3 Ways Legacy Retailers Are Finally Catching Up to Digital Transformation

From experts at Shoptalk

There's a renewed focus on what legacy retailers are doing this year. Getty Images
Headshot of Ann-Marie Alcántara

There’s change in the air in the retail industry, where executives are shifting their conversations away from discussing whatever marketing tactics these direct-to-consumer (DTC) companies employ to paying more attention to what the legacy retailers are doing—and if they’re in the midst of a digital transformation.

At this year’s Shoptalk conference in Las Vegas, executives at retailers like Gap and Nordstrom owned up to their missteps while simultaneously telling attendees broad plans for their future. Adweek spoke to a number of experts in the space to find out what retailers can do to stay relevant.

Shifting perspectives

Innovation at long-standing companies, whether it’s a Macy’s or a Walmart, requires “a lot of cultural shifts” and “innovation” to reach younger consumers, said Moiz Ali, CEO and founder of Native, a DTC deodorant company acquired by P&G in 2017. That can look a variety of different ways, said Ali, noting that Walmart, for example, doesn’t necessarily need to create a lot of DTC brands because they’re addressing issues around shipping (like two-day shipping) and logistics (buy-online-pickup-in-store).

“I think the best brands are striking the right balance,” Ali said. “In reality, the path [at these companies] should be to both acquire and build internally.”

Part of that cultural shift Ali references includes changing what a retailer can offer, such as going from pure commerce to extending services, like Best Buy’s Geek Squad, a dedicated 24/7 tech support, said Tomer Tagrin, CEO and co-founder of Yotpo, a marketing services agency.

“The ones that will succeed are the ones who will be able to transform themselves into a different business model like services or will be able to find themselves in their brand—[like a] private label product and launching their online brands,” Tagrin said.

However, Jon Reily, vp, global commerce strategy lead at Publicis.Sapient, thinks we’re entering an era in which retailers are understanding these shifts and making changes, instead of pretending “everything’s fine.”

“The first step to getting healthy is to admit you have a problem and I think retailers are starting to admit they have a problem,” Reily said.

Removing silos between teams

The one key difference between a traditional retailer and a DTC brand isn’t their goals but how they structure their teams, said Amy Vener, head of retail strategy at Pinterest. With DTC brands, companies are thinking of their consumer in a holistic manner as one customer versus thinking of them as the customer that came through Facebook or an email marketing campaign.

“Talking to retailers, traditionally, there’s oftentimes many silos,” Vener said. “So while I have an ad budget I’m only counting part of the value.”

Breaking down those silos between teams like who manages the online customer vs. the in-store one, and understanding that using different channels like social or digital advertising can reach the same consumer is an important step. It’s also crucial to factor that into all the different goals going on at a company.

“It’s almost like they’re looking at these initiatives and treating it as two separate consumers and we know that’s just one,” Vener said.

Continuing to meet the consumer where they are

Michael Rouse, chief commercial officer at Klarna, a payments company, said he’s seeing a shift in how retailers communicate with their consumers, trying to create direct connections with them—similar to the IOUs retailers used to do. And while that’s now chalked up to the ominchannel buzzword, ecommerce and retail are bringing back that touch of personalization and intimacy.

“It’s about, how do we start to talk to the customer again in a way that we recognize the customer? Because as much as online is growing, 80 percent of sales [are] still in physical retail and we’ve lost the ability to have that dialogue,” Rouse said.

Private credit card programs used to bridge that gap, but Rouse said retailers are creating loyalty that looks different than it used to. One of those techniques is through influencer marketing and tapping into how people actually get recommendations these days.

“Influencer marketing is creating tribes of people that generally don’t communicate in the same way to brands that’s happened before,” Rouse said. “People are following influencers; Gen Z is going to influencers to get their recommendations, they’re not going to additional channels.”

Brands realize that they don’t need to create every single solution (like a personalization engine) themselves if it’s not their “core competency,” Rouse said, especially if it slows down the customer journey.

“Your time, your convenience is no longer what it was for whatever reason,” Rouse said. “We want to waste our time on experiences, not shopping at shopping malls as we used to.”

@itstheannmarie annmarie.alcantara@adweek.com Ann-Marie Alcántara is a tech reporter for Adweek, focusing on direct-to-consumer brands and ecommerce.