A few weeks ago I joined thousands of retail executives, technologists, and vendors at “Retail’s Big Show,” the 2017 NRF Convention & EXPO. As usual, the halls were full of the latest gadgets from POS to RFID and even a big push from a new-comer – Virtual Reality. Originally my intention was to share my conference experience in order to highlight the new trends and buzzwords for those of you who couldn’t make the trip to NYC. But after attending the Exhibitor’s Insights Discussion with co-headliner Kohl’s CTO Ratnakar Lavu something really connected and this blog took a turn.

The Exhibit’s Success Story began with an articulation of the Kohl’s digital journey which is both fixated and centered around the customer experience. This, of course, shouldn’t be a surprise as the Omni-Channel movement has long paved the way for a unified customer experience across all major sales channels – especially digital. Industry leaders have already enabled their customers to have a uniform shopping experience across – website, in-store, mobile, social, etc. I’ve even worked with eCommerce retailers that extended their digital footprint into IVR, TV and soon-to-come Streaming channels. As an example, an omnichannel shopper can discover and add items to their cart on the Kohl’s website, try them on at the most convenient store location with an assurance of availability due to a Real-Time View of Inventory, make a delayed purchasing decision on their mobile device and have the purchases ship-from-store to their chosen address. Great – this was the omnichannel vision after all – so naturally, the discussion’s moderator asked what’s next…

“What’s next in the digital journey to enhance the customer experience?”

Ratnakar Lavu began speaking about the future of customer engagement which included empowering Sales Associates with a Kohl’s Mobile App – this was my connection – my mind was instantly brought back to an executive-level roundtable in early 2015, hosted by GigaSpaces Technologies on the topic of Omni-Channel, with attendees from Bloomingdale’s, L’Oréal, Ralph Lauren, eBay, William-Sonoma, Avon, and more. After introductions, each executive shared their opinions about the Omni-Channel movement and their company’s plans to embrace it for an improved customer experience. The discussion went around the room and after a while – it was my turn.

I’m not sure if it was the 2nd glass of Macallan12 or the Ghost of Retail Future but something took over – I encapsulated earlier customer-centric viewpoints into a conclusion on how the wealth of information, enabled by digital technologies, has empowered the Customer at the disadvantage of the Sales Associate, Store and potentially the Brand. After discussing the point further with a few executives, we agreed that the future of Omni-Channel, for Digitally Transformed Brick & Mortar Retailers, must have consideration towards a balance of power between the Sales Associate and Customer. This could be achieved by empowering the Associate with counter-intelligence about the Customer’s digital wish list, shopping cart items, previous orders, predictive recommendations, etc.

But alas that roundtable was two years ago – so fast forward to this year’s NRF when I approached the Kohl’s CTO for a post-Exhibit discussion – sure enough, he was way ahead of me. Lavu told me, “Empowering the Sales Associate is important, but we have to be mindful about overburdening them with too much data as it could inhibit a quick and efficient response to the customer’s dynamic needs”. Then he rhetorically asked a question which took our discussion to the next level…

Digital Transformation in the Retail Sector: Kohl's Journey

“Do we need sales associates to service all customer segments?”

At first, I was taken aback as this was not a question I had yet to consider. But as Lavu continued, it made perfect sense.

“We have to service multiple customer segments, including both Generation X and Millennials since each group enjoys a very different type of shopping experience. While a Generation X shopper may be accustomed to asking for an associate’s advice, a Millennial shopper could be more prone to interacting with a digital device relying solely on communication with a chatbot.” – Ratnakar Lavu, Kohl’s CTO

It’s easy to forget that younger generations have lived their entire lives relying on technology for information and communication. As technology integrates deeper into their personal lives, it shouldn’t be a surprise that millennials have grown accustomed to being self-serviced by interactive mobile apps instead of actual people. In fact, a recent study found that this phenomenon extends beyond millennials – more than 1 in 4 consumers prefer to use chat technology when interacting with retailers – surpassing both phone and email as the most popular customer service channel.

“Messaging apps are incredibly valuable for retailers looking to embrace relationships with consumers, particularly millennials” – Scott Horn, [24]7 CMO

These chatbots are interfaces enabled by machine-learning algorithms to mimic a Customer’s conversation with a Sales Associate or Customer Service Representative. Beyond answering common questions such as “where is my order”, chatbots can provide users with the convenience of scrolling back through their conversation history, check inventory, recommend complementary products and show top-rated reviews.

This doesn’t necessarily mean that Sales Associates will be left behind. In fact, Lavu said that Kohl’s Associates are now equipped with a mobile device that has built-in intelligence which helps them determine the optimal method of fulfilling an online order within the store. While limited in capability, let’s not forget Lavu’s earlier warning about overloading the Associate with too much data. Also, keep in mind unlike the niche market of Christian Louboutin – my wife’s favorite shoe brand and my sworn enemy – Kohl’s has millions of loyal customers which generate huge daily volumes of data. While creating a personalized experience for each consumer is a focus for Kohl’s, they are rightfully conscious of the investment for such an undertaking – it also provides us with a perfect segue into Customer Analytics…

“Will customer analytics take personalization to the next level?”

Retailers know that consumers seek a personalized shopping experience which doesn’t cross the “creepy” line. To achieve this, retailers face three fundamental problems – first, how can they collect enough customer data to make a personalized recommendation which will lead to a new sale or upsell? – second, how can they effectively store and process that “Big Data” which will inherently come with tracking engagement for millions of customers? – third, how can they mobilize that data in real-time to provide the recommendation and personalized experience when a customer is actually seeking it?

According to Lavu, Kohl’s is actively working to answer these questions by leveraging machine learning, artificial intelligence, and chatbots. It starts with gathering data by converting customers into Yes2You Reward members and active users of the Kohl’s Pay Mobile App. According to a recent NRF article, Kohl’s Pay Mobile App had 12 million downloads letting Kohl’s cardholders combine all of their coupons, discounts, and points with one scan at checkout. Besides providing customers with a simplified shopping experience, the data gathered as customers move between channels provides Kohl’s with analytical insights – informing decisions on merchandising, allocation and localization – all with the goal to “drive the best customer experience possible,” he says.

With regards to storing and processing Big Data, Lavu explained that it wouldn’t be scalable to create personalized digital content for the millions of Kohl’s customers nationwide. Instead, Kohl’s is focused on enhancing their search engine capabilities to deliver personalized search results and recommendations. In addition to traditional product-based offerings, Kohl’s is also using machine learning to detect patterns in consumer website analytics and price points.

“We look at our business holistically because everything works together. We’re making good progress toward our vision around data-driven insights to leverage them across the company.” – Ratnakar Lavu, Kohl’s CTO

Final Thoughts

A recent study, by the Pew Research Center, found that 64% of Americans still prefer shopping at physical stores over online e-commerce – indicating that brick-and-mortar retailers are not going away. While this is good news for Kohl’s, their CTO understands that simply relying on what worked in the past will not be a successful strategy as e-commerce’s popularity continues to grow. This also explains why innovative retailers have already embraced the digital journey which is no longer solely focused on omnichannel.

Earlier we discussed empowerment and a balance of power. Online consumers have all the information, all the time to make a decision, all the competing brands just a click away, and no pressure to purchase. In-store, however, consumers are locked-in – the sales associates, the strategic shelf layouts, the complementary product offerings, the flashy marketing signs, that delicious KitKat right before the checkout counter – it’s all in the store’s favor and retailers know it.

Hence the digital journey has recently taken a detour – no longer is the road simply to virtualize the customer experience – retailers have slowly begun leveraging digital strategies to lead customers back to their physical stores. But this time it’ll be different – this time there’s Wi-Fi, this time there’s a mobile app so you don’t forget the coupons, this time you can scan a product using your phone and scroll through its reviews, this time when you ask for a recommendation the sales associate can use customer analytics to actually get it right  – this time there are a balance and it’s personalized to you.

So what’s changed to make this possible? In large part the answer is technology. The recent convergence of In-Memory Computing and Big Data Analytics have opened the door to process transactional event-driven workloads (OLTP) and machine learning analytical algorithms (OLAP) on a single platform in real-time  –  Hybrid Transactional/Analytics Processing (HTAP). But now we are going from the forest to the trees which we’ll cover in a future blog. Until then, enjoy those KitKats, my friends.

Digital Transformation in the Retail Sector: Kohl’s Journey
Allen Terleto
Director, Customer Solutions @ GigaSpaces
Allen Terleto is responsible for direct sales, customer solutions and business development in the Eastern U.S. With over 10 years of engineering experience in middleware technologies, holding positions in both architecture and development, his technical background includes experience with distributed, high-volume and scalable enterprise systems, service-oriented architectures and in-memory compute technologies. Allen has earned multiple degrees including a Bachelors in Computer from the NYU Polytechnic School of Engineering, an MBA and a Masters in Information Systems Management from Stevens Institute of Technology, and is currently attending the NYU School of Professional Studies to acquire a Graduate Certificate in Enterprise Risk Management.
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