Reinventing Retail In A Digital Era: The Digital Essentials Of A Retail

Strategy

Overview

The advent of digital age is making retailing smart and efficient, changing the traditional ways of operating
the business. With consumers becoming more informed regarding their choices and business processes
and operations getting more agile and intelligent, the new digital retail core is an amalgamation of
customer experience, IoT enabled business processes, business network collaboration and workforce
engagement. Retailers and brand owners have retaliated in their own way by experimenting with a myriad
of ways to respond to future retail requirements by bridging the digital and physical gap and creating a
“Phygital” experience. With an estimated 350+ Mn1 digitally influenced customers by 2020, technology is
bringing a transformational change in retail and has opened up possibilities for disruptive customer
oriented businesses and new operating models.

Through this whitepaper, Wazir will explore ways by which brands and retailers can leverage digital
technologies to better engage with customers, optimize operations and business processes and to
discover new levers of growth. It will further highlight a spectrum of emerging technologies and platforms
to build, grow and transform the present-day retail businesses.

The Age Of Digital Doctrine And Strategy In Retail

The age of digital doctrine has changed the traditional way of operating a retail business. Traditionally
business processes were less efficient and were mostly driven by management’s “business hunch”.
Further, the purchase decision of consumers’ was mainly influenced by word of mouth or traditional
advertising.

But the winds of digital age have changed the dynamics. Now, the customer’s purchase journey starts
much before he or she enters the store or buys a product online. Customers read reviews and other
content on the product, compare prices, search for coupons and discounts to complete the purchase.
No bargaining (a skill which comes naturally to every Indian), no interaction; only a click of a button is
required to make the purchase. The supply chain has moved from being analog/manual systems based
to digital multi nodal networks. Logistics is now capable of providing real-time tracking capability with
various Geographic Information System (GIS) and Management Information System (MIS) tools. No
doubt the digital wave is just a spark in the retail sector that is going to see flares in the coming years.

By 2020, offline stores will have access to the same data points and analytics as e-commerce retailers.
This sudden change within a short span of 10 years can be attributed to the fact that, in the past, business
requirements drove technology and digital initiatives then enabled the businesses to advance but today
technology is creating new opportunities for the businesses and fundamentally changing the
battleground. Digital, as a disruptor in retail has transitioned itself from a business enabler to a business
stakeholder. With the use of digital and IT as a core strategy, brands and retailers can optimize various

1
Source: Wazir Analysis on published data
 business functions, improve customer satisfaction, and ensure a dynamic and connected supply chain that
would fetch a better ROI.

Snapshot Of Digital Intervention In Retail

Enabling consumers Enabling customers Ensuring priority Enhancing and Effiecient

Enriching post
to make an to shop anywhere, segmentation and optimising back end merchandinsing and
purchase experience
intelligent decision anytime right product pricing operations retailing process

•Digital •With the advent •The use of big data, •With the help of •The use of various •Loyalty programs
Transformation of e-commerce, advance mining advance forecasting and ensure high quality
has given m-commerce and techniques and communication planning tools can customer service
consumers the cognitive methods, enable an and high post
cloud organisation to
flexiblity to intelligence has collaboration purchase
technologies, equipped brands platforms and forecast and experience, so that
explore more and consumers can and retailers to tracking devices, optimise level of the customer is
more options and enjoy a seemless identify potential retailers can inventory at store engaged and
loads of content shopping hotspots and optimise route and warehouse. becomes a brand
to support experience 24*7. accordingly design planning, improve These can be loyalist.
decision making, marketing schemes. inventory control further linked to the
without incurring We are in an age and demand production
any significatnt where brands and forecasting. management
cost and hence retailers can micro systems to
segment and target dynamically
making an manage
the "segment of
informed choice. one" i.e. the manufacturing.
individual customer.

The Changing Face Of Technology In Retail:

The advent of smart devices and internet has acclaimed data as the new “gold” which is being generated
24*7 and can be effectively utilized to synthesize valuable insights. This has helped retailers and brand
owners to make smarter decisions and explore new business avenues to stay relevant and receptive to
market demands and expectations. Doors for digital disruptors have opened up making way for the
technologies like IoT, Artificial intelligence, Big Data, Block Chain etc.

Technology Platforms That Are The Basis Of Digital Disruptors In Retail

Artificial Intelligence (AI): Artificial Intelligence is the simulation of human intelligence processes by
machines, especially computer systems. These processes include learning (the acquisition of information
and rules for using the information), reasoning (using the rules to reach approximate or definite
conclusions), and self-correction. E-commerce companies like Flipkart, Myntra and Amazon have
deployed Artificial Intelligence tools to assist their consumers discover and refine product selections based
on their responses to a series of questions.
Big Data Analytics: Big data analytics is the process of examining large and varied data sets to uncover
hidden patterns, unknown correlations, market trends, customer preferences and other useful
information that can help organizations make more-informed business decisions. Big Data analytics is
applied at every stage of the retail process-from predicting product trends, forecasting where the demand
will be for those products, optimizing pricing for a competitive edge, identifying the customers and
working out the best way to approach them.

Block chain: A block chain is a decentralized, distributed and public digital ledger that is used to record
transactions across many computers so that the record cannot be altered retroactively without the
alteration of all subsequent blocks and the collusion of the network. Its applicability in retail, ranges from
B2B payments to product safety tracking etc.

Cloud Storage: Cloud storage is a model of data storage in which the digital data is stored in logical pools,
the physical storage spans multiple servers, and the physical environment is typically owned and managed
by a hosting company. Cloud technology provides an efficient way for retailers to store, access and
manage data.

Cognitive computing: Cognitive computing is the simulation of human thought processes in a

computerized model. Cognitive computing involves self-learning systems that use data mining, pattern
recognition, and a natural language processing to mimic the way the human brain works. The goal of
cognitive computing is to create automated IT systems that are capable of solving problems without
requiring human assistance. Retailers are leveraging cognitive computing by combining shopper’s history,
location information, and their buying trends. It helps retailers to maintain optimal inventory levels to
meet targeted customer needs by predicting what the shoppers would buy.

Dark Analytics: Dark analytics is the explorations of unstructured and/or hidden data to unearth highly
nuanced businesses, customers, and operational insights. Dark analytics focuses primarily on raw text-
based data, which may include text messages, documents, emails, videos and audio files, and still images.
Retailers are using dark analytics tools to gain a more nuanced understanding of customer’s mood or
intent by analyzing video images of shoppers’ posture, facial expressions, or gestures.

Digital Beacons: Beacons are small wireless devices that transmit Bluetooth signals to nearby
smartphones, tablets, smart watches etc. Retailers are gathering valuable real-world behavioral
information – pathways to and from the store, aisle choices and footfall patterns by deploying such
beacons. In-store operations are enhanced by real-time monitoring.

Enterprise Mobility: Enterprise mobility is the use of mobile devices and cloud services by employees
working outside the office to perform business tasks, making day to day functions collaborative and
efficient.

Gamification: Gamification is the application of typical elements of game playing (e.g. point scoring,
competition with others, and rules of play) to other areas of activity, typically as an online marketing
technique to encourage engagement with a product or service. Loyalty program is a classic example of
Gamification. Retailers like Shoppers Stop, Lifestyle, Pantaloons, Max fashion have loyalty programs that
encourage shoppers to make purchases in order to earn points.

Geographic Information System (GIS): A geographic information system (GIS) is a system designed to
capture, store, manipulate, analyze, manage, and present all types of geographical data also known as
geospatial data. Geospatial data can be analyzed to determine the location of high priority retail clusters,
distribution network mapping, regional sales density, and how a specific area has changed over time (and
in what way) etc.

Internet of things (IoT): The Internet of things (IoT) is the network of physical devices, vehicles, home
appliances and other items embedded with electronics, software, sensors, actuators, and connectivity
that enables these objects to connect and exchange data. This has essentially changed the way we
consume things and the digital trail we leave behind.

Near Field Communication (NFC): Near-field communication is a set of communication

methods/protocols that enable two electronic devices, one of which is usually a portable device such as a
smartphone, to establish communication. NCF forms the base for technology like digital beacons.

Predictive Analytics: Predictive analytics is a form of advanced analytics that uses both new and historical
data to forecast activity, behavior and trends. It involves applying statistical analysis techniques, analytical
queries and automated machine learning algorithms to data sets to create predictive models.

Virtual Reality (VR): Virtual reality (VR) is a computer-generated scenario that simulates a realistic
experience. The immersive environment can be similar to the real world in order to create a lifelike
experience grounded in reality. North Face, a leading American outdoor company has leveraged virtual
reality technology, to provide a 360 degree stereoscopic experience of different national parks, places and
activities.

1. Front End Disruptors:

In today’s world, shopping is more engaging, engulfing and entertaining. The purchase is no more fixed to
a pre-decided list of products but is more about how a retailer can influence consumers to buy products
and services. There is no doubt that the coefficient of impulse purchase has significantly moved up in the
past few years. A new era of planned-impulse purchase has begun in which the consumer proactively
consumes a lot of information about products that he or she wants to purchase, but the final purchase is
more impulse driven and may be based on a nudge that brands and retailers may provide.

Such planned-impulse purchases involve a new value discovery funnel for the customer, which includes
various touch points and a very high degree of involvement across the decision journey. Technology is an
indispensable tool for retailers to engage customers, in such an ecosystem. It can significantly affect
customers’ decision by enhancing the value discovery process and making consumption journey more
“tactical” in nature.

For example; digital kiosks are helping customers to navigate through various options available at the
store without any assistance. Similarly, predictive analytics is assisting retailer to offer the right set of
products to their customers etc.

It is thus, very important to understand how technology is going to change retail stores.

 Providing An Assisted And A Customized Experience: Present day shopping is all about choice, choice
and all choice, making it difficult and challenging for a customer to evaluate a product. Digital
Assistants & kiosks, customer analytics, and social shopping are few of the many examples of digital
technologies assisting customers to make a choice in a seamless way. Digital kiosks provide an easy
 way to navigate through the plethora of choices available at a store without any need of a salesperson
or a staff. Customer analytics has also proved a boon especially for high-end retailers and large format
stores where brands and retailers are able to aggregate a customer’s historical data to provide a
seamless experience by predicting what the individual customer would like and their next purchase.

Boulanger’s interactive kiosks

Boulanger, a French manufacturer of moldings and components, deployed interactive kiosks in

their stores to allow customers to browse product categories, read reviews and compare prices.
While customers browse the kiosks, Boulanger store staff use tablets to assist them with details
on products and can process purchases from anywhere in the store.

Marks & Spencer’s virtual desk

UK retail chain, Marks & Spencer, introduced a distal kiosk, consisting of 46 degree touchscreens
where customers can browse options from its ‘e-boutique’, check prices and watch a model wear
the clothes. Customers can then place orders for free delivery in the store via iPads or on their own
phone using the store’s WiFi.

 Making IT Interactive And Collaborating: Consumers have become more open regarding their choices
and want to interact with the products even before they buy it. A customer wants to “consume” a
product in various ways by picking it, feeling it, smelling it, trying it and exploring it and hence actually
consuming it even before the purchase happens. Virtual reality and Augmented Reality have open
new doors of experiencing a product even before owning it. Such technologies create a virtual
ecosystem for consumers to interact and collaborate.

Shoppers Stop virtual magic

Shoppers Stop recently implemented an Artificial Intelligence and Virtual Reality based virtual
dressing room solution also known as “Magic Mirror”. The platform helps customers to try various
clothing option without using a trial room. Customers can also ‘try’, click and share images to
their social media accounts directly from the kiosks. It has helped customers reduce their shopping
time drastically without any fuss.

North Face cognitive thinking

North Face, an American outdoor product company adopted cognitive computing technology to
help consumers determine what is best for them, based on variables like location and gender
preferences. For example, hiking in Iceland in October and commuting in Toronto in January will
yield different results. Published 2015 pilot results, based on data collected from 55,000 users,
resulted in a 60% click-through rate2 and 75% total sales conversions.

2
Click-through rate is the ratio of users who click on a specific link to the number of total users who view a page, email, or
advertisement.
 Moving Beyond The Four-Walls: With the rapid expansion of E-commerce and M-commerce, and the
exponential rise in the usage of powerful smartphones, the line separating the online and offline
channel becomes more and more blurred. Sooner rather than later, omni-channel retailing will turn
out to be the way everyone shops. Due to the convenience offered by an omni-channel network,
shoppers will spend more and more than they would on a single channel. Establishing the universal
experience on multiple channels beyond the store will help retailers to surpass customer expectations
while keeping pace with evolving technology and setting new standards.

Sephora: “My Beauty bag”

Sephora’s Beauty Insiders (i.e. members of its reward program) can use their Beauty Bag on their
mobile or on their computer to view and track their purchases and rewards. They can add items to
their shopping list, view their buying history, save items for future purchases, and easily order to collect
it from the nearest stores. This has made shopping experience more enriching for Sephora’s customers.

Zivame’s Secret

Zivame, a leading lingerie brand in India recently launched its first flagship fitting lounge, to help
women make educated choices in their purchases going forward. Customers can just walk in and enter
their details on a tab. The professional fitters at the lounge then go on to help them discover their right
size and also provide expert advice when it comes to the style and type of options available in the
market. The lounge also allows customers to make an online purchase right then and there. Thus, the
fitting lounge is aimed at providing customers a perfect touch-and-feel experience that will
complement the online store.

 Providing Right Product At A Right Place And Time: Consumer in the digital age has become a self-
shopper. He or she is no longer subservient to another person when it comes to buying a product or
service and therefore it’s very important for retailers to stock the right products, at the right place
and at the right time. It involves an amalgamation of digital technologies, social media and behavioral
insights. RFID, cognitive modeling/analytics and beacons are changing the way merchandising and
retailing is done in stores. This has enabled brand owners and retailers to optimize space allocation
across categories, leverage intelligent visual merchandising techniques and appropriate zoning of
“promotion hot-spots” areas.

Macy’s technology beacon

Macy’s implemented beacon technology in all of its stores in US. Macy’s worked with shopkick to
install 4,000 shop Beacons, and as shoppers entered Macy’s, they were reminded to open their
Macy’s apps in order to receive notifications, promotions, deals, and discounts. For Macy’s, this
technology offered new insights into which merchandise was of interest to which customers as
well as how they should place products and potentially design stores to extract the most value
from customer movement patterns throughout the store. For shoppers, the value came through
an enhanced shopping experience and additional savings.
 2. Back end disruptors
The advent of digital age has enabled key back-end operations to become the main levers of growth.
Supply chain, logistics, warehouse planning and order management are some of the core functions in
retail which are mostly linear and running on legacy systems. This is further complemented by the lack of
transparency at each node/point and inefficiencies in one step results in a cascading effect bringing similar
inefficiencies at subsequent stages. Also, inefficient interaction between the front-end functions and the
back-end operations makes it less collaborative and more unipolar.

Technologies like Digital Supply Networks (DSN), Dynamic fulfillment and Smart Warehouse Management
systems have almost eliminated such problems making the system more agile and receptive. Hence it’s
extremely important for retailers to understand the benefits of such digital interventions that can make
functions across back-end more collaborative and less unipolar.

 Agile is no more fragile: In the past, legacy-based supply chain systems supported linear processes
with information traveling in silos with each step dependent on the one before it. But, with the advent
of Digital Supply Networks (DSNs), the processes are well connected and intelligently optimized. The
system is sensor and location-based with real-time information flow using various GIS and MIS tools.
Such technologies are also used as a Business Intelligence (BI) tool by monitoring various KPIs (viz.
Customer Order Cycle Time, fill rate, Inventory Turnover etc.) on a real time dashboard.

Walmart: Digital Meets Physical

Walmart adopted a Digital Supply Chain Network to add value to their retail eco-system. Walmart
in US implemented the first companywide use of Universal Product Code bar codes, through which
store level information is collected and analyzed almost real time. Through a global satellite
system, Retail Link is connected to analysts who dynamically forecast demand to the supplier
network, based on real-time sales data from cash registers and inventory positions at Walmart’s
distribution centers. Suppliers and manufacturers within the supply chain synchronize their
demand projections under a collaborative planning, forecasting and replenishment scheme, and
every link in the chain is connected through technology that includes a central database, store-
level point-of-sale systems, and a satellite network.

 Operational Efficiency Is The Name Of The Game: With inventory distortion (overstocking and
understocking) touching high in the present retail setup, it is important to understand, discover and
meticulously plan the entire supply chain. Analyzing what the shoppers are buying from the store is
important, but what they are liking is also a metric that should not be ignored. Using Enterprise
Mobility effectively in stores and warehouses will help retailers understand the value of technology
in taking their businesses to the next level of growth. Increased operational efficiency will help
organizations to connect all the little functional pieces together to form the complete picture.

Tesco’s Transformation

Tesco, a multinational grocery retailer, tries to maximize revenue by reducing the chance of
product stock-outs. Tesco uses a complex algorithm to forecast inventory levels for each hour of
the day. It even feeds weather data into its predictive analytics tool to forecast demand of
weather-dependent products (such as coleslaw and ice-cream), and adjusts inventory and supplier
 orders in advance on a store-by-store basis to minimize missed revenue. Such analysis saved the
company approximately $140 million, mainly through the reduction of wasted stock.

Each of these digitally enabled functions play a role in enabling more informed decisions and can help
organizations to address the central question in their strategic thinking.

The Digital Spectrum

Disruption is not happening at the periphery of retail core rather it is pervasive. Unlocking the potential
of tomorrow’s technology must begin today and go straight to the heart of business strategy. No doubt,
the above listed technologies are creating a disruption in the market but it’s very important for retailers
to evaluate where they stand right now, what is required in the future and how to go about it.

Transform Dark
Cognitive
Analytics
computing

Virtual Block Chain

Grow Augmented
reality
Big Data Reality/Virtual
Digital Reality Cognitive
Quantum
Beacons
Time

Augmented computing
computing
reality
Establish Omni
Channel Artificial
Digital Supply IoT Intelligence
Networks Data
Gamification
Analytics

Agile POS

Technology

Wazir with its experience of working with brand owners and retailers has created a “Digital Spectrum” to
guide companies to sail through this disruptive change.

The spectrum tries to simplify the profiles of technologies we believe are most likely to confer competitive
advantage over time, considering proliferation in the market, costs and usefulness for brand owners and
retail. This profiling also help the companies to evaluate their inclination towards technology.

The whole spectrum can be broadly classified into three major areas:

Establish: These technologies are the stepping stones towards the path of digital transformation. They
provide a point of parity to the companies and have become a must have. For example, POS solutions, ,
Data Analytics etc. These solutions are the foundational elements for any retailer.

Grow: To move from the point of parity to a point of difference, retailer need to adopt forward looking
technologies. These technologies provide the retailers with a long term competitive advantage.
Technologies included in this category are Artificial Intelligence, Virtual Reality.
Transform: For companies to use ‘digital’ as the main ingredient in their daily operations, they need to
adopt technologies such as block chain and cognitive computing. Digital operating model needs to be
included in the overall mission of the company for reaching this bracket.

Conclusion

The Indian Retail market is diverse, unorganized and under-penetrated. Thus there is a lot of opportunity
for establishment and growth. But the retailer has to be pragmatic enough to understand the dynamics,
accept the technological disruptions and adapt accordingly.

Shoppers desire choices in every field; be it in the case of browsing for products, shopping or in terms of
check-out. Thus it becomes an uphill battle for the retailers to be at pace with these rapidly evolving
dynamics. It would be very interesting to see how brand owners and retailers will go about implementing
such digitally enabled platform as there will be some perceived roadblocks in this journey to come.

Hence, the future retail models will be driven by how quickly digital gets embedded to increase cohesion,
agility and responsiveness of the complete ecosystem.

Areas of
Processes and Functions Strategic Recommendation
Implication
-Invest in making customer experience more engaging and
collaborating. Work on applications that could be accessed
Customer Experience
by customers on their devices.
-Provide a complete omni-channel experience.
-Leverage analytics (e.g. Dark Analytics) to derive consumer
insights and provide targeted and contextualized
promotions based on past purchases.
Merchandising And
-Use technologies like virtual loops, big data to identify right
Retailing Process
“hot-spots”.
-Reduce manual intervention to make functions like
Front End merchandising more data driven.
-Implement Assistive Retailer Technology (ART) to sell
smarter.
-Use of smart payment gateways to make checkout
Pricing and POS solution
processes fast, efficient and seamless.
-Adopt NCF (Near Field Communication) enabled pricing
methods.
-Utilize existing customer data to provide next gen loyalty
programs and move beyond just being a discount-retailer.
Loyalty Programs
- Use customer data, SKU performance and store.
performance to create a dynamic loyalty program
- Shift from traditional supply chain to Digital Supply.
Networks (DSN)
-Use ‘big data’ and related technology to enable a better,
Back End Supply Chain
more holistic understanding in locating stock items.
-Use advance BI tools to get a micro level understanding of
supply chain networks.
 - Use logistics applications integrated with core warehouse,
transportation and labor management systems to ensure
Logistics And Warehousing fulfillment excellence.
-Use of fleet management platform for optimal utilization of
resources.
Procurement And Vendor -Use advance “Document & Process Management
Management Platforms” to track procurement and vendors.

About Wazir Advisors

At Wazir, we specialize in advising Indian and International companies to conceptualize, create and
compete in consumer facing sectors. From Indian to International corporates, from Private Equity groups
to family owned businesses, our work centers around enabling our clients make the right moves – from
strategy, to implementation, to value delivery and in building beneficial alliances. We possess more than
400 man-years of cumulative team experience across industries, geographies and economic conditions.
We leverage this to value add and get that edge in your business. Powered by our deep insights into the
Indian consumers, spread across age, social strata, gender and geography, we put the consumer at the
center of the decision making process and bring a unique outside-in perspective, imperative for success
in a hyper competitive market.

The industries below have been our primary focus for the past several years.

• Retail
• Packaged Consumer Goods
• Fashion & Lifestyle
• Consumer Electronics
• Beauty and Wellness Services
• Food & Beverages
• Automobiles
• Education
• Healthcare
• Financial Services

About the Authors

 Baqar Iftikhar Naqvi
Business Director-
Wazir Advisors
[email protected]

Baqar is a seasoned consumer products and retail professional and entrepreneur with over 18 years of
experience in strategy and operations, covering sectors such as Fashion & Lifestyle, Food & Grocery,
Consumer Goods and Services. Baqar specializes in retail startups and driving growth, having been
involved in multiple startups in India and internationally, including those in the e-commerce space.

Baqar worked for over 10 years with a premier Retail and Consumer Products consulting firm. As CEO, he
then headed a men’s value brand with 600 plus stores and 125+ Shop in Shops. Baqar was a part of the
startup team and the CEO of www.styletag.com, an e-commerce startup in the premium/designer fashion
and lifestyle space. As Co-founder & CEO, he then started an online social discovery and commerce
platform.

Baqar currently works as Business Director with Wazir Advisors, advising Consumer Products and Retail
clients on strategy, operations and M&As.

Aman Sinha
Associate Consultant
Wazir Advisors
[email protected]

A dynamic professional with rich industrial exposure in problem solving, consulting and marketing
Aman has helped companies earlier to improve their business processes and maximize their efficiency. He
has comprehensive exposure in handling customer centric business development and consulting
assignment ensuring customer satisfaction by achieving delivery & service quality norms.
Aman has done his Masters from Indian Institute of Management Indore (IIM Indore) in the area of
Strategy and is a Project Management professional with PRINCE2 certification.
Aman currently works as Associate Consultant with Wazir Advisors, advising Consumer Products and
Retail clients on strategy and operations.