WHY IT MATTERS: Digital Transformation

McKinsey lays down actions that forward thinking retailer should apply to survive the digital transformation. They include:

• leverage multi-channel to expand (and thus grow) revenue and profit;
• cut costs (as digital business are often leaner);
• reduce real estate (I wrote about that already - physical stores are here to stay but must transform as digital help push certain distribution activities towards eCommerce)
• leverage digital (data and analytics) for decision making (not looking back but looking forward)
• rethink assortments and product offering (with Future Shop now selling vitamins and food supplements, I guess all retailers must do that as well!)

2.3B$ in technology to try and increase its online sales (now at 2% of 73B) is proof of the need by retailers to transform their ways or disappear. Then again Target used to let Amazon run its website.

This informative but shallow post (as is often the case with BI.com) nevertheless made me realize how much amazon warehouse and fulfillment process will transform physical stores in the future.

No more will we go to stores for the mundaine and the repetitive shopping (replenish peanut butter or buy a computer cable). We will go to stores for the "experience": we will be entertained, trained, or pampered. Visit an Apple store today and you'll get my point. You do not go there to buy a cable (this can be done online) but you go to see a new product, try it, get help and explanation from the genius bar or get insight from sales persons. The store is small and already has the highest sales per square feet of any store in the US. 

What does this mean for brick-n-mortar retailers? Move all the non-value-adding sales real estate (all those middle aisle with shelves full of non-descript low margin products) to online eCommerce store (with low cost fulfillment and delivery/pickup), then transform the freed-up store aisles into customers-focussed training, entertaining, pampering, etc. areas.

This represents a huge challenge for organizations as they will need to transform their merchandising, store operations, marketing, HR, etc. into a digital world (customers will expect online and in-store experience to be seamless) where customer service will become more important (sales clerks will need to know more about their products and not only be shelf stocking low paid employees).

Fun times ahead!

Very simple 4 steps that can be done using free or very low cost tools:

1. be online
2. share content
3. measure everything
4. optimize

Sounds like a great niche. And everything an online commerce should be: well defined audience, real need, (rules, regulations, families not being inside, inmates not being outside, etc.), and long-term customers (in certain cases).

Makes me think of those special orders flown into northern territories from stores in the "South" where products are cheaper and airfare, in bulk, less expensive than the many intermediaries in typical retail.

I have not seen so many papers and articles regarding online grocery shopping since the late 1990s when webvan was a big thing. And the angle remains the same (everyone needs to eat, the market is huge, just 1% is enormous, etc. etc.).

There is a huge difference however: now the Internet is real. With Peapod getting 30% of its orders from mobile, Ocado fulfilling 180K orders per week (yes per week), there may be now the right conditions to make online grocery a reality. We should know soon enough.

The real question is raised  here as well: what will be the role of brick and mortar grocery stores? Certainly they will remain but for what? High end and niche products, where low-cost staples get delivered from a warehouse (who needs to see the peanut butter before you buy)? Recipe demonstrations and culinary tips, with a focus on hands-on experience and expert recommendations? Where will technology fit in all this? 

Looks like subscription models from online retailers have limitations. Or is it because walmart has failed to deliver the products people really are looking for?

Anyone running an eCommerce website should at least look at this checklist. It covers all bases (homepage, product, page, checkout, etc.) and plugs some specific solutions.