Given the state of retail, store executives have their hands full as they attempt to catch up with the changes rocking the sector. Of the many areas they’re most preoccupied with today, none is receiving as much attention as customer experience.
In every speech, investor meeting and fireside chat, chief executives are eager to outline the ways in which they’re making their physical locations and e-commerce sites easier and more fun to shop. And each is going about it differently.
Online, Walmart is redesigning its website to create a “specialty” environment that presents regional favorites on the homepage. Online and in stores, Coach allows shoppers to customize their handbags. Sephora has brought its makeup “playground” to its app through virtual tools that allow consumers to test products and colors from home or on the go. Nike has improved how customers get their hands on new product. Now instead of standing in long lines to get the latest goods, sneakerheads can participate in gamified drops that send them out into the streets. At the Container Store, the in-store experience is evolving thanks to new communication tools that allow salespeople to be more present, helpful and connected.
Erick Rowe, vice president of industry strategy for Infor Retail, said this focus on the consumer reflects a shift in priorities—one that’s been precipitated by Amazon. “They’re absolutely, 100 percent focused on the customer. That’s making all of retail place the customer as the No. 1 priority,” Rowe said.
This Amazon effect is changing things both big and small. Think about the typical layout for grocery stores. It used to be that essentials like milk and eggs were located all the way in the back so shoppers had to pass cookies and chips and thousands other things they didn’t necessarily need in order to reach them. While that might have boosted impulse sales, it wasn’t particularly customer friendly. Now, Rowe said, that’s changing with stores like Target making it easier to grab necessities and go.
“The retailers that will be successful will pivot their business so that everything they do is focused on customer experience, and what’s going to come out of it will be a new age of retail that doesn’t look like it used to,” he said.
Here, Rowe talks transformation, personalization and Infor innovations.
Sourcing Journal: Last year’s headlines were dominated by the retail apocalypse narrative. What did the news get right and what did it get wrong?
Erick Rowe: We’ve heard so much about the apocalypse. We’re just believers that it’s not really true, but it makes good press. However that said, we do believe the retail industry is going through one of the biggest transformations of any industry out there. Maybe the record industry went through something as big. Maybe the car industry will when we get to self-driving cars.
We like to look at it from the perspective of who’s going to be successful. In the ’80s with the big-box retailers, it was all about your supply chains. They perfected their supply chain and got their cost of goods low, and they won by supply chain and having the right products in the store. What Amazon has done is they’ve made both of those commodities. You can’t win on the best selection of iPhone cases because Amazon will have millions of them. You’re not going to win on assortment or supply chain either because people can get [products] in their house the next day. So customer experience was third in that list of what stores competed on, and in the new world, it’s No. 1 because the other two things have fallen away.
SJ: Speaking of Amazon, it gets a lot of blame for the ills in the industry, but I’ve also seen a few people who give it credit for moving the industry forward. What’s your perspective?
ER: The reality is that retail as a whole is growing, and it’s growing faster than the GDP so people are buying things. Amazon as a whole, including grocery, their overall percent of total retail sales is not that big. They’re certainly disruptive, and people need to change the game but the game’s not over. There’s really no scenario where that gets flipped where Amazon has 90 percent of the revenue and everyone else has nothing.
Historically, though, retailers haven’t spent a lot on technology, and Amazon really came in and did that in the spirit of improving the customer experience, so there’s some catch-up for retailers to do in general.
SJ: And how is Infor Retail helping them do that?
ER: Infor Retail as a company came about out of the fact that the software for retail was built out in the ’90s. What was interesting was that commercial software had a better user experience than enterprise software. It was making it tough for retailers to recruit the people they needed.
And speaking of recruiting, we have a company called Talent Science. For retailers, it used to be about scaling their businesses. Now they realize having the right people in the store is critical. And expecting a thousand different store managers to figure that out based on a regular behavioral interview is almost impossible. They’re using Talent Science to pick the right people for the stores because they know they’re going to win or lose on it.
Another example of science related to customer experience is machine learning forecasting. With the cloud, it’s not just about retailers not having to pay for their own infrastructure. It’s about this elastic computing that could be applied to science in a way that you couldn’t before. We have a retailer that has core processors that go from a couple to 14,000 processes. From a science perspective, it allows you to do things you could never do in the past. It allows for attribute-level forecasting. You might have a hundred attributes for a product and machine learning looks at all of those attributes and figures out the different correlations between thousands of items to figure out the best demand. Now you understand what attributes roll up to different products and which are right for individual customers to localize your assortments much better.
SJ: Depending on who you speak to, online retail is still only 10 percent of retail. So is the focus on online overblown?
ER: The focus is good because that’s where things are most dynamic and where things will change, and what happens online will change the world of the stores. Those retailers that figure out online are the ones that will win because the digital and physical are coming together. If your strategy was just the physical, I think you lose. Maybe a dollar store could [succeed] but even for them I’m imagining a scenario where in 10 years another dollar store cleans up because they’ve figured out how to harness the power of digital. [The focus on online is] overplayed maybe from the “apocalypse” standpoint but as far as retailers being successful, it might even be underplayed.
Maybe everyone is thinking innovation on the digital side, but the ones that will be successful need to think of combining the two. We’re seeing that with Amazon Go stores and with Macy’s allowing customers to check out on their phones. People who are willing to rethink that kind of stuff will be winners.
SJ: Beyond those two examples, which retailers are doing the best job?
ER: The digital providers going into physical stores like Warby Parker. It’s different from a traditional shopping experience at the mall, and they don’t have to put a store on every corner. But the fact that they had one in addition to the all of the cool stuff they do online ends up being very compelling.
Nordstrom is doing some great stuff on the digital side and combining that with the store experience. They’re focusing on making sure the core salesperson has all the tools necessary. They’ve won with the salesperson in the past, and it’s so important to their brand that they’re providing them with digital tools to help get them there.
And I’d add Adidas, which is using our technology. We have GT Nexus, which is a digital supply chain platform. The whole process of Adidas allowing you to go online and design your shoe and combining that with the store experience is another example. People always talked about mass customization, and it never really came to pass but now you’re starting to see more of it.
SJ: Well, that brings us back to your initial point that retailers can’t win on the supply chain anymore. Doesn’t something like mass customization make supply chain important again?
ER: It does but I would argue now supply chain is table stakes. It’s necessary. We are seeing a ton of interest in the GT Nexus platform as retailers are reinventing their brands and processes. It used to be all about efficiencies which is still important but as people digitalize, it also gives them flexibility and speed. At Shoptalk Europe, Li & Fung said brands used to come to them all about cost, cost, cost and now it’s about speed, speed, speed. And we’re seeing the same thing. Cost is still important, but the speed and agility part are even more critical, so supply chain is necessary but it has to serve that end customer. It’s not just getting it there cheap, it’s getting it there in a customized way or being agile enough to change the assortment at the last minute. But if you’re not efficient, there’s no way you can compete with Amazon. You can no longer win and dominate on the cost side, it’s more table stakes.