In a recent Econsultancy report, Digital Transformation in the Retail Sector, most retailers indicated that they were well on their way toward achieving key goals of digital transformation.

More than half of the respondents stated that they were at least working on a 'single customer view' (59%) and 'customer journey analysis' (56%).

Yet evidence of changes in the retail customer experience are difficult to find. Most aspects of retail shopping haven't changed much in the past five years.

Accent Group, which manages multiple footwear retail shops and brands in Australia, has, however, pushed ahead with digital transformation and is now offering its customers a very different shopping experience, enhanced with digital technology.

To find out more, I spoke with Mark Teperson, the Chief Digital Officer of Accent Group and discussed many aspects of their digital transformation programme.

In part one of our talk, we discuss the group's digital transformation journey, the reaction of the international brands and what Teperson felt were the key characteristics of a successful digital transformation.

The business models

Accent Group consists of nine different retail brands and it has distribution rights for 10 international brands - including TAF, Skechers, Merrell - and it has a total 445 stores across Australia and NZ. I asked Teperson what the digital transformation journey has been like for a company with so many moving parts?

"It's a good question and one which I get asked more often than any other. I think what is important to know is that in the makeup of the businesses and stores, we operate using a number of different models.

"For The Athlete's Foot (TAF), Accent Group is a 'franchisor' with about 100 franchisees. So, with them, we have been doing digital transformation in a franchise business - that in and of itself could be a case study.

"Accent Group is also a licensee and, for example, we were the first distribution license for Skechers internationally and we have been so for 20 years. We work with global brands but manage them locally in Australia with very stringent brand guidelines.

"Our third business is those brands which we own locally in Australia, predominantly being Hype DC and Platypus Shoes. In these cases, we own that retail format and we can drive and dictate how that evolution comes to light.

"So, there are several competing business models and many variables that we have to contend with when we go about this."

Follow the customer

Teperson talks about the digital transformation journey starting and ending with the consumer. This isn't just a soundbite. Here, he elaborates:

"Everybody says that they have 'customer-centric strategies' and talk about 'putting the customer at the heart of everything you do'. I don't know if you have seen a picture in my presentations - on my wall in my office there is a quote from Sir Terry Leahy, former Tesco CEO: “Follow the customer, and you will never have to look for growth.”

"And that principle, that very salient principle, is what has underpinned all the innovation that we have brought through digitizing our business. 

"What do I mean by that? Our customers told us that they wanted click-and-collect, so we implemented it.

"And then, off the back of click-and-collect, our customers were looking for more product to be able to be purchased online. So, we then turned all of our click-and-collect stores into distribution points. We started thinking of our stores not only as experience centres for our customers but as distribution centres for our product. This means we are able to get products to customers faster, but we also open up the inventory pool.

"Doing so had a transformational impact, not only on the business in terms of the sales and the momentum that it built for us, but importantly for the customer as well. We were fulfilling more of their demand online.  

"And digital transformation has been built off the momentum that we have seen off of these innovations. Click-and-collect started and it was a great incremental lift. We saw overall about 10%-20% lift in our digital sales when we launched it. Then, when we did ship from store, we saw another 30-50% lift in our digital sales as a result. And so, this is why you should 'follow the customer'."

Same-day delivery and 'endless aisle'

On top of click-and-collect, Teperson expanded on what's next for tech and logistics at Accent:

"Consumers invariably value choice and service and so Accent Group is next launching same-day delivery and then 3-hour delivery. That will not just be from a warehouse, it will be from every single one of our stores across the country. This means that we'll have approximately 80-90% coverage of the consumer market and be able to get product to them within three hours across the country - which is a pretty amazing transformation.

"And because one of the learnings from ship-to-store or click-and-dispatch was to make all of our inventory available to customers online, we next want to solve the problem when we don't have the inventory in the store a customer is at, but we have it somewhere else.

"To do so, we are going to launch 'endless aisle', where a team member in one of our stores has access to every piece of inventory we own across the business. So, if the customer is standing in front of them, they can fulfill that desire for that customer and have it delivered to them free of charge next day, make the customers life and the experience better.

"So back to your question around digital transformation across the group. The take up of these pieces of innovation has been a little bit different across each of our brands, but it is always driven by what the consumer wants."

I asked Teperson if these initiatives get different reactions at different brands, stores and franchisees.

"You touch on an interesting paradigm," he said. "Comparing our own brands Platypus or Hype DC to the more complex franchise model, there are a lot more stakeholders involved in a franchise model and so digital transformation is a more complex journey.

"The brilliant thing about it though is that because we have done it before in all our company-owned businesses and licensees, we had a history of results. So, we could say 'this is not what we think - it's what we know'. And to be able to go to these businesses with a definitive case study or model around how something should or will operate makes the digital transformation business case easier."

Accelerating digital transformation

Next Teperson picked up the theme franchisees and their possible reluctance to accelerate their transformation.

"Regarding The Athlete's Foot (TAF), I was responsible for our first ecommerce execution five years ago.  At a national TAF conference they took a poll in the room asking the franchisees if they thought they should be online and, if so, in what time period.  The response was 'yes we should be there', but only sometime in the next 5 years. Within a few months after that, though, being online became the most important issue in the business to get solved and we deployed a website for them.

"To be able to go to these businesses with a definitive case study or model around how something should or will operate makes the digital transformation business case easier.

"But the challenging piece in that model is that the website, which had profit share with franchisees, was seen as a competitor to their business. So, we then changed the model so that all the fulfillment comes out of stores, the orders are allocated according to the proximity of the delivery address and the franchisee gets 100% of the benefit.

"That in and of itself has been a transformational change for our franchisees who no longer have to fear digital - and changes in consumer behavior - as being a threat to their business. They can now capitalize on these changes."

Teperson was pointing out that for Accent group, digital transformation is not only a digital issue but has elements of appeasing existing stakeholders in the business.

"I think this whole concept of digital transformation is such a profound topic," he says. "It's the biggest buzzword in the market at the moment and arguably every business is dealing with it. But when it comes to the really simple principles around what makes a successful transformation, what are the ingredients for those things, I think there are a couple of kind of key characteristics of it."

Characteristics of successful digital transformation

Teperson laid out these two key characteristics.

1) The customer

"The first thing is that the strategy starts and ends with the customer. More often than not, I see examples of brands which try to build monuments to themselves when they think about digital transformation. They build technology which customers don't want - and haven't asked for - but they think it demonstrates that they are digitally savvy. So, really listening to your customers around what they want is first and foremost."

2) Emotional intelligence

"But I think that what we probably don't talk about enough in digital transformation is the soft skills required to make us successful. And what I mean by that the emotional intelligence (EQ) that you need around a senior leadership table to position digital transformation in such a way that it is not a threat to the business - or more importantly a threat to someone else's job. Instead, digital transformation is a very empowering opportunity for solving business problems or customer problems or challenges that exist in the business - inefficiencies - through a digital lens.

"When digital transformation projects are thrust into a business it can create a very awkward political tension. Most people are, naturally, scared or resistant to what they don't know or understand.

"So, digital transformation is too often positioned as a complete change to the way we are going to operate instead of as an opportunity to discover how we can solve problems, how we can be more efficient, how we can help our consumers have better experience. It's really the lens in how you position digital transformation that can often be the difference between success and failure.

"What most people fail to understand is that a successful digital transformation requires the alignment of every single division in the business.

"In our vertical, it's retail operations. We have to make sure the stores are fulfilling on that seamless customer experience whether its click-and-collect or in store. Inventory levels need to be very accurate otherwise you're going to create a really poor experience for a customer who thinks something is available in the store when it’s not. 

"Finance, reporting, logistics, infrastructure, IT, and training are all key functions that need to come together to support the strategy.

"What most people fail to understand is that a successful digital transformation requires the alignment of every single division in the business.

"So, the customer is the most important reason around digital transformation - but emotional intelligence has to be the second most important element in terms of getting digital transformation right."

Momentum

I put it to Teperson that it's quite common to talk about senior level buy-in and technology integration as being key to successful digital transformation - but was he saying emotional intelligence is the underrated quality of a successful digital transformation project?

"Absolutely," he replied. "The senior leadership buy-in - let's call that table stakes - it needs to happen. You have to be able to respond to the different stakeholder dispositions such as where are they today in their understanding of digital, where do you need them to be and how can you help them bridge that gap.

"But those strategies need to be done at a very personal level on a one-to-one basis, and by building that coalition, you build momentum.

"I think the most important thing about a successful transformation is that once you have the customer vision right, and you have the right people who have that EQ and can influence people, the next key thing is the momentum.

"You can't do everything overnight. Where is the lowest hanging fruit? How can you prove it to the business? Not only the wins that you are delivering to the consumer but what are the financial benefits that are flowing from that? And then taking it forward from there."

This is part one in a three part series. Read parts two and three.

If you are interested in how Econsultancy can help you with your own digital transformation journey, get in touch.

Jeff Rajeck

Published 11 June, 2018 by Jeff Rajeck

Jeff Rajeck is the APAC Research Analyst for Econsultancy . You can follow him on Twitter or connect via LinkedIn.  

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