Every week it seems that another major retailer resorts to bankruptcy protection to address its liquidity challenges. Turns out that estimate isn’t too far off, as the first 18 weeks of 2017 have seen 14 retailers announce they are seeking protection – more than all of 2016. I have fond memories of buying a shiny new pair of cleats at Sports Authority every couple of seasons, so that one hit me especially hard.
We all know the reasons for these retail falls from grace – channel shift to online and competition from Amazon among the most obvious. It’s likely too late for many of the larger legacy retailers to get out of their own way. Saddled with leases and without the “digital DNA” of many of their new and nimble competitors, they resort to store closures and layoffs, restructurings and changes to senior management. In other words, hard work. To be fair, some of these steps are necessary, but to have any chance for long term survival, retailers and brands need to bring more technology to bear in operating their businesses, enabling them to work smarter, not harder.
Here are some strategic ways big retailers can use technology:
Step it up on the vendor front. Marketing, supply chain, and logistics vendors are perhaps the lowest hanging fruit when it comes to driving efficiencies in a retail business. The best digitally native brands are masters of customer loyalty, often adopting cutting edge customer relationship management (CRM) systems that are robust enough to tailor marketing messages and track activity across channels (yes, M. Gemi, I want 20% off those shoes I have put in my cart three times and I’ll take them in black too if you give me free shipping). These CRMs are often powered by machine learning, among the most impactful technologies in retail given its potential to inform everything from in-store inventory levels to pricing strategies. Optoro, a Revolution investment, uses software to address the Achilles heel of e-commerce – $260 billion of returned inventory. Although it may not drive foot traffic, retailers must invest in such tech driven infrastructure to be nimble enough to survive in the era of Amazon.
Remove friction in the payment process. Nobody likes a line, so it’s a wonder more retailers aren’t rethinking the payment process. Many mass merchants have experimented with self-checkouts, but this effort, which is focused more on saving labor dollars than on improving the customer experience, has largely been a failure. If you make the payment process simpler, customers get out the door faster and usually spend more. I use Uber mainly because I love jumping out of the car at the end, not a care given about the cost (until the credit card bill arrives anyway). Amazon shocked everyone when its “Go” store used machine learning, sensors, and AI to rid shoppers of the payment process altogether. I believe we are getting technologically close to living in a cashier-less world. Retailers are desperately trying to improve in-store experiences, and the best retailers will do that from start to finish.
Use concept stores to truly innovate. Different from a flagship store or a “guideshop,” concept stores are all about big ideas and big data. Sure, having an in-house tattoo parlor or coffee shop can help with foot traffic, but the goal is more about thinking outside the box and gaining as much insight as possible to drive broader change within the organization. The most successful companies will continue to challenge themselves to get smart on the changing needs of customers and what might improve their experience. Lululemon now has a design lab in NYC where shoppers can interact with the design staff. Last year, Nike opened a concept store in SoHo chock full of new tech features and spaces for customers to try out the products. The stores seem a little gimmicky and limited in reach at the outset, but I’m positive both companies are closely tracking the results of these “experiments,” so takeaways can be quickly implemented chain-wide, inform the way the brand speaks to its customer, and/or drive design decisions.
The retail landscape is shifting quickly and only the most dynamic companies that are willing to lean into the change will avoid the challenges plaguing the industry. Of course, some will choose and have chosen to acquire their way to digital DNA, and the results of that strategy remain to be seen. But for the rest, investing in technology and prioritizing innovation are the keys to staying relevant to today’s digitally minded consumer.
Kristin Gunther is a Vice President at Revolution, the venture capital firm founded by AOL cofounder Steve Case. Kristin has spent her career working in venture capital, private equity, finance and operations, and has helped portfolio companies and management teams in retail and other industries on growth strategies, operating and finance matters, and exit planning. She served as Board Member and Interim CFO of Established Brands, Inc. and was also on the Board of Haggar Corp., a men’s apparel company founded in 1926.