Monthly Archives: May 2016

The Essence of Digital

How e-commerce is transforming not only the way we shop but the way we run our lives

Type in a search for ‘e-commerce’ and the definition is fairly universal “e-commerce: commercial transactions conducted electronically on the Internet”. Seems pretty simple and straightforward, yet behind this there is a multitude of implications for retailers and consumers alike which are transforming not only the way that we shop but the very nature of the way we run our lives. The digital revolution is of course well and truly upon us, shaping our lives in ways in which we never dreamt possible (think augmented reality, virtual mirrors, Amazon dash buttons, even Uber) and the exciting part is that this is just the beginning.

So before we consider how e-commerce impacts us today, it is worth a reminder of where it has come from. Take a look at what the Apple website looked like in 1996:

Apple

Clearly, in the ensuing 20 years much has changed. Consider the online experience in those days; no tablet, no smartphone, no broadband. Instead a desktop and a dial-up (for those of us old enough to remember that annoying tone) with patchy connectivity and glacial download speed – and of course, most of us had a phone which made calls and sent texts – perhaps typically a Nokia 6000 series. And we thought it was cutting edge – although the battery did last for days and not hours! So, from humble beginnings e-commerce has come a long way; today it proliferates our lives in ways in which we never dreamt possible. And in this context the UK market is often the focus of attention from the rest of the world so what is the significance of the UK?

UK retailing has the highest proportion of online retail sales, primarily driven by 3 factors: 1) smartphone penetration 2) wifi / broadband coverage and 3) geography – making home delivery accessible. Today online accounts for 13.4% of total UK retail spending (as opposed to 12.4% in the same period in 2015*). The Centre for Retail Research paints rather an apocalyptic scenario for the UK High Street where the share of online sales will account for 21.5% of all retail spend by 2018 resulting in:

  • Total store numbers falling by 22%, from 281,930 today to 220,000 in 2018.
  • Job losses could be around 316,000 compared to today
  • There will be a further 164 major or medium-sized companies going into administration, involving the loss of 22,600 stores and 140,000 employees. Many of these companies will survive but at the cost of closing more than half their stores.

That all adds up to a period of dramatic change for UK retail where the flexibility, ease, convenience and options e-commerce provides, is completely reinventing the way in which we shop. According to the IMRG, sales via smartphone and tablets in the year to April 2016 grew by 29.4% meaning that virtually all growth in e-commerce sales is now coming from mobile. A sharp reminder to all those retailers who haven’t yet optimised their sites for mobile that in 2016, this represents our preferred method of shopping. According to some sources, retail sales via mobile devices will reach 50% share by 2020. This might be a little far-fetched however it serves to indicate where retailers should be paying attention and making their investments.

Somewhat perversely, it is those retailers who manage to combine both online and in-store in one seamless experience who will survive as opposed to simply focusing on online alone. And this is the key to succeeding in today’s brutally competitive retail marketplace: understanding how online and stores interact and that each are part of a whole as opposed to representing different channels. John Lewis were one of the first to recognise this and invested heavily in supply chain in order to meet the consumer demand from online. In its 2016 annual report, whilst sales for John Lewis grew +4.4%, sales from online grew by 17%. A trend echoed across the industry.

The growth of e-commerce, particularly mobile, will continue unabated; where it finds its natural level as compared to in-store sales is difficult to predict, if only because as channels become more and more blurred, many retailers are still grappling with how to account for online sales – to the store in the case of click and collect or to the online website. However, one thing is certain; those who manage to deliver one seamless, integrated, convenient, easy to use, engaged and above all inspiring experience will succeed. In today’s retail world, the term ‘digital’ is often used and has become very much a mantra for many, nowhere is it more relevant than e-commerce – the essence of digital.

*source: Office for National Statistics April 2016 Report

Andrew Busby is Retail Business Head at Zensar Technologies

Advertisements

Data Driven Decisions

Data driven decisions

The changing role of the retail CMO

In the past, life was relatively straightforward for an IT vendor – we spoke to the CIO, convinced him or her of the business value of our proposition, they would agree the investment spend with the CFO and we signed a contract. Done. Everyone knew their place.

 

 

But as we know, things look very different today; because in addition to the CIO, there is the Chief Digital Officer, the Chief Customer Officer and of course – the Chief Marketing Officer. Each and every one of them has a stake but in the case of the CMO this is an ever expanding, ever more critical role. The omnipresent nature of the internet and the access it affords to consumers means that marketers are now pivotal to the success of the business. And in this context, business = brand. More than ever before it is all about how the brand is perceived (think Tesco vs Aldi / Lidl) as, in this world of the super connected, digital consumer, everything is just a click away. And information and insight about brands and products is constantly at our fingertips.

The consumer journey now involves extensive research, product assessment, consumer reviews, peer recommendations etc etc and in all this the key to unlocking the insight which is so desperately required is: data. Lots of it, mountains of it – and we know this as Big Data. And Big Data and Analytics = Consumer Insight and competitive advantage for our CMO. With this and the ability to turn all this data into actionable insight comes the unlocking of the Holy Grail: Personalisation.

Personalisation has been on the agenda for many years now, however, when we look back in years to come, in this context we will view 2016 as we now view VHS and cassette players of the 1980’s; antiquated, immature and downright clunky. Remember, there are millions of current internet users (and spenders) who have never known a world without digital commerce.

So, to return to our CMO for a moment and to understand how and why they hold the key for many IT vendors in this digital age. According to a recent McKinsey report, “Consumers knowledgeable about and comfortable with online research and sales will make many companies change their business models”. And in this context, as the CMO’s role broadens, so does their sphere of control and influence and, of course, their budget.

In November last year, Gartner reported that 2015 saw marketing budgets increase 10 percent to 11 percent of revenue, and two-thirds of marketers expected their budgets to grow in 2016. Areas of focus being social marketing, analytics, customer experience and digital commerce.

So it is increasingly to the CMO that CEO’s are now turning in order to drive the business forward. The CIO’s role becoming one more of a guardian of the data and the internal supplier to the CMO in as much as providing the means by which they can steer the organisation in the face of the torrent of consumer engagement and knowledge. According to the same Gartner report; “Digital marketing was one of the highest ranked areas of marketing technology investment for 2015 and a full 20 percent of marketers said digital commerce was the highest priority on their list.”

What can we conclude from all this?

In today’s data driven digital retail world, it is imperative that IT vendors understand two things:

  1. Digital – be it commerce, mobile, social etc
  2. The language and agenda of the CMO

In the new normal digital world, just as a retailer must interact with their customers in a way which is engaging, contextual and above all relevant; so too must IT vendors engage with retail businesses in a similar fashion and this means stepping outside the traditional comfort zone of the CIO’s domain. And above all it means having the ability to be able to work with a retailer to unlock the potential of all that data.

 

Andrew Busby is Retail Business Head at Zensar Technologies