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As Digital Declines, It’s Actually Time to Reinvest

Kevin Sterneckert, DemandTec Chief Strategy Officer

Historically, winners invest in innovation during downturns. Retail is no exception. 

An article from CNBC came as a surprise to some – not all – in the retail industry. As part of the big sell-off in stocks that accelerated in the first week of June, eCommerce has dropped 1.8% from a year ago while in-store sales grew 10%, according to recent data gathered by Mastercard SpendingPulse. While it might seem wise to simply double down in brick and mortar, history suggests we do the opposite: reinvest in the digital experience. 

Why? As the long-held business adage goes – embraced by Silicon Valley – perhaps the best time to invest in tech innovation is when times are tough. In retail, where margins are so thin, gaining margin on a strategy that is forward-leaning could mean the difference between winning and losing. In 2020, when the pandemic was beginning to batter the retail industry, a Forbes contributor argued, “To bounce back, businesses and individuals will probably need to be more reliant on tech, not less. Companies should be investing in technology that promises to help them run more efficiently and scale their business. In other words, you need to focus on tech that will pay for itself in the long run.” 

Here’s an even more compelling argument: it appears that consumers today are more concerned with ease than convenience. That’s where the most impact on the shopping experience can be made. Big retailers know this. In the grocery industry, look at what Amazon, Walmart, and Kroger are doing. They’re not sitting on their digital laurels; they are actively pursuing the most innovative, disruptive technologies today. 

Here are three areas where wise investment in tech will make a difference during and after the current retail disruption: 

  1. The New Three P’s: Personalize your pricing with precision. As we observed in a recent survey conducted by Retail Systems Research, “precision pricing” is becoming a must-have for retailers and consumers. Consumer data shows that many products are price-sensitive while others are not. In grocery, for example, many consumers are price-sensitive for meat, poultry, and dairy. But in order to execute precision pricing, grocers will need to invest in systems that can personalize pricing at scale. This is not a job for spreadsheet jockeys. It requires AI so that grocers can intelligently price at scale while avoiding human error and bias. 
  2. Empathic Loyalty: Hold down prices where it matters to your customer. Precision pricing will not only protect margins. It can also generate brand loyalty by empathizing with consumers. Most loyalty programs focus on making consumers more loyal to the brand; few embrace the reality today that retailers themselves must be loyal to their customers. There are few things worse for consumers during economic downturns than the perception that retailers are exploiting economic downturns. While retailers such as gas stations and car dealerships are struggling to be empathetic, other retailers in grocery and apparel can empower consumers by holding down pricing for the most price-sensitive products by pricing slightly more for other products. This is a principle that launched companies like Walmart, whose founder built on their brand promise of everyday low prices. While Walmart might have done this at the expense of suppliers, it won a staggering number of customers that today rely on the store chain by sticking to its brand promise. 

  3. Embrace Collaboration. A final note about the behemoth from Bentonville: In recent times, Walmart has rethought its relationship with suppliers by launching a massively scalable collaboration portal. But if one thinks that only the retail giants can afford to do this, open platforms for collaboration are becoming available for retailers of all sizes. Collaboration is not just a nice-to-do. It’s essential for both the efficiency and sustainability of a company’s relationships with trusted partners who benefit from the technologies that improve their operations and profitability. 

In closing, winning retailers today are working through downturns by not shying away from innovation. For example, Amazon’s early work on drones may pay off soon with consumer behavior that’s expected to survive the pandemic: home delivery. Will it matter to all consumers? In pharmacy, where often an order is urgent, it could matter a great deal. Why wait for next-day or two-day delivery when an intelligent drone can bring it to you in minutes? If you’re a retailer, why wait to invest in delivery technology until it becomes commonplace? By then, your competitors will have prepared for the next innovation.

Invest in retail innovation today. Contact Us.

 


About Kevin Sterneckert, DemandTec Chief Strategy Officer

Kevin partners with our customers and across the DemandTec team to develop strategies to drive growth through solutions that empower retailers and manufacturers with advanced capabilities that unlock new value and competitive opportunities.  

With more than 35 years of industry experience in retail technology, including extensive hands-on pricing and merchandising experience at HEB, Walmart and others, Kevin combines forward-looking industry visionary insights with the pragmatic grounding of a seasoned practitioner, including previously serving as a senior leader of DemandTec in its start-up days. With a range of successful prior executive leadership roles at retail technology companies including Symphony RetailAI, JDA (now Blue Yonder), Predictix, and Oracle, as well as several years as Gartner’s Research Vice President and Lead Analyst for the Consumer Value Chain, Kevin provides a unique and expert point of view to focus on high-impact solutions that will enable retailers to succeed in a fast-changing landscape, today and in the future. 


About DemandTec:

A pioneering leader in retail pricing, promotion, and markdown technology for decades, DemandTec is ushering in the new era of unified autonomous merchandising. With Unify by DemandTec — the industry’s first — retailers can unite their data, systems, internal teams, and collaborate with suppliers to generate profitable revenue growth with the power of AI.

From food to fashion, DemandTec partners with more than 700 customers around the globe. To learn more, please visit us at www.demandtec.com.

 

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