There has been much talk about digital transformation for a few years now. Certainly, the pandemic accelerated this change within companies, which had already begun to move (quietly) towards new worlds. But even after many steps forward, that transition is not over yet, and perhaps never will. As we speak of it, what was new a minute ago has already been surpassed.
The challenges, after all, are many: improving customers’ experience, expanding into new markets, implementing sustainable practices compatible with a newfound (hopefully) social responsibility. Digital transformation has played a central role in this. Innovation is the answer to many of our problems, as it leads to process optimization, breaking down barriers, bringing to life better performing products and services, creating new business models, supporting communities and working toward a better future.
If we connect, for example, payment systems to other parts of the business organization, such as inventory management and supply chain, it gives rise to more satisfied consumers and happier companies willing to continue investing in innovation. The time has therefore come for companies to adopt a vision of digital transformation that is as holistic and unified as possible.
Take fashion retail as an example: according to Statista, in 2022 the digital retail market in Italy is worth 45 billion euros and will grow by 15% annually until 2025. In the retail of the future, technology is proving to be central in creating the most interesting customer experience, with seamless shopping, characterized by fluidity between online and offline, highly personalized, with circular logistics and perhaps even virtual fitting rooms. As McKinsey’s article “The future of shopping: technology everywhere” (2022) reports, the impact of new technological solutions would be able to double retailers’ EBIT as well as make the approach to the new consumer, who is increasingly hyper-connected, informed and demanding, more and more personal.
Looking at the in-store experience, new payment solutions – via mobile POS or QR code and endless aisle shopping, that is, with terminals that can be used to check for additional stock for home delivery – make consumers more willing to buy (Retail Report 2022 by Adyen and KPMG). In addition, payment data, when analyzed, allow for better profiling of consumers, their preferences and needs, enabling the development and implementation of more effective marketing strategies aimed at customer loyalty. In fact, it is no coincidence that one of the rising trends is big data analytics, which in the specific case of retail takes the name of “retail datafication.” Data analytics tell us, for example, that most consumers are more willing to purchase with cross-channel flexibility (such as, for example, the ability to buy online and make returns in store). Knowing this, companies may then decide to incorporate these purchasing methods, which then assume changes in terms of both processes and business model: in fact, while companies find themselves with stock movements between online and physical warehouses, the business model may include a decrease in franchising and multi-brand channels, if previously present. This is because a customer who has purchased from the company that owns the brand will only be able to make a return in a DOS (Directly Operated Store, that is, a store owned by the company itself). The use of First-Party Data (i.e., company-owned big data about its customers obtained through direct interaction with them) and a direct market outlet gives rise to a transition to a D2C (direct-to-consumer) model. This approach enables companies to control, direct, and maximize a commerce ecosystem by leveraging once-unattainable flexibility and innovation in the customer journey, such as increasing revenue, reducing costs, improving cross-selling/upselling capabilities, and responding to new commerce opportunities (Forrester Opportunity Snapshot, 2022).
The online experience must complement and embrace the physical retail experience: from social networks to fast and secure payment, from virtual fitting rooms to gaming and NFTs. The two worlds must interact constantly so that the customer experiences the brand seamlessly in an experience that can be called “immersive.”
Across sales channels and all touch points of the customer experience, circular logistics is another indispensable factor in fashion industry innovation. The ability to track goods and assets in real time throughout the supply chain is necessary in order to have dynamic order management to support online sales and the physical store, as well as to reduce production waste in response to a more sustainable and transparent business vision (Roncucci&Partners has previously written about this topic).
So far, we have discussed specifically about the fashion industry, but this is an argument that applies to any industry. Any digital transformation necessarily also leads to innovation in terms of processes (new ways of billing, procurement, data collection and analysis, CRM, etc.) and business models, which in turn imply new ways of management.
Like it or not, this progress is necessary to deal with a world that is different today than it was yesterday: as Simon Sinek writes in his “The Endless Game”, in order to survive the changes of the times, a company must know how to embrace those changes and allow itself to be transformed by them.
Valentina Gestri Paolucci
