Want To Be Successful At Digital Retailing? Don’t Miss The Main Ingredient: Part One

Want To Be Successful At Digital Retailing?
Don’t Miss The Main Ingredient: Part One

Written by Mark Krupnik, CEO at Retalon. Read the original article published on Forbes here.

 


Mark Krupnik, PhD, is one of the world’s top experts in advanced analytics & AI for retailers. He is the founder and CEO at Retalon.

 

Forbes article: The missing ingredient to successful digital retailing.
Do you want to be successful at digital retailing? Discover the missing ingredient.

Store closures? You might think, “That has nothing to do with us. We can’t die. We are too big; our brand is iconic,” and so on.

The truth is the only constant change. Digital retailing is an industry mainstay and has pushed established brands to evolve. Meanwhile, a new generation of companies are already here, they’re well developed to fit the current retail landscape and they are growing.

You’re left with only two options: You can adapt, or you can become too old to fit in the new reality and be pushed out. We’ve already seen a number of retailers “too big to fail” close their doors in the past few years.

But what does it mean to adapt? Last year, Amazon’s net sales neared $386 billion. What is the secret ingredient that makes Amazon, Walmart, Chewy, Wayfair, Macy’s, Lowe’s and other retailers showing massive online growth so successful?

To answer this question, we need to understand which elements of their business are vital and which are optional. This will help you form your own strategy.

In an attempt to become the next Amazon, many retailers tend to focus on the following four “must-do” elements:

 

1. The Right Team

• Bring in executives who have experience with digital retailing.

• Build out new teams dedicated to digital retailing.

 

2. The Right Market Strategy

• Collect and review online market research.

• Roll out aggressive consumer-centric marketing and engagement.

 

3. The Right Process

• Develop new processes aimed at the digital channel.

• Build a consistent and enjoyable shopping experience.

 

4. The Right Execution

• Expand breadth and depth of assortment, enabling endless aisle shopping.

• Seek strategies to identify best-selling products.

• Increase warehouse space, open more local DCs and fulfillment centers and increase automation.

• Optimize last mile delivery.

It looks like all the necessary elements for success are in place. But are they sufficient?

 

The Missing Ingredient

When considering this question, I reflect on a phone conversation I had back in the early 2000s with a newly established online shoe seller. At the time, we had just started our business, and the goal for my call was to explain how my company’s analytics could optimize all their operations simultaneously, from inventory management to pricing.

I had already heard a few different reactions to my elevator pitch, but this one made me stop and think.

Their response was a completely new concept for me. I can honestly say I was shocked by what I heard: “Who do you think we are? We aren’t another retailer selling shoes; we are analytics people applying our knowledge to the business of selling shoes.”

These were people who knew from the very beginning how to measure efficiency and execute their plans in the most optimal fashion. These people had a vision that was solidified by analytics.

When you look close enough, you can see the secret ingredient: The leaders of online retailing are not retailers that try to be more efficient. They are analytically driven businesses.

They don’t suffer from overstocks or loss of sales due to out-of-stocks; they have the right sizes and colors and they price products precisely to maximize their ROI. They don’t declare, “We do AI.” They actually do things that truly transform retail through analytics.

You might be thinking, does analytics really make that much of a difference? Is analytics really the key to success in retail?

The short answer is yes.

We live in a world of smartphones, smart cars and even smart appliances. Analytics verifies our banking transactions, recognizes our faces and voices, helps diagnose illnesses and has, in essence, improved each facet of our lives where it’s been implemented.

Why would retail be any different?

Retailers spend time and money undertaking massive transformations to their businesses so they can compete in today’s smart industry. Yet surprisingly some of them think the smart component is a secondary element and somehow it will all work out.

Guess what — it won’t.

Over the past 20 years working in the retail industry, I’ve been able to measure the success of many major retailers based on their analytic advancement. I took into consideration what solutions they used, their supply chain and inventory management processes and their pricing strategies.

Unsurprisingly, the analytic readiness of a retailer is directly proportional to the success of the organization.

Predictive analytics is designed to optimize retail at a level humans simply cannot. What’s more, by delegating the heavy lifting of data processing to a computer, people are free to focus on more important issues, such as business development and sustainability.

Imagine this scenario for a moment: If you knew for sure that you could get 100 units of a product at $10 each (including all the costs) and you were guaranteed to sell them all at $15 each, resulting in a profit of $500, how could you not succeed as a retailer?

An effective predictive analytics solution does just that. It absorbs all the complexity of retail operations — supply chain, assortment, competition, logistics, labor, prices and all other relevant factors — to provide the most efficient actionable recommendations — recommendations that are as easy to implement as in the example above.

 

The Final “Must-Do” In Digital Retailing

It turns out that the final “must-do” of digital retailing is the most important, as it improves every other part of the plan, allowing retailers to save time and significantly increase their profit.

The best analytics platform should:

• Accurately predict demand.

• Build the most attractive assortment.

• Optimize online channel and BOPIS.

• Dynamically compete on pricing.

Analytics is the real reason for the success of the fastest-growing retailers these days.

This is the new reality and an age-old truth. It was best said by Isaac Newton, “If I have seen further, it is by standing on the shoulders of giants.”

Wondering where to start? Read my next article on how to get started with analytics in five easy steps.

 


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