Innovative Retail Technologies

MAR-APR 2017

Innovative Retail Technologies (formerly Integrated Solutions For Retailers) is the premier source for innovative yet pragmatic technology solutions in the retail industry.

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Page 15 of 39

What Is Digital For? Over the last three years, we have asked retailers to define what they see as the primary role of digital channels. We understand that digital serves multiple roles, but forcing a choice of one makes retailers think about what is truly the most important aspect of the digital side of their business. For two years, a strong plurality has said digital's primary role is to transact, and this year is no different (Figure 2). However, there are some important shifts underneath this top objective. First, retailers have come back from their pessimism about stores — in 2015, only 11% of retailers reported that the primary function of digital was to drive traffic to stores. This year, 20% of respondents agreed this is the primary role. On the flip side, digital as a shopping aid in stores dropped precipitously — from 14% in 2015, to 4% this year. The percentage of retailers citing digital's primary role as creating brand awareness has steadily fallen over the last three years, from 20% in 2014 to 17% this year. On the other hand, the objective of educating consumers about lifestyle elements of the brand has steadily grown, from 6% in 2014 to 11% today. Are these shifts simply a matter of nuance? Brand awareness versus lifestyle education might be nuance, but the role of digital for the store — as a traffic driver versus a shopping aid in stores — is not. Over the last two years of RSR's store benchmarks, we find retailers are struggling to define the right role of store employees, the right role for digital, and even the basics of a store strategy. These shifting perspectives year-over-year reflect no small degree of thrashing about as retailers try to understand how to accommodate digital as part of the store experience for both consumers and employees. But neither of these objectives has anywhere near the support of anything related to selling — whether directly through transactions or indirectly by driving traffic to stores. It may be that retailers are still feeling the sting of online competition and are renewing their focus on capturing customers in the channel where they choose to engage. If consumers are browsing online before heading to a store, why wait? Why not invest to capture the sale then and there, rather than risk that a customer's hesitation leads to a competitor's ultimate sale? It may also reflect retailers' store struggles, that it is easier to just lean on digital channels for what is easy to understand and measure — selling — and forget the rest. Even more interesting is the data cuts of these numbers. In 2015, only 23% of retail winners said that the primary role of digital is to transact. This year, that number rose to 40%. And 50% of those with greater than $5 billion in revenue say that the primary role of digital is to transact, with very small minorities spread across the other objectives. Last year, we applauded retail winners for taking a broader view of what digital can mean to their business. Sadly, it looks as if the store challenge is so difficult that everyone — winner or otherwise – is returning to the easiest thing to ask of digital, which is simply to sell more stuff. Ironically, as more business shifts from stores to online, that only makes the store problem worse. 13 Mar-Apr 2017 1% 5% Percent Of Store Sales Influenced By Digital Channels In 3 Years Today 9% 9% 30% 12% 21% 29% 10% 21% 10% 16% 14% 11% >75% 50% - 75% 25% - 50% 10% - 25% 5% - 10% 0% - 5% No metrics in place Figure 3: Retailers Sandbag On Digital's Influence

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