How AI is transforming Line Management.
Line managers have been the workhorses of the global economy for 3,000 years. Ever since humans started congregating in larger groups (e.g., city states...
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The turn into a new decade triggered a flurry of trend reports and thought pieces on what the next 10 years might hold in store for retailers. Following a peak season which continued to show a strained and challenged industry after a decade of transformation, everyone seemed to be asking: has online finally killed bricks and mortar? And if so, where do we go next?
Many of the retailers that we talk to are finding their focus consumed by their existing struggles. Although they’re well aware that innovation and transformation are required to survive in the future, it can sometimes seem out of reach when they’re already firefighting a multitude of issues.
But does it necessarily have to be this way? Do retailers have to embark on large-scale projects that require organizational upheaval and an appetite for risk, creating plans that start now so they can deliver in the next five to ten years? Or is there a third option they haven’t yet considered, one that stays agile in the face of fluctuating risk whilst evolving the business more gently? Such a solution would need to adapt existing processes, whilst meeting all these trends head-on, to deliver a category-leading and profitable retail outlet.
In this blog, I’ll cover the grand headlines that have emerged this year and look to how retailers can translate them into their strategic planning, plus what small steps can be taken now to have a powerful and protective impact later down the line.
Beyond the attention-grabbing futuristic gadgetry promising to monitor every inch of your store, and follow your customer online to offline and back again, several consistent messages came through:
The retail world seems to be in unanimous agreement that the offline retail experience needs to deliver an exceptional customer experience. What this means in practice, however, is a little more varied. Depending on what you’re selling, you might choose to focus on the in-store experience by creating entrancing stores that tick every sensory box. Or you might choose to interpret it as a personalized omnichannel approach, with customers looking at products online one day, only to find that their browsing history is waiting for them when they arrive in-store along with a store clerk who already knows their name.
Skeptics and traditionalists will probably tell you that too much technology is actually the problem, and it’s all about getting back to the basics: the customer having genuine interactions with kind and considerate store staff, and being able to find products that delight them in a pleasant environment.
As with most things, it’s about getting the balance right: finding the right technology that enables stores and staff to deliver fantastic shopping experiences for customers. And that’s not going to be through giving them yet another platform for them to manage, and yet more data to make decisions on, but through one which mops up all of the back-office management that normally keeps them tied up and off store floors.
"We need to be thinking about the art of it far more than the science of it."
Retailers seem to assume that using data efficiently is a difficult goal to achieve. In Forrester’s recent report Predictions 2020: Retail, 38% of Retail and Wholesale respondents predicted that improving their use of data insights in business decision making was going to be ‘very’ or ‘extremely’ challenging. This says a lot about their current experiences with data platforms. Additional research, this time from NewVantage Partners, finds that 93% of businesses experience people and processes as obstacles to getting the most out of their data investment. If retailers continue with technology platforms that aren’t embedded easily and naturally into the daily life of staff, a customer-wowing experience is going to languish at the bottom of priority lists.
That’s where we see a tool like Quorso making the crucial difference. Designed to fit into the pre-existing weekly performance process, it removes the need for operational upheaval by simply digitalizing and streamlining what Store and Regional Managers are already doing. Its intelligent analytics layer identifies store-level improvement opportunities and coaches colleagues to take action, using tailored root-cause suggestions and a simple SMART plan workflow. Acting on data doesn’t need to be cumbersome, complex and time-consuming – it should liberate staff to focus on the basics of delivering a great in-store experience for customers, whilst being intelligent enough to help them prioritize and optimize.
Being able to coordinate activities across a vast organization to cumulatively work towards business goals will also be vital to staying resilient, as sustainability becomes an increasing pressure on retail businesses from consumers, governments, and investors.
In the 2000s, customers wanted products that displayed their wealth. In the 2010s, they transitioned to those that flaunted their health and cultural influence. Looking ahead to the future, commentators from Forrester through to Mary Portas are calling on the 2020s as the decade where customers buy into brands that align with their values, showing off their worldly conscientiousness through virtue signaling.
If retailers didn’t have enough problems in trying to keep up financially, they’re now going to face pressure to cut waste, demands for transparent supply chains and legal requirements to publish their carbon emissions. And if they fail to do so, their bottom line may take a hit as consumers take their business elsewhere. Thankfully, all businesses will be in exactly the same boat and will all face the same uphill struggle to digitalize and measure their sustainability metrics. In a recent report by Accenture for the UN that interviewed CEOs globally, 55% reported that they had to operate under a tough trade-off between extreme cost consciousness versus investing in the long-term strategies that are at the heart of delivering a sustainable business. Despite that, they also found that 40% of businesses were realizing revenue growth from their sustainable initiatives, and 35% found value in the cost-reduction it drove.
Those who will be at a clear advantage are those that can identify and prioritize the greatest improvement opportunities, have mass coordination across their organizations to drive toward common goals, and have the ability to accurately report back on their improvements.
At Quorso we’re exploring how we can build out our tool to drive improvement outside of pure financials, and are currently working with select partners to optimize both their service and sustainability performance, at the same time as growing a more profitable business. To learn more, sign up for updates from our newsletter, or read our case study of how we used Quorso to investigate global carbon emissions.
Everyone is well aware that online has transformed customer expectations in Retail. Online shoppers, wherever they are, at whatever time, get to browse a product offering tailored to their desires through search and social media. Thanks to lower operating costs for online pure-players, everything is seductively cheap and forces omnichannel retailers to drive down their own prices. Digital banking and payments mean they can buy with a click, and it’ll turn up on their doorstep in a few hours if they’re willing to pay for it. Everyone has a stylist thanks to influencers, reviews tell you more than any store clerk could, and next-day delivery feels like you have a personal assistant. Why would consumers settle for anything less?
Because as with any technological revolution, the blind optimism of its early stages has begun to discover its own limitations. The aggressive and easy consumerism now has to answer to environmental and societal concerns and as the zeitgeist moves, the possibility that online is viewed as irresponsible. Across the board, ‘on demand’ culture is damaging both planet and people. Whilst sustainability might present a number of challenges for physical stores, it also represents an opportunity to appeal to consumers who are looking for a return to authenticity and quality.
"Even by 2023, e-commerce is forecast to account for only 21% of total retail sales and just 5% of grocery sales. And with Amazon and other major internet players developing their own brick-and-mortar networks, it is becoming increasingly clear that the future of Retail belongs to companies that can offer a true omnichannel experience."
Other commentators have called for a re-evaluation of how the ROI of physical stores is calculated, claiming that they’ve been unfairly underappreciated for the crucial brand impact they deliver. Brand awareness is hard to measure online, and is usually inferred from the number of impressions an ad has delivered to target audiences. But measured it is, and is usually factored into the cost-effectiveness of the channel.
"We’re not accounting for the value of stores. Buying advertising doesn’t work anymore. Stores are not about the distribution of products anymore, they’re about the acquisition of customers."
Even online pure players are looking to transition into the physical realm. Casper Sleep, a direct-to-consumer mattress retailer that has consistently been praised as an industry disruptor, is still making losses ($92 million in 2018) and expects profitability to be some way off. Its quest to seek an IPO this year is causing some commentators to hail it as the next WeWork of over-inflated valuations, and its announcement that it plans to continue expanding its physical stores suggests that bricks and mortar plays a vital role in creating valuable companies.
The key is instead to start seeing online and offline as different points in a singular customer funnel:
"It has to be acknowledged that many customers are going into stores but end up purchasing online. There’s nothing wrong with that, and the burden falls on retailers to build a store that exists for more than just the transactional piece of the relationship. It’s almost like an insightful billboard."
By creating a workforce which is spending more time with customers, and embedding the right technology which allows knowledge to move bi-directionally through an organization, staff can deliver rich customer learnings back into the business whilst carrying out their day-to-day jobs.
Doug Stephens, retail futurist at The Retail Prophet, highlighted the immense value of this to retail strategy by remediating the disconnect between customers, frontline employees and central management. Speaking in a piece for Retail Dive, he frames how growth of a business introduces poor customer experiences through a loss of immediacy and intimacy:
"When most retail businesses are founded, the owner usually has an intimate knowledge of their customers because they spend much of their time interacting with them. In some cases, the owner themselves is a consumer of the product and so innately understands the needs and preferences of their customers from personal experience. As organizations scale, this intuitive understanding dissipates, and leadership loses touch with the needs of the customer.
That's when power and decision-making move away from the front lines of the business toward the middle of the organization. And instead of speaking to customers directly, companies hire research firms and conduct studies and focus groups — none of which can replace the intimacy and immediacy that the company has lost with its customer base. Instead of emanating from the front-line, strategy begins to roll downhill, often disconnected from the customer reality. And eventually the dissonance between the company, its employees and its customers becomes fatal."
His solution for retailers is to build operational processes that decentralize management decisions, allowing central management to become controllers rather than bottlenecks:
"The challenge for organizations is to push power, autonomy and decision-making back to the front lines and to let information from the front lines inform the broader strategy. In order to accomplish this, the structure of the company and its compensation programs have to promote such a dynamic."
This is where the strengths of an operational management platform like Quorso play perfectly: front line managers are enabled to make day-to-day decisions bespoke to their locations and customers, guided by crowd-sourced learnings from across the business. Their successful actions are then automatically added to a central playbook and shared across the chain, while simultaneously being scaled up to central management to help inform broader strategic decision making.
The biggest priority for retailers was made very clear at NRF2020’s opening keynote at from Microsoft’s CEO, Satya Nadella. Detailing his four key criteria for intelligent retail – a sector that accounts for 31% of the world’s GDP – he concluded that empowering employees was the single biggest thing retailers could do to drive ROI:
"Ultimately the art of retail still comes down to how the people who work for you in your stores, even in your online operations, are able to drive decisions. So putting insights and data in their hands and empowering them is going to make a difference. It’s perhaps the highest ROI thing you could do. You increase the conversion rate by 15% and you improve the [customer] satisfaction by 10%."
The statement was a clear call to arms to the retail sector to create a data-enabled workforce, but their solution felt a little off. Welcoming IKEA on stage, they used Teams, Microsoft’s proprietary chat tool, to promote collaboration around established business intelligence platforms.
This approach, however, is nothing new. Whilst the introduction of platforms like Teams and Slack into businesses has indeed facilitated communication, it still only remains a tool available to workers if they wish to use it as an alternative to email. The biggest technology winners of the twenties will be those that have grander aspirations and look to ease the systemic issues within increasingly complex organizations, making technology that works for humans rather than the other way around. In a world increasingly aware of the interconnectedness of everything, and our understanding that change and remediation can only come from a systems approach to problem solving, new technology cannot simply be layered on top of existing technology. It must encompass entire circular processes, reducing the number of tools required, in order to maximize utility and efficacy.
Quorso is one example of such an approach. Therefore it doesn’t focus on an isolated pain point to provide some relief through a digital alternative; a ‘point solution technology’. Instead our systemic platform tackles an entire end-to-end process – from data insight, to targeted execution, to measurable and scalable results – meaning that the technology falls naturally into line with human habits and existing behaviors. Most BI and Prescriptive Analytics platforms stop at opportunity identification and leave the rest up to unguided human activation, whilst most communication platforms, such as Teams and Slack, only enable communication of the end result. Quorso, however, drives the process right the way through, to ensure insight-driven actions are carefully tracked and measured, and only the effective ones are then communicated and shared.
In conclusion, retailers have minimal room to make sweeping changes to their businesses, but there are going to be ever more pressures on them in the next few years that they can’t ignore if they intend to survive.
Thankfully technology too is developing apace. Most emerging solutions are still only acting as topical ointments that soothe specific pains of archaic systems, while sitting awkwardly on top of human processes and requiring user upskilling. Some technology is taking a more holistic view of organizational problems, to provide sophisticated systemic solutions that intelligently process the huge complexity of large organizations. These solutions intuitively complement human processes with great user-centric design, and thus require little training or large-scale change management projects. McKinsey visualise perfectly what this could look like in their report on the Future of Retail Operations:
"Rebecca, the store manager, is thinking about plans for a big new promotion that starts next week...But that’s nothing new: the store is always adapting its stock and presentation, and Rebecca spends most of her time working with colleagues to improve and fine-tune its offerings. It helps that many previously time-consuming tasks, like associate scheduling and reporting, are now handled automatically by artificial intelligence tools. Her phone alerts her when a situation needs real attention in real time, such as a promotion that’s not selling as well as in other stores. That means she can focus her efforts on performance and service improvements, aided by the store’s sophisticated performance-analysis systems."
