Digital transformation during the Covid health emergency: strategy and rules to follow

MARCO BONINI
13/05/2020
In brief
The digital transformation is the ability to develop a business model which has as its core the collection, analysis and use of data forming the differentiating value factor in decision-making processes and the opportunity of enhancing the overall level of the customer’s purchasing experience.

What do we refer to when we talk about the digital transformation of a company?

We talk about it with Marco Bonini, Retex Associate Partner with proven experience in food and non-food retailing in leading companies and in a variety of roles, from purchasing to the development of specialist stores, up to heading the Cash & Carry channel for a retailing chain.

“It would be too trivial to think of creating an e-commerce website and mark the topic as resolved, as the digital transformation of the company affects everything, penetrating the entire range of operations. On the one hand, it is a question of digitalising all processes requiring repetitive and not highly specialised labour, so as to reduce the costs of non-qualifying business activities, and on the other,and above all, digital transformation is the ability to develop a business model which has as its core the collection, analysis and use of data forming the differentiating value factor in decision-making processes and the opportunity of enhancing the overall level of the customer’s purchasing experience.

We can link the digital transformation to the activities that companies need to put into practice for a successful exit from this lockdown period, which we remind are the following 6:

  • Rethinking the value proposition ensuring that it is always updated according to the changing market and post-lockdown customer’s behaviour
  • Rethinking the network in an omnichannel key
  • Reducing complexity
  • Fostering  business ecosystems
  • Innovating work procedures and processes
  • Taking advantage of any opportunities for market growth by implementing strategic and competitive business initiatives.

These activities will force us to call into question the four pillars of our business, allowing us to open up to new scenarios, specifically:

  • Customer
  • Product
  • Store and by store I mean the physical or virtual place where the purchase experience occurs
  • Technology

The customer has evolved and acquired a greater awareness of, his way of buying and references. He skilfully and freely moves between different players according to his needs of the moment, and it is therefore up to the retailer to define which market segment he wants to target and stand out in a decisive and clear way.

If we take the case of large retail chains/organised retailing of foodstuffs, we can say that customers are divided into two macro-categories: those price oriented, with a tendency to make their purchases in discount stores, and others who find fulfilment and reassurance in the products offered by their brand of reference.When the reference driver is not a purely economic one, it is important to get to know the customer as well as possible by mapping the data related to him, allowing to make predictions on his specific behaviour or, for simplification purposes, the cluster of customers to which that customer belongs, making marketing and operations more efficient.Customer engagement requires a finer use of communication and marketing tools, as it is not sufficient to draw up a leaflet, most of the time repetitive in terms of products and promotional techniques already used the year before and the one before that.

Thus discount stores will be able to maintain their communication strategy through the dissemination of leaflets, while the other brands will finally be able to give up the routinely scheduled leaflet in favour of other smart alternatives more targeted to their actual customers, by identifying through the data collected and analysed their needs and expectations, with real-time personalised offers when the customer is actually present in the store, thus reducing the across the board offers to focus on promotions by customer or cluster of customers, with less margin wasted and a smoother and more stable relationship thanks to the study of the customer’s behaviour.

This means that in non-discount stores it will be possible to develop and grow the distributor’s private label  which, thanks to the trust placed by the customer in the brand, will be able to move to centre stage at the expense of other national labels which will have difficulty in finding a role within the store, in being duplicates often used for promotions and special offers with shelf price studied for such occurrences.

Retailers operating in this segment will have to involve local suppliers who become an element of differentiation between the brands, acquiring visibility and promoting the growth of the local economy with social benefits, with consequent boost to Made in Italy consumption and the circular economy.

Under such conditions, the price becomes a variable with less weight, thanks to the lower comparability of the assortments, while the study of customer behaviour will provide the opportunity of capturing the weak signals arising from the physical and online market, i.e. from competitors in the same segment, and accordingly it will be possible to make linear changes or move ahead with actions focused on the customer.

This approach will allow to have probably smaller stores thanks to the management of information and reduced needs for in-store stocks, strongly connected both to the supply chain and customers, to provide information on products and the chain, on services and offers dedicated to the customer, on the brand’s mission and on the educational or information activities scheduled in-store or online.

The digital transformation of the store becomes a necessity as the customer is becoming more and more omnichannel and focuses on the brand that most suits his needs at that moment, choosing from time to time the desired services and products.

It is against this background that the role of technology becomes a determining factor for the collection and analysis of the larger amount of customers’ data to be strategically used for taking decisions and develop a business analytics approach, for innovating services and updating and experimenting new assortments based on the behaviour of customers who are already shopping, or have stopped or thinned out because these are no longer focused on their needs.

At the same time, it is necessary to implement in-store technologies to streamline processes and improve the shopping experience to enable to redefine the relationship with the customer, such as: beacons, self-scanning, mobile payment, apps, digital signages, intelligent Wi-Fi, etc. The digital transformation of a company is a decision that cannot be delayed any further, but it requires a well-organised plan that, starting from the development of the necessary back-office tools, allows companies to generate profits to be reinvested in continuous innovation processes.

The more static companies, as well as small non-native digital enterprises, will find it hard to undertake a digital transformation and risk disappearing altogether, swept away by this wave of innovation that will leave them outside or on the edge of the market, gradually becoming less and less important for a customer who requires clear answers to the needs of the moment.These companies will thus become easy targets for acquisitions by those brands that were able to manage this transformation better, creating value and, as a result, the financial capacity to expand their territorial coverage at low-cost.

A big push towards the creation of business ecosystems could create the basis for the growth of companies with similar market positions, on different products that do not generate horizontal competition among themselves. Also these ecosystems could be identified in the study and analysis of data, with a cost-effective investment in technology and the creation of ‘virtual business parks’ which can exchange data and trends with each other and that will make the offerings more attractive to the customer with a wider and more personalised range of opportunities.

I think that it should now be widely understood that opening an e-commerce store does not mean digitising the company, as the digital transformation in this sense needs to be strongly supported by a plan that will guide actions and investments in this direction over time, and that cannot be achieved without the expert and safe guidance of an executive who knows how to create mutual trust and vision for the attainment of the final goal”.

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