(bright upbeat music)
- I'd like to start by saying a big thank you.
I want to thank Paul Zahra and the entire ARA team
for hosting today's event,
but also for the incredible leadership you've shown
in a relatively short time.
It's wonderful to see the strong vision
and strategy that you're shaping
for the Australian retail sector,
and we at Microsoft are delighted to play our part
in supporting that.
But I also want to thank you,
it's no exaggeration to say
that retail has changed dramatically in the past year.
And all of you, as business leaders,
digital officers,
operations executives,
customer and supply chain managers
and store workers,
have transformed an innovative in unique
and inspiring ways.
From Smart Logistics to contactless shopping,
you adopted new digital tools
and developed new digital capability
in response to every challenge.
It's fair to say,
there has been this collective awakening including
the tech industry to say,
"Wow, we do have the resource
and digital tech that allows us to not only transform
and pivot fast to new circumstances,
but also gives us resilience.
These two words, transformation and resilience
through digital tech have been the big awakening.
And we've seen this across many retailers.
Large, medium and small.
Your capacity for innovation kept
the Australian economy moving during lockdown and recession.
And now in 2021, it will power our recovery.
And whilst the events
of 2020 gave us no choice but to innovate,
fast, the imperative for 21 and beyond is even greater.
What do I mean?
Haven't retailers already done more
than their fair share of digital transformation?
Isn't it time to slow down and return to business as usual?
Well, no, the argument that I put to you
is that the era of rapid change isn't over.
In fact the imperative to operate
at even greater agility and speed,
is just as critical now as at the height of the pandemic.
And here's why.
Amongst the many innovations
and successes we've seen across retail these last 12 months,
we also saw how the increased reliance on digital,
proved to be a test for many
where existing weaknesses and pain points went
from being relatively minor issues,
to major strategic flaws.
Matt Shea and our president shared in his opening
some global trends,
one around the uneven performance across sectors prior
to the pandemic which became starker during
where we saw a divide
between essential and non-essential retail.
So for the retail sector to thrive
and avoid there being an industry of two sides,
strong and weak,
all businesses need to strengthen their digital muscle.
Secondly, the economic value of Australia's ability
to fully harness digital technologies is too significant.
It's estimated to be worth $315 billion of net new value.
As an example, in 2019 pre COVID,
the economy was $126 billion larger,
due to productivity gains enabled by AI,
big data and advanced manufacturing.
So, our ability to continue generating growth
is crucial as we make up for lost ground,
grapple with unemployment,
a weak global economy and uncompetitive exchange rates.
Finally, given retail's contribution to Australian GDP,
and being one of the largest employees,
particularly of young Australians
who are in healthcare and social services.
Retail is best positioned to lead this effort
for the Australian economy
by continuing to transform and innovate processes,
operations and create new products
and services leveraging the capabilities
and muscle you've already started to develop.
The incredible opportunity ahead,
is instead of simply adopting these tools and capabilities,
We want to see retailers hard wiring them
into their everyday nature, their business models.
I like to think of this process as digital stickiness.
It's the process of ensuring that innovation sticks.
It's a practice of making transformation business as usual.
But what does it look like in practice?
I want to answer that question
by looking at four major trends impacting retailing in 2021.
Now some of these were touched on in the opening keynote,
and I also want to share some examples
of retailers leading the way.
If digital stickiness is a destination,
it's during the course of the sector's longterm future,
then the trends in fact represent the bridges to get there.
The core business drivers if you like
for innovation that will unlock economic and social value.
The first one I'd like to share and talk about is data.
More specifically, the way data is exploding.
Just taking a look at the slide,
you may know that the amount
of data we generate over the next three years,
will exceed the amount we've created over
the past three decades.
More importantly, consider the volume of data that passes
through the retail ecosystem each and every day.
Be it payment and transaction data,
web searches,
customer service channels,
social media,
employee comms and marketing,
retail in many ways represents
the demand signal for our economy.
And as you think about your data,
be it merchandise,
the employee store, your data increasingly
is becoming as important,
in some ways more important,
as your physical assets.
We've seen how data is integral to innovation.
The challenge is how to make sense of it all
because most of the data generated today
about 80% is unstructured.
At least it's not structured in ways
that most legacy IT systems
and tools and processes can handle.
For context, we're talking 40 petabytes
of data being generated per hour.
10 petabytes is equivalent
to 10 billion photos on Instagram.
So it's huge, which is why the priority
for any retailer trying to innovate is to organize,
analyze and action the massive unstructured data
that's available to them.
In trying to make sense
of the data increasingly we are seeing customers
like Walmart and Walgreen and Kmart,
set up actual media centers to better understand and harness
to become a true asset to help them monetize
and bring to bear all
those great innovations we often talk about
such as order fulfillment of supplies systems,
personalization and everything in between.
We talked to many retailers
about data management and analytics
and I can tell you
that analytics capabilities is absolutely seen
as a competitive advantage
and that any business who lacks it will struggle
to remain relevant.
One example I'd like to share
is Chipotle a major Mexican fast food retailer
in the U.S doing amazing things in this space.
It all started when the company decided to invest
in collecting data to gain a single view of their customer.
Prior to this, their only insight
into customers was through transaction and receipt data.
Chipotle's marketing team knew that
if they were going to innovate
to provide better customer service they needed
to analyze the data and really better understand
their customers because it came
from so many channels.
It was completely unstructured.
So we partnered with them
to help build a new platform that gave
them the ability to standardize and analyze an action,
all their customer data.
Now, as well as transactional and geographic insights,
they can now see what customers are interested
in particular areas
such as lunch or dinner,
whether they're interested in vegetarian options,
or meat dishes,
do they prefer online orders
or in-person dining.
So it's incredibly straightforward
for them now to tailor specific offers
to make sure the right person receives
the right communication.
And then they launched a loyalty program
that unleashed a tone of data
about customer preferences and purchasing habits.
It became so popular,
they had 17 million customers sign up
within the first few months.
So that's just one example of what retailers can do
by standardizing data on the one platform
which is a huge step
towards building foundations for innovation.
The next trend I want to talk to you about
is customer loyalty.
One of the most surprising things we've seen
and learned from COVID,
was that convenience triumphs loyalty.
When supply chains became unstable,
and Australian consumers couldn't find
their preferred product,
many switched brands without a second thought.
When delivery times offered by one retailer were too long,
the same thing happened.
Shoppers just jumped onto a competitor's website.
This loyalty shock compelled retailers
to find new ways to meet their customer needs.
We saw this particularly
in grocery stores who really stepped up
their digital purchase channels in response
to closures and social distancing.
We worked with Woolworths,
Coles and others to help expand their online sales capacity,
improve, click and collect and home delivery.
And with people investing more in their home,
environment retailers like Bunnings,
moved to simplify the customer shopping experience
by introducing easy to use apps
to fast track search and install locations
to really help save valuable time.
In addition to retailers investing in their own capability,
some of the fastest and most efficient examples came
because of retailers partnering with digital disruptors.
Sometimes these disruptors offered retailers
fast delivery capabilities,
sometimes it was contactless payment options.
One example that springs to mind which is Petbarn
which partnered with Uber
to offer same day delivery services.
We also saw supermarkets teaming up
with open table restaurant,
the booking app to offer shoppers specific windows,
to schedule the times for which they could do
their grocery shopping.
Woolworths in an effort
to scale its online delivery capacity,
to help meet the needs of essential food
and grocery to customers,
partnered with Australia Post and DHL
to supply Woolworths basic Spock's
across several states to customers unable
to leave their home.
So whatever the specific solution,
these partnerships enabled retailers to respond
to the changing customer demands in an instant.
It was a powerful lesson
in how cross industry partnerships can enable businesses
to be more agile.
And that brings me to the third trend we're seeing
in retail this year.
The growth of partnerships
and the ecosystem.
Retailers looking to regain market share
over the next 12 months,
have a couple of options.
They can either grow their core business
or they can expand business
by offering new products and services
in unique and differentiated ways.
We're starting to see many examples
of companies creating significant value
from strategies that are focused
on building these new business models to ecosystems.
Now, think of this essentially as an interconnected set
of services enabled through one retailer's ecosystem
of partners, suppliers and customers.
To explain further,
consider the opportunity that may exist
in harnessing data and the digital signals
which I mentioned earlier,
by bringing together CPG companies,
supermarkets, telecommunications with tech to work together
to create new product and service models
that might be enabled through 5G,
cloud computing, digital apps,
to specifically remove friction in the customer journey.
Now McKinsey and their latest report highlights
that this integrated network economy could represent
about $60 trillion in terms of global revenue pool globally.
Now, one retailer we've been working
with in this space, is 7-Eleven.
7-Eleven as you know big on convenience
and have always specialized
in making life easy for their customers.
Because now, those customers are demanding new services.
They want to send and receive parcels,
they want to click and collect,
they want to last mile delivery
and they want to do it all with 7-Eleven.
So, 7-Eleven's task has been to transform
from a convenience store,
into a set of connected services,
provided through a digital ecosystem
that meets its customers every need.
Instead of developing digital capabilities from scratch,
7-Eleven can simply tap into the expertise
and tools of its partners and try new approaches
and roll out new capabilities at speed and scale.
Now, clearly partnerships are crucial
for enabling that type of transformation,
but so is integration.
And in response to this growing trend,
we've also invested in our own product development
to create a cloud platform for retail
which integrates every link of the value chain
as you can see here in the slide.
Integrates all these digital capabilities
to give you one complete view of it from social media,
to Bricks and Mortar,
inventory to last mile,
customer feedback with data at the heart and center.
The final trend I want to share,
sweeping Australia's retail sector is a growing demand
for sustainable and ethical products.
In fact, 67% of customers now say they all make decisions
on which brands they buy,
based on the sustainability
with many retailers referring to this
as their path to net zero.
Woolworth's customers recognized
that 50% of their customers make decisions
on where to shop based on the retailers commitment
to sustainability practices
with 25% saying reducing plastics was a top three priority.
Like the explosion of data,
the changes we've seen in customer loyalty
and the trend towards retail ecosystems,
the sustainability revolution
was major opportunity for retailers,
looking to not only regain market share,
but create competitive advantage.
In our own customer base,
it's been fantastic to work with a fashion retailer H&M
who offer now a new service
which allows customers
to bring back items they've previously bought,
leveraging digital capability to recycle
and reward customers for their effort.
So when a H&M customer drops
their old clothes in a bin in store,
a screen using computer vision actually shows
the weight of their donation.
It also flushes a 15% discount code
and provides pictures and social prompts
the donor can share to amplify their positive action
within their own network.
Then you have IKEA
which is innovating to tackle the problem of food waste.
In partnership with IKEA and startups,
IKEA has installed a system of cameras
and smart scales and machine learning tools
in cafes to detect when food is likely to be waste
and calculates the environmental
and financial cost of that waste.
Kitchen staff then use these insights
to learn where the problems lie
and take corrective action.
And the system has already saved millions
of meals from waste.
So the demand for ethics and sustainability in retail
is already strong amongst Australian shoppers
and will only continue to grow.
To meet this demand the most efficient way possible,
we see more and more retailers relying
on digital innovation.
So these are just some of the trends influencing
the way retailers will innovate in the future.
And of course, all of this is underpinned
by the continued focus
on the health and wellbeing of staff and customers.
Of course there are other trends,
as the future of retail stores,
creating intelligent supply chains,
and we've heard many of those in the opening keynote
and throughout the summit.
But ultimately it comes down to innovation
and how retailers are hardwiring their innovation
into the way they do business.
I reflect on what Gareth and Andrew
from ThinkUncommon shared.
Being there is plenty of information available
to retailers that want innovations to adopt
but very little on how to do it.
And it will vary from some like Chipotle,
it means starting to develop capabilities built
around your data.
For others like 7-Eleven and Woolworths,
it means partnering up
and creating ecosystems to unlock new value.
Different retailers will have different approaches
to making digital stick
but the ones that get it right,
Well, they have a few things in common.
And I want to end by sharing some of
the common characteristics we're seeing,
with organizations,
For not only driving a strong agenda in digital,
but in parallel are delivering exceptional growth
and performance in terms of profit and market share.
First point relates to strategy and clarity of purpose.
In every organization I mentioned above,
there was a clear link between the business imperatives
and the digital initiatives.
Whether it's speeding up delivery times
or serving up more relevant marketing,
the relationship between an innovation
and its benefit to customers was crystal clear.
This clarity also helps to secure executive buy-in,
where senior management is fully aligned
and committed to the organization's digital strategy.
There is a commitment to talent and learning
where professionals, IT,
business at the executive layer develop digital skills
through tailored curriculums,
by role and progression along their careers.
There is also consideration given to the ways of working
where there's a strong centralized coordination
of initiatives which is balanced
with close connectivity to the end user experience.
Any change will involve an element of risk.
But retail is the most successful innovators manage
that risk in several ways.
They have a roadmap,
they have comprehensive government frameworks,
and this really helps to minimize
the areas like data ethics and privacy,
that they want to focus on.
And speaking of data of course,
successful innovators also
have very clear strategies around
how they will use their data to innovate.
And how they will drive that internal data capability
across the organization.
And defining data driven decision making
is incredibly important for retailers going forward.
The final thing that successful innovators tend
to have in common,
is the way they adopt technologies and capabilities.
And these organizations,
everyone is clear on how
the new initiatives should be executed,
and its impact is actually tracked
through a comprehensive set of KPIs.
But at the end of the day,
adoption comes down to people.
Strong coordination is crucial for making innovation stick
but leaders who model good behaviors are equally key.
And the most important part of that puzzle is the end user.
Because ultimately the difference between an innovation
that sticks and one that doesn't will come down
to the skills of your people,
your culture and mindset towards growth and innovation.
Innovative retailers know that
there's no point putting a powerful tool in someone's hands,
unless that person has the confidence,
permission, structure and the skills to use it.
And like professor Gary Mortimer shared,
"Feel empowered to experiment.
Bend the rules to create positive customer experiences."
Investing in people retailers can really help shape
the future of their industry through
an innovation mindset that sticks.
Thank you.
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