Thriving through innovation (IRM55)
For retailers who want to thrive and grow digital innovation has to be at the heart of their business, but embracing digital innovation both online and in store and blending the two seamlessly is crucial for success. Research Editor Liz Morrell shares the findings of InternetRetailing’s latest research report, sponsored by Delphix.
Through a combination of retailer and consumer surveys and in-depth interviews we sought to understand and analyse leading retailers’ attitudes and actions in the field of digital innovation to find out what it means, what its challenges are and how retailers are using digital innovation to embrace the changing needs of consumers.
Retailers realise its value since an overwhelming 92% of retail businesses told us it was either vital or very important to them in our survey with nearly two thirds (64%) rating it as vital.
For consumers it’s a subtler approach. Although many of our interviewees said that they didn’t think their customers were interested in innovation per se – preferring an easy shopping experience to bells and whistle technology – our UK wide survey, which surveyed more than 200 consumers aged from 18 to 65 years, found that more than half (53%) of consumers said that they would be put off by shopping with a retailer that appeared to be slow to innovate.
They cited ease of payment, navigation and delivery as their key priorities with two thirds (66%) of consumers saying that innovation when shopping online for them meant that payment was quick and easy. The second biggest priority for consumers was ease of browsing and searching for products, followed by delivery tracking and communications.
Defining digital innovation for retailers however can be tough since for some retailers they define their approach to innovation as to whether they have yet adopted technology or practices that nearly everyone is currently using – such as click and collect.
Yet, it’s about a more intrinsic change to business than that. Jack Smith, Digital Director at New Look, comments: “It’s around rethinking what we do today but in a way that works better and is smarter – it’s not necessarily about introducing new things”.
Tom Murrell, Web Development Manager at online tile retailer Walls and Floors, says it can have huge benefits in winning customers. “It’s something that sets you apart from the crowd online, captivates your audience and makes them stick around or come back wanting more,” he says.
Retailers generally realise the benefits this can bring since the most popular reason given by retailers for their investment in digital innovation was to drive revenue growth (71%) with customer demand the second most popular reason at 60%. Retailers are reacting to changes in customer behaviour by focussing their digital innovation efforts most heavily on web and mobile (both at 77%).
The report showed that retailers were confident of their position as innovators too. Just over one in five (21%) claimed to be leaders in innovation whilst just over one in four (26%) said that they were part of the leading pack of retailers in terms of innovation. More than a third (35%) said that they were fast followers.
More efforts and resources are being put into digital innovation although budgets remain a major headache with nearly two thirds of those surveyed in our report (64%) saying that budget is the biggest IT barrier that they faced in terms of digital innovation.
Retailers want to invest with nearly a third (32%) significantly increasing investment and more than half (55%) increasing investment cautiously. Investment is going on new tools for 58%, internal staff for 55% and infrastructure modernisation for 53%.
Unsurprisingly, it is the challenges of infrastructure that hamper the ability of many companies to innovate. The difficulties of dealing with legacy systems remains one of the biggest headaches when looking to digitally innovate and has to be coupled with a cultural and process change at businesses too, which makes it an even harder challenge to overcome.
The report looked at the move towards agile environments, continuous development and a DevOps approach to IT that is helping to generate faster, more effective change than ever as retailers look to speed up their development cycles. Half of retailers said that they operated on a monthly release/update cycle whilst just under a third (31%) worked on a once a quarter or less update cycle. Only 8% were managing weekly updates and 6% daily. This is something that needs to change – especially as retailers ramp up the number of platforms that they are developing for as well as negotiating a move to a smoother, cross-device experience for customers.
“It doesn’t matter if you are a traditional retailer or a new one, the need to provide continuous delivery on key customer facing applications is becoming the norm. Once a quarter or even once a month are no longer the desired state… daily and weekly are the new industry benchmark,” says James Spafford, Director of Northern Europe at Delphix.
Some retailers are realising the value of a DevOps strategy, where the development and operations teams work more closely than ever, with 20% of respondents already using the DevOps philosophy in some specific projects and 15% using it across their organisations. Nearly a quarter (23%) were investigating the potential of DevOps.
“IT methodologies designed to increase the efficiency of software development such as Agile, DevOps and Continuous Delivery are helping retailers speed up the development process, but getting the right data into the right hands at the right time is a major bottleneck to agility and speed, and of course innovation,” says Spafford.
As well as relooking at how they manage their data and IT strategies many retailers are also investing in innovation labs – from Argos to Boots, John Lewis and M&S – as they seek to reinvent how they do business. Their strategies are investigated more fully in the report. Such labs – whether part of the retailers’ business or a partnership approach – allow retailers to isolate resource and introduce change at a far faster pace than the rest of the business is traditionally used to whilst also ensuring that focus does not shift from the core day-to-day business of retailing.
Others are rethinking their structures at a more fundamental level however. The adoption of a “radical agility” focus at Zalando for example, has seen a complete shift in how the company’s technology team operates with increased individual ownership driving innovation and change faster than ever. It’s an approach not without its challenges but six months into its adoption it is providing good results and a hunger and passion for digital innovation now that its tech team have been given greater responsibility for it. You can read more about the retailer’s radical agility approach in the case studies section of the report.
The 2015 Digital Innovation report proves just how important digital innovation is to retail success today. It’s an area that is changing fast and retailers have to keep up – not only in terms of the practicalities of what they are doing but also their ability both as a business and culturally to adopt change. The 2015 Digital Innovation report also includes more than 15 in-depth retailer case studies – including the likes of New Look, Shoes of Prey, Shop Direct, John Lewis and Starbucks.