August 06, 2019

At the inaugural NRF NXT event last week, retail digital leaders met in Las Vegas to figure out what’s next for retail. Over the course of three days — with a series of keynotes, case studies and technical sessions to provide inspiration — one theme came to the forefront: Retail has traditionally organized around the store or the website; now it’s time to organize around — and optimize for — the customer. No one talks about doing business in anything other than a “customer-centric” way, but NRF NXT made it clear that the gap between theory and practice, or rhetoric and reality, is significant for many retailers. It’s time to close it.

Making customer-centricity real requires significant changes to retail operations, from how we define brands to how we drive innovation and manage the customer relationship. Merely articulating a new strategy does not deliver change. Rather, it’s the challenging work of modifying organizational structures, processes and systems — how people actually do their work — that delivers a new reality. At NRF NXT, we began to map out what realizing such changes might entail.

Understand

It starts with customer understanding. Every marketer or retailer knows there is frequently a dramatic difference between what consumers say and what they do. In a competitive world, just using surveys, focus groups and pop-ups doesn’t get the job done. Getting closer to customers by watching what they do is key. This insight takes a page from design thinking; the process starts with what’s called “customer empathy and discovery,” and it involves listening for pain points, exploring latent needs and asking people to talk about how they live their lives.  
Co-create

One step closer is to co-create the retail or brand experience with customers. At NXT, both new entrants like Dolls Kill and Rothy’s and legacy brands like Lilly Pulitzer and DSW talked about how they involve their customers in co-creating brand experiences, extending the brands into social media (with consumers as content creators and channels of distribution) and evangelizing the brand message to bring new customers into the fold. Co-creation is a powerful way to build loyalty; by giving customers the tools they need to create their own bespoke experiences, customers have a greater sense of ownership and an elevated desire to share.

Digital channels offer other opportunities to get close to customers, by gleaning first-party data from direct customer interactions. Two insights arose: First, access to rich first-party data depends on building consumer trust in brands. Under regulations like GDPR that mandate consumer opt-in, trust is essential for any brand aiming to personalize at scale. Second, data alone has little value without analytic capabilities to query the data. As a result, data science is an essential part of the retail equation.

None of these adaptations of the retail model come easily — the discussions at NXT illustrated the point. To talk about these new ways of doing business is easy; to make them real requires serious effort. And all of this must happen in a context of intensely competitive retail markets where the new scarce resource — consumer time, attention and purchasing power — is what’s really at stake for retailers. Every retail brand needs to refactor its DNA for an attention-scarce world, and that starts with changing how retail does business now.

Jeffrey F. Rayport is a faculty member in the Entrepreneurial Management Unit at Harvard Business School, where he teaches in the MBA and Executive Education programs. He consulted with NRF to create its NRF NXT event for digital retail leaders, held July 22-24 in Las Vegas.

 

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