{"id":2315,"date":"2017-03-22T14:22:59","date_gmt":"2017-03-22T21:22:59","guid":{"rendered":"https:\/\/www.microsoft.com\/industry\/blog\/uncategorized\/a-shock-to-the-system-transforming-from-within\/"},"modified":"2023-05-31T16:45:13","modified_gmt":"2023-05-31T23:45:13","slug":"a-shock-to-the-system-transforming-from-within","status":"publish","type":"post","link":"https:\/\/www.microsoft.com\/en-us\/industry\/blog\/retail\/2017\/03\/22\/a-shock-to-the-system-transforming-from-within\/","title":{"rendered":"A Shock to the System: Transforming from Within"},"content":{"rendered":"

As the retail industry undergoes a digital transformation<\/a>, retailers and CPG brands are breaking out of their comfort zones to school themselves in the ways of startups and tech entrepreneurship.<\/p>\n

They’re shaking up timeworn business philosophies and ingrained modes of thinking\u00a0to make the necessary leap to a digital culture.<\/p>\n

The shift is playing out among the so-called titans of industries, from retail and consumer products goods to banking and hospitality, as all businesses these days must double as technology companies to survive.<\/p>\n

Technology-driven innovation is critical amid what\u2019s been called \u201cUbernomics,\u201d \u201cthe Uber effect,\u201d and \u201cthe Uber economy,\u201d whereby scrappy digital startups upended established, less nimble old economy giants. It\u2019s how Uber disrupted the taxi industry, and how Airbnb has nudged the hospitality sector into reset mode.<\/p>\n

Retailers are now tapping into startup and \u201chack\u201d culture to accelerate the cycle of innovation\u2014rapid prototyping, testing and learning\u2014that\u2019s so integral to the tech industry.<\/p>\n

The need for speed was one of the big lessons Brian Cornell, CEO of Target, gleaned from working with the entrepreneurs from its Techstars startup accelerator program. \u201cThe juxtaposition of our operation and theirs was stark,\u201d he said in a Target blog post<\/a>. \u201cStartups are measuring time in terms of months worth of funding. I saw first hand that we moved too slowly, too often,\u201d Cornell said. \u201cThis kind of [product and solution] innovation is vital for retail\u2019s future and will redefine our industry.\u201d<\/p>\n

Microsoft is learning too. During its annual \/\/oneweek Hackathon<\/a>, employees from varied backgrounds team up to dive into passion projects.<\/p>\n

They\u2019re given a week to birth a project or tackle a technology problem in the experiment-and-fail-fast startup ethos that can stoke the rise of great ideas that originate anywhere.<\/p>\n

The Hackathons push us toward agility and experimentation, and have produced more than 3,200 projects, such as the Microsoft HoloLens, the augmented reality headset that\u2019s being tested at home improvement chain Lowe\u2019s<\/a>.<\/p>\n

Legacy retailers are also adopting a digital culture by plucking talent from the tech-startup world and digital enterprises, and installing them in the C-suite at the big retail chains. It\u2019s evidenced by the rise of chief digital officers, who are working to bridge the gap between e-commerce and brick-and-mortar stores, and unlock their complementary profit potential.<\/p>\n

Quick Study<\/strong><\/p>\n

The world\u2019s biggest retailer has taken on the sector\u2019s ultimate disruptor, Amazon, by joining forces with e-commerce entrepreneur Marc Lore, who founded Diapers.com, which was sold to Amazon in 2012.<\/p>\n

Wal-Mart not only purchased Lore\u2019s startup Jet.com last year, but also named him president and CEO of Wal-Mart\u2019s $13.6 billion online business, tiny compared to Amazon, which boasts $82.2 billion in e-commerce sales.<\/p>\n

With the acquisition and Lore\u2019s leadership, Walmart is now taking on dynamic pricing, one ingredient in Amazon\u2019s secret sauce that\u2019s tripped up less agile legacy chains.<\/p>\n

Via dynamic pricing, online retailers can make infinite pricing changes using sophisticated algorithms in real time based on market conditions, be it to undercut the competition or maximize the sale of a hot item.<\/p>\n

But brick-and-mortar retailers, hobbled by 20th<\/sup> century systems, have struggled to keep pace with this \u201cborn in the web\u201d technology.<\/p>\n

Now Wal-Mart is jockeying to leapfrog Amazon with Jet\u2019s \u201csmart basket\u201d technology. The platform, which runs on Microsoft Azure, aims to further disrupt the retail-pricing paradigm with its name-your-price model.<\/p>\n

A consumer\u2019s bill shrinks as their online shopping basket fills up, so the more one buys, the more they save. And the platform also offers consumers the option to pay an even lower price if they forfeit the free-return perk. It\u2019s a potentially margin-boosting ploy, as, like free shipping, free returns are a huge profit drain for retailers.<\/p>\n

For Wal-Mart, the potential payoff of smart-basket technology is the ability to compete with Amazon\u2019s pricing prowess more easily and cost effectively.<\/p>\n

\u201cOur pricing engine will continually work out the most cost-effective way to fulfill an order from merchant locations closest to the consumer,\u201d Lore said in a Microsoft blog post<\/a>. \u201cThe engine will also figure out which merchants can fulfill most cheaply by putting multiple requested items into one shipment. And so we can cut probably 10% of a cost of a typical e-commerce transaction just by being smarter about fulfillment.\u201d<\/p>\n

In my next post on digital disruption within the industry, I\u2019ll talk about collaborative commerce and the democratization of retail. In the meantime, you can also access our new Microsoft resource on transforming retail<\/a> for the digital age.<\/p>\n

LinkedIn: Tracy Issel<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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