GUEST COMMENT Amazement: retailers’ biggest threat

It seems that there are only two types of retailers today: those facing deep existential challenges… and Amazon.

I recently came across the horrible term “Amazonization” (yes, and it really has got two Zs in it too). Aside from the ghastly grammar, I don’t think it’s the right word. While many great retail brands are thriving, many more seem to be simply stunned: alternating between running in the tiny circles of conflicting tactical moves; and stopping altogether, scared to rack up even the tiniest costs. They are Amazed, rather like Mowgli staring into the spiral eyes of Kaa, the hypnotic snake in The Jungle Book.

Of course, digital-only providers have a massive cost advantage and they win with a combination of speedy innovation, easy transactions and low prices. That’s before we even consider their economies of scale and tax advantages.

So physical store owners need their huge cost base to be working much harder than ever to pay for itself. Shifting a physical presence from being a financial millstone to a source of lasting competitive advantage is not easy. It takes courage, decisiveness… and breaking Kaa’s spell.

Great store-based retailers know that they must find ways to bring their customers all the experiences that they love when buying online:

• Easy access to all the product information they need
• Plenty of choice
• Easy engagement as they move from one channel to another
• Competitive pricing (not necessarily the very cheapest, but close to)
• A quick, painless checkout experience
But they also need the things that they can’t get from a website:

• A friendly, knowledgeable face
• A sense of community, “they know me here”
• The chance to touch and experience the products (vital for clothing, audio, TVs etc)
• A pleasant trip out (not a chore)
• Instant gratification – walking away with the goods
• The option to buy the same things that they see in store through other channels without a hassle
It is sad when you see retailers who cut their costs by making the stores ever more unpleasant places for a customer to be. The snake eyes of Amazement are at work.

All of these challenges have had a significant organisational impact.

For example, a couple of years ago, most retailers had a head of digital, often accountable to the marketing side of the boardroom and an IT director accountable to the CIO or even finance.

These days, almost all retailers have recognised that keeping digital and physical thinking apart is a strategic mistake, playing into the hands of the digital giants. As this thinking has changed, the role of head of a digital has slowly morphed from being a marketing discipline to an increasingly technical job.

For many, the denouement has been a final boardroom showdown between the chief digital and chief information officer with one ending up reporting to the other – or removed altogether.

This is a great shame because both backgrounds bring a valuable perspective based on a very specific set of experiences. As someone who has been providing technology and services to retailers for some time now, I find that my role can sometimes become a broker between the two worlds. So what are the differences?

Well, most CIOs come from a background where their primary role is that of a custodian. The CIO knows to keep the company safe, secure the data and keep all the systems running. I remember a CIO once told me that he didn’t need an annual appraisal – as long as email was working properly, he was considered a great IT leader.

CIOs also come from an environment where new initiatives need big capital investments that must be written down over a long time. CIOs then, think long-term, with a focus on security and reliability at all costs. Better to be slow than to put the whole business at risk.

CDOs come from a very different background and culture. As most physical retailers began their eCommerce activities as a Skunkworks-type activity, the risks and implications of a mistake were always far less. For a CDO, the worst sin is to be left behind by innovation; to look old fashioned next to the competition. CDOs come from the Silicon Valley, “fail fast” school of iterative innovation.

I have been in many meetings where the digital people roll their eyes at their overcautious, negative colleagues whilst the IT team stares back in horror at their reckless colleagues’ willingness to risk the company’s integrity on yet another unproven technology.

So who is right?

Both. And neither. A retail business that can’t keep up with its digital competitors risks a slow, painful death. But a retailer who loses control of their customers’ data, or who is unable to trade through a busy weekend could be finished overnight.

Digital thinking has brought forward huge advances in development methodologies from Agile to DevOps, making an iterative approach to delivering value mainstream.

The CIO never forgets that the business must be protected come what may and all that messy capitalisation and balance sheet stuff still adds up.

Together they hold the keys to a physical retailer’s success. Together they can make the store experience a delight, with well-informed staff providing personalised services and flexible delivery options. Together they can get the best out of the company’s assets, technology and unique expertise. Together they need never be Amazed, but they can often be amazing.

Author: Ian Benn is a senior vice-president at Ingenico

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