Then the COVID-19 pandemic hit in 2020, brick and mortar retail stores closed with the exception of a few players such as Walmart, Target, supermarkets, Home Depot and Lowe’s. Suddenly, digital transformation efforts looked a bit more pressing. Digital sales surged, delivery models emerged, and curbside pickup and store fulfillment became omnichannel staples amid stay-at-home orders. The latest batch of retail earnings have highlighted the transformation that’s occurred in the retail industry. What has emerged is a transformation playbook and model for further technology investment. Here’s how it happened. Technology spending accelerated because retailers had no choice. Yes, there were a few retailers who were thinking ahead. Target’s purchase of Shipt for instance made it look like the company had a crystal ball. Walmart was heavy into e-commerce before COVID-19 hit. But debt-ridden retailers trying to slow-walk digital transformation stepped on the gas. Let’s hear the retail CEOs tell the tale. Jeffrey Gennette, CEO of Macy’s, said on the company’s second-quarter earnings conference call: Edward Stack, executive chairman and chief merchandising officer for Dick’s Sporting Goods, said on the company’s earnings call: In the second quarter, we attracted nearly 5 million new customers to Macy’s, which is a 30% improvement versus 2019. Average customer spend in the quarter was up 10% compared to 2019 and up 2 points compared to the trend in Q1 of 2021. Corie Barry, CEO of Best Buy, said: “Over the longer term, we are fundamentally in a stronger position than we expected to be in just 2 years ago.” Barry could have been talking about much of the retail sector. Omnichannel went from nice to have to necessary to survive. Target has become an omnichannel poster company as has Walmart. Target CEO Brian Cornell said the transformation that accelerated in 2020 is just starting. He added that in-store pickup such as its Drive Up service and Shipt account for more than half of its digital sales. “Among those same-day options, Drive Up has quickly grown to be the largest, accounting for more sales than pickup and Shipt combined,” he said. Comparable digital sales grew 10% in the second quarter, building on the record growth of 195% last year.
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Walmart CEO Doug McMillon said: Dick’s Sporting Goods CEO Lauren Hobart said the retailer is using data to offer more personalized promotions via its ScoreCard loyalty program. Hobart said a big pillar for the company is increasing its database of athletes–the core customer of Dick’s. Hobart said it added 8.5 million athletes to its database in 2020 and 2 million in the most recent quarter. She said: Best Buy CEO Barry said the company is leveraging data to predict buying intent as well as train workers to offer better service and increase Net Promoter Scores (NPS). Retailers understand it’s a mobile-first customer. “We continue to improve our online shopping experience. This includes our strategy to lead with mobile, which for the first half of 2021, represented over 50% of our online sales as well as faster delivery times and an enhanced shopping and checkout experience,” said Hobart. Target has added a feature called School List Assist to enable partners to find supplies and buy a list with a click. Another feature, internally known as “promo FOMO”, will show Target offers before checking out. And Best Buy is working on mobile app checkout. Retailers learned technology investment is now critical to an enduring model. Macy’s Gennette said the company’s recent operating leverage will enable it to continue to invest in the business. Walmart’s McMillon said the company is investing in technologies that can scale into new businesses across the company. “More than 30 applications across five countries are leveraging cloud-powered checkout for retail transactions. Things like building a 360-view of the customer using machine learning are important for our business in the U.S., but it’s also important in other markets. That’s why we’re now leveraging this technology in Mexico and in Central America,” said McMillon. Target’s John Mulligan, chief operating officer, said he’s an engineer by training and the bet is that the company can leverage automation to augment the productivity of its employees. Mulligan said: This is another example of the power of “and”, and how it runs through every part of our business. The choice doesn’t have to be about people or technology. We can invest in both people and their productivity.
