powered concierge and chat-bots to simplify shopping,e.g. Amazon Echo powered by Alexa
• Big Data & Analytics
  • Predictive analytics for forecasting
  • ML-assisted product recommendations
  • Search analytics platform
  • Web analytics for product discovery
• IoT/Connected Devices
  • Auto-replenishment services & subscriptions like Amazon Dash
  • Inventory tracking to reduce shrinkage
  • Proximity targeting with personalized notification through beacons
  • Intelligent queue management systems with cognitive IoT
  • Smart shelves using RFID technology
• AR/VR
  • Product virtualization to help customers view how their goods will look in practical use before buying them, e.g. Holoroom by Lowe’s
  • Providing in-store shopping experience online
  • Information dissemination through window displays, e.g. Sephora to Go app displays female founders’ stories in stores
• Payment Services
  • Payment platforms & wallets
  • Integration of payment gateways
  • Loyalty & reward programs
• Robotics
  • Robotic advisors, e.g. OSHbots by Lowe’s
  • Inventory management, e.g. Kiva robots in Amazon
• 3D-Printing
  • Product customization
  • 3D-scanning

In Summary…

Today, a compelling convergence is happening where the digital strategy of many retailers is fast becoming their corporate strategy. No longer just another tool in the marketing toolbox, digital is becoming the foundation of entirely new ways of doing business as well as giving rise to entirely new businesses.

The CDO is now a “transformer in chief”, charged with coordinating and managing comprehensive changes that address everything from updating how a retailer operates to building out entirely new businesses. They are the new stars of the C-suite as well as transitory roles which will eventually go away – when the corporate strategy and digital strategy becomes synonymous.