Retail 2020 - every little helps in Tesco's digital thinking

Stuart Lauchlan Profile picture for user slauchlan September 25, 2013
Tesco's CIO/CMO double act may not convince me that Gartner's got it right but the duo paint a compelling picture of retail's digital future.

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CIO McNamara

It is now of course compulsory for every tech conference in 2013 to have at least one senior executive stride out on stage and repeat Gartner's CMO v CIO power struggle prediction. Failure to do so would be far short of expectations.

At Oracle OpenWorld this week that job fell to Senior Vice President of Product Development Reggie Bradford, who recited the manta:

"We've all heard the news that by 2017, the CMO will spend more on IT than the CIO."

But Bradford did add to the idea:

"What this means is that there is a need for a hybrid to develop between marketing and technology. There are overlapping functions, so collaboration—and the technology to foster this collaboration—are essential."

Furthermore, unlike a number of other such declarations at other conferences, on this occasion there was some evidence presented of how such collaboration might work in practice.

This came in the shape of a CMO/CIO double act from UK retail giant Tesco which sought to demonstrate how closely IT needs to work with the business and how tech-savvy line of business people will need to be if the reality of digital retail enterprises is to be achieved.

Tesco CIO Mike McNamara was brutally honest from the get-go:

"As a retailer we know that if we don't embrace the digital culture we're finished. It is as stark and as simple as that. Change or die!

"Increasing numbers of our customers are riding the digital wave and being a wave it is by its nature uneven.

"But its course is unstoppable. If you want to win, you need to be riding that digital wave. If you let it crush over you, it will wipe you out."

McNamara reckoned that the role of the CIO and the direction of travel for Tesco's IT investment has changed over the past two years:

"Two years ago the focus of my role as CIO was around process automation, simplification and information.

"Today the focus of our technology investments has swung 180 degrees: from the operation to the customer, from efficiency to loyalty, from lowering our cost base to increasing our sales.

"Technology is transforming retail at an unprecedented rate and actually if you think the rate of change so far has been speedy so far then hold onto your hats because the rate of change over the next few years will be absolutely breathtaking."

Tesco has seen the impact of this, he explained, and had to react accordingly:

"In two years Facebook has added 400 million active users, equivalent to the entire population of Western Europe. Smart phones and tablets have come from leagues behind to overtake PCs as the way we connect to the internet.

"Two years ago Tesco didn't even have a Facebook page; today we have over a million fans and we answer within an hour over a thousand posts, each and every day.

"Two years ago we were still experimenting with mobile apps; today millions of our customers all around the world use our apps every day to check in, to shop and to pay. Last Christmas for the first time mobile visits to our site exceeded those of PCs and contributed to 30% of our online sales."

The road ahead

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CMO Atkinson

Now Tesco's focus is on the shape of what McNamara calls Retail 2020, a retail future built on cloud, social and super-fast networks delivered for the benefit of the digital customer:

"In less than ten years time all of my children will have entered the workforce. Everybody under 25 will be a digital native, born after the mass adoption of the internet.

"For digital natives, none of the advances in digital technology are in the least bit scary. They don't understand the old world etiquette of not contacting people after a certain hour of the evening. They communicate all around the world, all around the clock.

"When a digital native goes shopping, they don't have the clunky 'do I go down the store or buy it online - debate. They just make purchases in whatever way seems most convenient at that time.

"They're 'bilingual' and shift seamlessly between languages. Digital natives shift seamlessly between the digital and the physical world. Most of us are still digital immigrants and it's like having to learn to communicate in something other than your mother tongue, but that's what you have to do."

Digital immigration was picked up on by McNamara's marketing colleague, Matt Atkinson who describes it as critical for the future of an organisation such as Tesco.

He emphasised the impact that digital has on how Tesco manages its customer experience strategies in a social and cloud connected world:

"We have to stop thinking about customers in silos and start thinking about about one customer and multiple experiences.

"The new world is about the customer who has the ultimate power to like or unlike you, to rate and review you at the touch of a button."

Atkinson posited that 'like' is only the beginning of a whole new lexicon of social language that will develop across the customer experience landscape:

"As Facebook reaches over a billion and other platforms appear, the web of people and their knowledge becomes a reality. We're going to enable more knowledge and more connection at everyone's hands.

"There will be new verbs, like 'cook', 'want' and 'love'. You'll be able to click on a verb and do what you like. Click cook and we'll add a recipe to your shopping basket or your food planner. We'll put the world of verbs to good use to make our customers lives better."

Personalisation will also become a powerful tool for both buy and sell side, he suggested:

"The power has shifted to the customer. They configure all of our terms and pricing on their terms.

"In the future we will need to provide a more personal service for them, like click and collecting or providing them with a digital wallet that allows them to seamlessly check in and get the things they want."

McNamara picked up the personalisation challenge:

"Today if two people go down to Tesco and buy the same basket of goods you'll pay the same price at the checkout. In the future price will become increasingly personalised. Promotions will be individually targeted. They will move to e-coupons on you smart phone.

"Online product availability is already pretty much infinite. In physical stores stock will become very finely tuned to local tastes. This is the era of mass customisation."

Bricks or clicks?

But for all this, some things aren't going to change, he added. Customers will still want to - and be able to - pop down to the mall or the high street:

"Physical bricks and mortar stores won't disappear. To see this as winner takes all prize fight between physical and online shopping is simply to see it all wrong.

"The point about physical stores is not to relegate their importance in customers lives but to use technology to build on what it offers in their lives.

"Convenience will remain a key determinant of customer choice. Today convenience is all about location and opening hours. Convenience tomorrow will be all about click and collect.

"Already 65% of our general merchandise online orders are actually collected from one of our stores. Click and collect grocery is rapidly increasing in popularity. Online delivery lead times will drop from days to hours and even to minutes."

Magic Mirror

Atkinson cited an example of how digital tech can enhance physical experience in action, pointing to the F&F clothing brand where customers in store can try on clothes in traditional fashion or can use a digital 'Magic Mirror' to try them on virtually, even when if the item is not in store.

He explained:

"It''s about finding ways to seamlessly integrate technology into traditional experiences.

"Customers like the fluidity of scanning a physical product and automatically adding it to their digital shopping list, or 'liking' a recipe on our social sharing platform and then using our product finder app to find all the ingredients in our stores."

McNamara concluded:

"Our approach to succeeding in this new normal world is around combining our digital and physical assets into a compelling customer proposition.

"The battleground for the future is who serves the customer best in this seamless and connected world."


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