The last time I caught up with Rob Garf, VP and General Manager at Salesforce Retail, was just prior to the all-important Holiday season where the underlying question was whether Christmas was cancelled. In the event, it was not and things panned out pretty much as expected, with some flattening out of digital demand and the re-opening of physical stores.
At that time it might perhaps have been expected that, with (supposedly) the worst of the COVID pandemic behind us and an emerging Vaccine Economy bedding in, the arrival of 2022 might have enabled the retail sector to step back from full-on crisis mode, take stock of the past couple of years and start thinking about longer term strategic goals.
Instead the new year brought rampant inflation, Russia’s brutal invasion of Ukraine and, yes, more COVID variants.
So is the expectation now for 2022 to be another year of ‘let's just get through it’? Garf observes:
I think the Holiday season was somewhat of a premonition of what we're going to expect throughout the course of the year. We've seen a boom over the last two years in digital - globally a 57% year-over-year increase on 2020, 16% year-over-year increase in 2021. We all anticipated that that demand wasn't sustainable over an extended period of time. Actually, the one of the most common questions I'm getting from retail executives is, 'How am I going to comp COVID? How should I think about this post COVID world? How do I set the right expectations from my board who have been really spoiled over the last two years?'.
The current macro-economic and geopolitical climate mustn’t become drivers to ease up on digital transformation, he adds:
For the first 18 months of COVID, retailers got really scrappy. They put a lot of new programs in place to cater to how the shopper not even wanted to shop, but needed to shop. We started to see in our business and overall in retail, movement from scrappy to scale in terms of, ' OK, let's start to now think about the efficiencies, think about the technologies, think about what incentives you can put in place'.
I am a little worried that retailers will become too reactionary, particularly [in regard to] supply chain and inflation, and not stick to their plans. I'm a positive person, especially as it relates to retail and I'm going to stay positive that the leaders, the innovators, will stick to their plans because it's no time to pause on this digital transformation. If that happens, the consumer experience is still going to be is going to be broken.
That being the case, Garf expects to see more back office focus from the more savvy retailers:
We've been focused on the ‘last mile’ for the last two years, in terms of how we get the product to the doorstep. There's there's gonna be a re-focus on the ‘first mile’. The inbound supply chain is, believe it or not, going to become a little sexy. Maybe a different way to say it is, supply chain actually plays a critical role in the customer experience.
Loyalty will also become a major agenda item and in a different way to previously, he suggests:
A lot of switching happened over the last two years in terms of people shopping at new brands and retailers. Part of it was just necessity because hey, if I can't find my Charmin toilet paper, I'm gonna get a private label because it's available.
But it’s important to think about loyalty in terms of outcome, he adds:
To understand what data is actually available about the customer, especially as cookies go away, the need to really harness first party data becomes even more important. Think about loyalty as an outcome. Loyalty is understood [as a] loyalty program, but not all consumers think about it in that regard. They want to be treated differently, more unique. In fact, our research shows two-thirds of consumers want to feel like they're being treated in a unique way. The challenge is only one third of retailers have the ability to operationalize the data, the personalized promotions, recommendations, pricing, and experiment, according our research.
Once, loyalty programs were built around getting a physical card in a consumer’s wallet or purse; then, it became about being on a key fob, particularly in grocery; now it’s all about the app on the phone. Garf explains:
That means there's a degree of loyalty because there's so much real estate on the phone. That becomes almost the access point, the entry point, the remote control to how the consumer wants to manage the experience. The conversations I'm having, many times it's less about that app being the place where people can see their points. It's where people can see where the closest store is and see product availability and re-order and ask questions and it becomes a place for them to more control the relationship.
I think loyalty is hot right now. You're seeing it across the board. You're seeing digital wallets and it's kind of amazing because that real estate in the wallet was so important for so long in terms of company-branded cards. The reason why aggregate loyalty programs never worked because nobody wanted to give up that real estate and that brand.
Loyalty over the last few years has been defined by health and safety, convenience and trust. I'm going to do business with a brand or retailer because of that. What the common denominator is to me is removing friction. Take the friction out of the process. Having a card in the wallet isn't frictionless. Having an app on the phone that has location-based services, that has utility. That's key - having utility that removes friction.
He cites US drug store chain CVS as a case in point:
I am more than happy to provide my email and be a member of that [loyalty] program because they not only email me my receipt, but they now put my transactions available in the app. All the coupons that used to be on the back of that receipt, that was oftentimes two meters long, is now available in the app.
Love the store
There is also the question of the future of the store. As diginomica has long argued, keeping the store as a hefty part of the omni-channel balance may be tricky, but it is essential. Garf’s experience at the recent Shop Talk conference in Las Vegas affirmed that what he calls “the symbiotic relationship between digital and physical” is top of mind among retailers:
A head of store operations from a major retailer in the US asked the question of, 'You talked about the fact that the store associate is becoming a fulfillment expert or becoming a social media manager or becoming a digital concierge - what changes need to happen to make that work?'. I was a little surprised actually that that question was being asked, but my initial reaction was just this - the incentives need to change.
There's a lot of other stuff, but the incentives need to change. For instance, if you're asking a store associate to be a social media manager, maybe you should measure them on the number of followers they have, the level of engagement. If they're being asked to become a fulfillment expert, it's not just about scanning and bagging at the point-of-sale, but it's how many products or how many packages they are picking, packing and shipping. So there's a whole new mindset.
As noted above, the prospect of 2022 being one where the retail sector might be able to ‘pause for thought’ as it were was never particularly realistic, even before real-world events kicked in to create fresh pressures and uncertainties. As Garf observes, this is no time to take the foot off the pedal of omni-channel transformation.