Retail — especially brick and mortar retail — has seen huge upheaval in the past two years. Necessity accelerated business’ digital transformation plans by up to seven years.
Recently we provided an in-depth look at how companies have approached these changes and the mindsets driving their approach. But — specifically for retail brands — what are the hidden pitfalls to avoid? And what are the advantages for first-movers in the digital transformation space?
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Many of the benefits of digital transformation are clear: a more effective retail experience for the customer, optimization leading to reduced costs, and extra automation freeing up employees from menial tasks. But legacy retailers taking the right approach toward venturing into the digital can also unlock other, less immediately obvious advantages.
Think of “digital transformation” as a re-alignment of business practice rather than rebuilding from the ground up or putting a bandaid on obsolescence concerns. It’s not just forcing everyone to install a couple of apps, rolling out a basic online ordering system, and hoping for the best, it’s a change in mindset that ensures incumbent retailers maintain their hard-won momentum.
The outlook can seem daunting, in 2022, Green Street Advisors estimated that about 40% of U.S. department stores had closed since 2016 — but digital transformation can unlock the potential of a legacy business’ existing resources rather than abandoning them completely.
For example, when it comes to promotions, legacy retailers know their industry and their customers. Digital transformation doesn’t mean abandoning this valuable insight. For example: Talon.One’s diverse, ever-evolving promotion engine ensures a company is on the cutting edge but it can also preserve and iterate on current carefully-developed strategy. The customizable context-sensitive approach offered by Talon.One, such as targeting specific geos and taking a customer’s purchase history into account, can also recreate the tailored experience usually synonymous with an experienced salesperson on the sales floor.
When considering digital transformation, it’s a no-brainer that legacy retailers should take note of the innovation in Amazon’s physical locations, such as their “just walk out” payment approach and single customer account online and in-store. It's also worth considering why these locations have sprung up in the first place.
Just as legacy retailers are pursuing digital transformation in earnest, online retailers are learning the benefits of bricks-and-mortar when it comes to customer acquisition. As Chris Stadler, CMO of smart gym brand Tonal said, in an interview with Modern Retail; “There are only so many leases available at great malls, great locations within the mall, at a good price.”
However, much as there are advantages that incumbents have that can be amplified by digital transformation, a badly strategized digital transformation plan can pose a huge threat to retailers.
There’s an episode of Seinfeld where George obsessively recreates a specific meeting to deliver a long-gestating comeback to a co-worker’s joke. He is immediately humiliated by a second, follow-up insult he hadn’t anticipated.
This mirrors a significant risk of digital transformation. Companies routinely create issues for customers and employees by sinking time and resources into solving for the now only to find themselves broadsided by what comes next. Growing pains are inevitable but they pale in comparison with a failure of the new infrastructure, a retreat to standard practice and the fear of a potential second attempt.
As described by Forbes, losing sight of the human factor is one of the biggest risks of digital transformation. The process should empower existing employees, not be inflicted on them.
Internal digital transformation can be viewed, especially by those separate from the day-to-day challenges of creaky technical enterprise architecture, as an arduous process that functionally leaves the company back where it began. This leads to focus business model innovation on sales, with its potential for the most immediate, tangible returns being an easier proposition to sell internally. Speaking to Harvard Business Review, Ikea’s Chief Digital Officer Barbara Martin notes customers are merely the tip of the iceberg “At the top of the iceberg, we have the customer needs and adaptation — revamping everything around customer interaction and new purchasing journeys — and under the surface, we are making huge changes to our business and operating model. And what is under the surface is a much bigger change than what we see above”
A small vegetable wholesaler supplying restaurants pivots to weekly home deliveries of produce boxes. Suddenly their potential customers number in the hundreds, even thousands. To act quickly they take orders over social media and accept whatever payment method the customer had on hand, likely designed for non-business transactions. As outlined by ZDNet, this kind of strategy inevitably leads to inventory, cyber security and GDPR issues in the long term.
An extreme example perhaps but hasty digital adoption, especially of remote work, was vital during Covid and it’s inevitable some of this would not be as robust or secure long term. Retailers must take stock of practices when digital transformation was kickstarted by a crisis and ensure they’re future-proof and up to standard.
It’s important legacy retailers also consider their limitations when confronted with a Buy Vs Build dilemma. Processes introduced by digital transformation are complex, need constant maintenance and must be scalable. In-house development can be incredibly costly and distract from the core business. This complexity involved has led to an explosion of specialized microservices which empower a company’s existing digital infrastructure.
Talon.One integrates seamlessly with a company’s existing tech stack, allowing them to get up and running quickly with a scalable, versatile and future-proof promotion solution. After initial set-up, the ease of use frees up in-house development resources by allowing new campaigns to be created, edited and maintained by non-technical staff. This avoids the distraction from the core business often threatened by digital transformation. When asked about the advantages of Talon.One, Annie Whitford, Product Manager at Casper, explained “With Talon.One we unlocked thousands of promotion options overnight. What once took us 4-6 weeks to set up, and would be full of bugs, can now be done by simply creating a new campaign.”
For more information on getting started with a headless approach to retail, check out our ebook Building A Headless Commerce Stack From Scratch.
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