Leverage new opportunities or risk ‘death blow’
Steve Laughlin, IBM VP/GM of global consumer distribution
“The last best experience anyone has anywhere becomes their expectation everywhere,” and the retail experience is no exception. That was the message conveyed by Steve Laughlin, VP and general manager of global consumer industry at IBM, in his CVS Health Innovation Summit presentation.
Laughlin noted that heightened consumer expectations, coupled with increased efforts by manufacturers and distributors to adopt a “direct-to-consumer” sales model, should be compelling drug chains and other retailers to leverage new opportunities in their businesses — or prepare for a “death blow.” He outlined several building blocks for capitalizing on these opportunities.
Leveraging cognitive systems
The retail industry as a whole is doing a poor job of harnessing data for such competitive purposes as enhancing customer engagement, in part because so much of that data is unstructured and, consequently, difficult to analyze, according to Laughlin. Cognitive systems comprise a good solution here because they understand imagery, language and other unstructured data (e.g., comments on social media), as well as have the ability to reason, grasp underlying concepts, form hypotheses and extract and infer ideas. Additionally, such systems can learn; their expertise sharpens with each action, data point and outcome; and they can interact with humans in a natural way.
Applying artificial intelligence
Laughlin pointed to the example of “shopping bots,” such as the Macy’s on Call shopping bot piloted last year by the Macy’s department store chain and developed using IBM’s Watson artificial intelligence platform. To use these shopping bots, customers type questions pertaining to the general or specific product they seek (e.g., women’s dresses or a woman’s dress by a certain designer) and are directed to its exact location.
Re-imagining the store
This involves reducing the volume of inventory available in store (although not necessarily from an alternate location, such as a distribution center) and decreasing the amount of space devoted to merchandise. The objective, Laughlin explained, is to give retailers sufficient space to undertake initiatives associated with their mission. For drug stores, these initiatives might be centered on wellness, fitness and helping consumers live a healthier lifestyle.
In re-imagining their stores, Laughlin said retailers must bear in mind how consumers think. He cited a pilot program introduced by Target and Home Depot. Both retailers featured a display of teakwood patio furniture in their stores, but the products were unavailable there — only via two-day delivery.
The results were different, Laughlin said, because Target customers don’t typically think about buying patio furniture there, so the products were purchased on impulse and the wait for shipping was not a problem. Conversely, Home Depot customers might indeed consider the retailer’s stores a destination for patio furniture.
Individualizing the shopping experience
In an individualized shopping experience scenario, personality profiles derived from consumers’ shopping history and customer analytics are used to deliver unique product recommendations online and in store — for instance, through mobile offers delivered while a consumer is standing in a store aisle. Each click of a consumer’s mouse or action taken in a store sparks further personalization and recommendations.
Adopting hyperlocalization practices
These practices include using not only historical and other internal data, but also external data, to plan store locations, merchandise assortments and finalize merchandise allocations. Laughlin said one chain utilizes Watson to curate information on the behavior of individual stores’ competitors and adjusts its own activities, such as price adjustments, accordingly.
Engaging in ongoing experimentation
Keeping pace with disruptive forces in retail necessitates a willingness to experiment with technology and data to interact with shoppers, building stronger relationships with them. Retailers need to deviate from their scripts and test different ways to engage customers. "Retailers need to act like the disruptors with which they’re competing,” Laughlin said. “It means moving quickly and, more important,” being willing to fail.