Tow

ards

a n

ew d

igita

l era

RetailMany organisations are in the process of

launching a digital transformation plan.

This report highlights the benefits and

implications of new technologies allowing

retailers to better assess the competitive

advantage of a smart digital strategy.

2

Whoare my customers?

Ret

ail

3

Understanding your customers

is the key to successIn today’s retail environment, modern

technology platforms provide brands

with deep customer insight. These

platforms provide powerful tools to deliver

a personalised and engaging relationship,

optimised for each specific customer.

The ability to improve your supply chain

and supporting back office are far easier

and quicker, in response to changing

consumer demands, allowing retailers

to focus on customer service and

ultimately to become truly data driven.

Want a sustainable head start over your

competition? Here is where it starts.

69%of consumers say that a retailer’s ability to provide personalised customer care positively influences their loyalty.Source: ‘What do Gen Z shoppers really want?’, NRF & IBM, 2018

79%of consumers feel that brands must actively demonstrate that ‘they understand and care about me’.Source: ‘Wantedness’, Wunderman, 2018

4

Customer experience reigns

How can brands improve

their customer engagement

and provide the level of interaction

that clients now expect?

Meeting customer expectations, both online and in-store,

has become a powerful means for brands to improve their

revenue and build a strong future for their business.

The same goes for service. 69% of consumers say that

a retailer’s ability to provide personalised customer care

positively influences their loyalty(1).

Customers now expect a seamless shopping experience whether

they buy online or walk into their local shop. This includes:

Seeing and trying the products they checked out

online beforehand.

Being offered an omni-channel loyalty program, that will let them

build loyalty points and unlock exclusive offers and deals through

each of their purchases regardless of the sales channel.

Being identified as they push the door to a store and getting

the same personalised services that they get online.

Being directed to the items that they are most likely to be

interested in.

The key to meeting all these expectations is to take control

of the data – become a data driven retailer. An important first

step is to bring together the vast amount of data generated

in the online space and merge it with the various customer

Ret

ail

5

70%databases generated across all channels

(physical stores and outlets, value added

services, loyalty programs, etc.) to create

a single customer data platform.

The next step is to generate value through

intelligent data analysis to provide a seamless

and personalised customer experience.

This includes using machine learning and

artificial intelligence (AI) to extract trends

that will help determine customer preferences

and habits to tailor offers and services

to their individual profile. Today’s loyalty

programs are expected to offer benefits

that truly correspond to a given customer’s

personal preferences.

But assembling, retaining and using personal

customer data is becoming increasingly

regulated. The good news is that clients

are willing to assist as long as they get an

exceptional customer experience in return.

Zoom on Dixons Carphone

In the UK, Dixons Carphone is using a chatbot that can check the product catalogue and inventory status to help both clients and store assistants get instant information on a given item. Today, 70% of Dixons Carphone customers use their mobile in the shop to get further product information.

6

How can data science

and AI generate high

value by reshaping

a brand’s operations and

supply chain processes? eeting today’s customer

expectations requires a digital

grade supply chain, from supplier management,

to intelligent procurement, to inventory, logistics

and fleet management systems.

A digitally enabled supply chain empowers

brands to offer a wider range of products.

In a recent survey, 68% of Gen Z consumers

said the choice of available products was

the most important factor when choosing

where to shop(1). Going digital in the warehouse

also helps improve efficiency. Companies

with fully integrated IT warehouses are

out producing non-integrators by 20%,

mostly due to improved data access(2).

Data analytics and artificial intelligence also

allow the analysis of inventory status in all

outlets, also taking into account customer

data and externally sourced data (weather,

competitors’ promotions, etc.). Taking all

these parameters into account, the system

will issue recommendations to ensure every

outlet has the required amount of stock

of every product at any given time. Intelligent

fleet management evaluates stock levels

in every store and determines if a given

outlet should be supplied from a regional

Operations drive

M

EXCELLENCE

NUMBERS

70%of US consumers say they’ve spent more money with companies that deliver great service. Source: 2017 Customer Service Barometer, American Express

58%of consumers expect inventory status to be visible online while shopping.Source: Gartner L2 Digital IQ Index, 2018

Ret

ail

7

warehouse or from a nearby store for a given product, taking into account sales

levels in both shops, scheduled deliveries and even traffic conditions. Inventory

rotation is another aspect where retail science makes a difference. For slow

selling products, AI helps determine the exact amount of discount that will get

products out the door while minimising impacts on margins, taking into account

the result of past promotions in a given area or competitors’ current promotions.

Since 2019, France’s Carrefour is using AI to collect and analyse data from stores,

warehouses and e-commerce sites to better anticipate demand and optimise

orders sent to suppliers. Carrefour’s goal is to limit both stock shortages

and overstocking in both shops and warehouses.

Every step of the way, digital technologies allow retailers to free up employees,

that can be redeployed to higher value tasks, closer to the customer. This is also

an effective way of improving employee satisfaction, by offering them improved

career prospects. Indeed, companies with highly engaged employees outperform

their competitors by no less than 147%(3).

8

Ret

ail

In the coming years, Millennials will rule

retail. These customers demand best-in-

class, differentiated, one-on-one and even

entertaining and recreational shopping

experiences. Increasingly they will expect

brands to close the gap between high street

stores and online shopping with more and

more of their purchases being initiated through

one mode and carried out through another.

Increasingly, the concept of a standalone

store will disappear, making way for the

emerging concept of the everywhere store,

blending a series of services, provided either

online or in the actual high street outlets.

An example of this complementarity

is using augmented reality on the mobile

to guide customers through a physical

store directly to the items they checked

out and marked on the brand’s web site

or mobile app beforehand. At the same time,

augmented reality may attract their attention

to other products or accessories matching

their identified preferences, or even to

discounts they earned through their loyalty

points. Directing customers to the closest

shop carrying inventory for the selection

of items they wish to try on is also a valuable

proposition. But the complementarity

between real life shops and eCommerce also

goes the other way, with the correct sizes

tried out in the shop being saved

to the user’s account for a later purchase

through the brand’s online ecosystem.

All this needs to be seamless and enjoyable,

as consumers are less and less indulgent

with dodgy service. Directing customers

to the closest shop carrying inventory for

the selection of items they wish to try on

is also a valuable proposition. But the

complementarity between real life shops

and eCommerce also goes the other way,

with the correct sizes tried out in the shop

being saved to the user’s account for a later

purchase through the brand’s

online ecosystem.

The everywhere store also responds

to Millennials’ appetite for visual and

experimental shopping. France’s Sephora

developed a store concept where customers

may try out a wide selection of perfumes

and makeup items that can be ordered

online right away and delivered to the

person’s home. It is an effective way to

widen the product offering without having

to maintain the corresponding inventory

in the local store. A ‘selfie mirror’ also allows

customers to send their friends a photo

taken with a new lipstick to get their

opinion before committing to a purchase.

The everywhere store is on the rise

How can retailers meet the expectations of digital native customers, who see

the line separating conventional and online shopping gradually blurring?

9

WithTim Rowe

Retail Industry Director,

Hitachi Solutions Europe

Expert Vision

What is the main challenge facing the retail industry?Leadership. A recent study, The DNA of Future Retail Leadership, cited 36% feel

retailer leadership is not moving fast enough to keep up with consumer demands,

only 27% has the required digital expertise and 56% are not diverse enough to

reflect their customer base. Not exactly a ringing endorsement, especially when

you consider retailers with top performing management teams are growing

five-times faster than the competition. I often hear about changing customer

demographics, the rise of the Millennials and Generation Z, but as with any

business, change is constant and management teams need to be re-structured to

inject speed and innovation and place the consumer at the heart of all decisions.

Which companies are taking a head start today?For now, the most successful are the e-commerce players that took an early start

in digitalisation. A good example is Amazon, with the development of Amazon Go

stores, where customers may walk in, pick up the items they want and walk out

without the burden of waiting in line for checkout. The system uses their mobile

Tim’s experience gained at PwC, Microsoft and now Hitachi Solutions makes

him an expert in delivering modern and cost-effective technology solutions for

the retail sector. He shares his views on making digital transformation a success

in the retail space.

TR

TR

10

phone to detect who they are and directly bill their account. So far, traditional

retailers are still lagging in offering similar services. Some regions, however,

are catching up fast. A number of Chinese grocery chains have aggressively

invested in digital technologies, to the point that over 150 stores in China are now

offering a similar value proposition, versus just over 15 Amazon Go stores in the US

over the same time period.

What is the impact of digital transformation on the supply chain?Digital technologies enable new ways of meeting today’s customer expectations,

by building flexibility and accountability into their supply chain. It also allows brands

to offer the transparency and traceability that Gen Z customers, in particular,

are demanding. As an example, blockchain technologies provide an open source

ledger that can give customers reliable information on how a product was made,

from which core ingredients, using which farming techniques, etc. It also gives

a guarantee that responsible transport was used, child labour was avoided, and so on.

Which prime advice would you give a retail company ready to move forward?Retailers need to define their operating model. It is now clear, successful

operating models coalesce around four themes: Platform, Brand, Value and Service.

In choosing an operating model, retailers will need to carefully consider their target

customers, where they create real value and their own strengths and weaknesses.

Once defined, the retailer can then embark on a continuous programme of innovation

across all facets of the business including full digital transformation. This will

impact on almost every function of the business and must be led from the

management team. It is important to recognise that such a deep transformation

takes time and needs to be broken down into steps and driven at a pace that

fits the organisation. It is therefore essential to select a consulting partner with

a full understanding of the project scope and your industry, who will be able

to support the company through the entire digital transformation lifecycle.

TR

TR

Ret

ail

11

Can you really turn a global retail franchise around, implementing new technologies,

principles and business models for tomorrow, as well as engaging all employees and

store associates across 63 countries throughout the Americas, EMEA and Asia?

Dr. Martens strongly believes so. In 2018, the Group started a 3-year digital

transformation programme worth several million euros, with the ambition to underpin

and support Dr. Martens’ ambitious growth plans. The new architecture will replace

a plethora of legacy IT systems and processes and will create efficiencies across

the board, increasing supply chain efficiency and offering added visibility over

the business.

The project

“This programme will use IT as an enabler – resulting in change to our current systems,

processes and procedures. It aims to help us become more efficient as a business,

operate globally and enrich the role of our people by replacing a number of manual

and cumbersome tasks with tools that better support our global growth.”

Jon Mortimore, CFO Airwair International

Why Hitachi Solutions?

“We chose Hitachi Solutions as our business transformation partner not only

because of their expertise in the technology, but also for their expertise in retail;

their global presence and, crucially, their ability to assist with the business process

and people element of the change programme through their Transformation

and Adoption consulting team.”

Jon Mortimore, CFO Airwair International

Success Story

When a global brand engages in a major digitisation programme

HITACHI SOLUTIONS EUROPE 11TH FLOOR - TOWER 42 - 25 OLD BROAD STREET LONDON EC2N 1HQ - UNITED KINGDOM

@HitachiSolEU

Hitachi Solutions Europe (UK) www.hitachi-solutions.co.uk