Billions & Bankruptcies: 3 Lessons on Digital Transformation in Retail
As eCommerce continues to gain momentum, the days of human stampedes through department stores on Black Friday could be approaching their end.
Digital transformation in retail is bringing us to the cusp of a new era — one in which record-setting shopping extravaganzas can occur in the comfort of your own home instead of in chaotic lines at 4 A.M.
Online shopping isn’t a novel concept. But some companies, like the global conglomerate Alibaba, are redefining eCommerce for both businesses and consumers.
$1 billion in a flash
Alibaba netted $1 billion in sales during the first 68 seconds of the 11th edition of Singles’ Day, the world’s biggest shopping event. After a half-hour, that figure rose to $10 billion. By the end of the day, it closed $38.4 billion in sales, easily passing last year’s world record of $30.7 billion.
At nearly the same time, well-established brands like Forever 21 and Sears are shuttering hundreds of stores in the throes of bankruptcy.
What sets apart the success stories from the strugglers in the digital era, and what lessons can retailers glean from superpowers like Alibaba?
Slow to transform, quick to decline
Take Forever 21. The fashion chain thrived in the early 2000s and rapidly expanded from seven countries to 47 in under six years, at its peak operating 600 stores globally. But as foot traffic to malls slowed down and consumer preferences shifted online, the enterprise began to struggle.
According to Forever 21’s Executive Vice President Linda Chang, just 16% of its sales come from online shopping. The business strategy’s emphasis on its brick-and-mortar stores hasn’t been serving it in the digital era.
The company disclosed that its revenue declined from $4.4 billion in 2016 to $3.3 billion in 2018. In September 2019, the retail chain filed for Chapter 11 bankruptcy.
Additionally, it will shutter 350 stores globally, including 111 in the U.S.
Sears tells a similar tale. The big-box retailer filed for bankruptcy a year ago, using the last 12 months to repay its debt. Its survival plan included shutting down 60% of its stores (down from 1,000 locations to 400), though it recently announced additional closings.
On top of its financial distress, Sears has lacked the leadership to give its turnaround a chance. Void of a CEO for the last 12 months, the American staple could be forced to liquidate.
What can retail leaders learn from these stories?
Lesson No. 1: Digitalization is not digital transformation
First and foremost, digital transformation in retail is not the same as making your products available online. It’s not a side project or a supplementary strategy.
In the digital age, consumers demand and expect a personalized shopping experience, total convenience, helpful customer service, and rapid delivery. The only way to achieve this is to provide a comprehensive digital experience — one that accounts for and optimizes each touchpoint of the customer journey.
Lesson No. 2: Powerful digital capabilities will uncap your potential
Think about how many individuals it takes to generate $1 billion worth of sales in just over one minute.
The volume of shoppers across Alibaba’s sites was as high as 544,000 orders per second on Singles’ Day, thanks to its Aspara Operating System’s data processing and analytical capabilities.
Where most servers would likely crash with this amount of action, Alibaba Cloud said its artificial intelligence and AI technology enable it to achieve “zero downtime.”
By creating a powerful infrastructure to support the scale and scope of the event, Alibaba can ensure the best possible business outcomes while providing an engaging, fun, and reliable experience to its customers.
Lesson No. 3: Make accessibility a top priority
Another impressive fact: AliExpress’s machine translation service was used 1.66 billion times during Singles’ Day, according to South China Morning Post. On top of that, more than one million orders were placed and processed through voice command.
Making Alibaba subsidiary products accessible to international residents is the only way to reach the half-billion shoppers it aimed for.
While few businesses desire to reach as many markets as Alibaba, the principle remains constant. You should be asking:
- Who is my target audience?
- Where are they?
- How can I reach them?
- How can I use digital capabilities to maximize accessibility?
Digital transformation can serve many purposes, but an essential one for retailers is increasing access, convenience, and the overall customer experience.
Don’t settle for the status quo
Successful eCommerce businesses can offer many tips about successful digital transformation in retail. The common denominator among all of them is that in the technology era, transformation is a continual process.
Even global conglomerates like Alibaba are always striving to change, progress, and improve.
Jeff Zhang, CTO of Alibaba Group, put it this way: “Alibaba Group is like a highspeed jet that is capable of upgrading its engine during the course of flight.”
Adding basic digital capabilities is the first step to digital transformation in retail. It’s dipping your toe in the deep end. By cultivating a mindset that rejects the status quo and seeks new ways to develop your business digitally, you can harness new opportunities and drastically improve business outcomes.