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How to keep brick-and-mortar retail relevant in the digital age

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How can retailers succeed as the omnichannel retail environment continues to evolve?

With so many innovative ideas on the table and so much potential value at stake, the current retail landscape is ripe for business experimentation. While intuition may lead decision-makers to implement an initiative, its incremental profit impact cannot be accurately measured without first testing the idea with a subset of markets, stores, employees, or customers, and considering the impact in store, online and on mobile devices in a holistic way.

For instance, suppose a retailer planned to introduce a click-and-collect programme, hypothesising that it would drive an increase in transactions and ultimately profits. 

Without a scientifically-designed test, natural sales volatility and noise would make it incredibly challenging for the retailer to isolate the impact of introducing click-and-collect, likely leading to an inaccurate or inconclusive evaluation. 

However, a well-designed test would yield analysis with clear, potentially counterintuitive, results. Perhaps click-and-collect actually caused an overall sales decline, as a result of fewer in-store impulse buys. In short, it is dangerous to make assumptions about the response an initiative will draw in the marketplace, even if industry trends or customer preferences point to success. 

Moving beyond “Yes/No” decision-making 

While it is important to have a clear understanding of whether an idea was profitable on average, very few programmes cause the same results everywhere. 

In addition to answering, “Did it work?” a well-designed test can also provide insights regarding the types of locations or customers that responded best. Using these insights, retailers can intelligently target programmes only to the areas in which they are profitable.

For example, a new digital in-store display may drive incremental sales for stores located in areas with a more young and more affluent population, but may not resonate elsewhere. A retailer could leverage this information to target its display investments, thereby avoiding significant losses and maximising the programme’s profitability. 

Just as alternative purchase channels have disrupted the way retailers interact with the consumer, data analytics and in-market experimentation have revolutionised the business decision-making process. 

Relying on “gut feeling” is no longer enough, particularly in such a fast-paced retail environment where constant innovation and trial is essential to remaining competitive.

Rupert Naylor is senior vice president, Applied Predictive Technologies.

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