Avoid these five digital retailing mistakes

By: Prabuddha De, Yu Jeffrey Hu, and Mohammad S. Rahman

Source: https://sloanreview.mit.edu

In a world where customers are shifting a significant portion of their purchases from off-line to mobile and online channels, the mantra for retailers is to embrace the change and capitalize on the virtues of digital commerce. But rather than haphazardly implementing various website features, retailers should adopt a data-driven view — with the goal of understanding how different types of information that consumers collect via the website affect their behavior.

We researched the effects of web technologies on a retailer’s critical performance metrics such as sales and returns. To study these effects, we needed to measure consumers’ actual web technology usage and match it with their transactions. Toward this end, we partnered with a women’s clothing retailer that has a large online presence and offers the type of web technologies that consumers typically encounter in e-commerce. Overall, we studied 7 million purchases made by approximately 1 million unique customers of this medium-size company over three years, and focused primarily on two months’ worth of data, consisting of 183,000 transactions and 52 million lines of server logs that tracked consumers’ web activities. Detailed findings from our research were published in the academic journals Management Science and Information Systems Research.

Our findings suggest that managers should encourage consumers to embrace innovative technology features like different types of web technologies, personal assistants, and apps, because such usage is generally associated with a higher level of sales. But our research also indicates that it’s critical for retailers to take steps to avoid five common digital retailing mistakes.

Mistake 1: Letting a Consumer Get Lost in a Sea of Products When consumers do generic searches on the web, a retailer should not just present a large set of products to them. Rather, the company should guide the consumer through a process to narrow the search results. This is important because a large set of potential options can confuse consumers and lead them to abandon the purchase process.

Some companies already do this. For example, Nordstrom Inc. has “Nordstrom Style Boards” enabling store salespeople (called stylists) to offer product recommendations to customers via the internet, and J. Crew’s website offers the “Very Personal Stylist,” a service that gives customers a way to connect with a personal shopper 24/7. But for many companies, significant improvements are still needed in this area. In the near future, shopping assistants driven by artificial intelligence (AI) should help deliver those improvements.

Mistake 2: Recommending Only Popular Products Amazon.com Inc.’s recommendation system (for example, “Customers Who Viewed This Item Also Viewed”) is an example of how website features can be used to steer sales. Our research found that a recommendation system can increase sales by more than 5.5%. This is because it lets consumers learn about products in unprecedented ways.

Recommendation systems enhance sales of both popular, well-known products and products that are not so well-known yet. However, our research found that their effect is more prominent for the latter group of products. Popular products typically have a higher sales volume and a lower margin because of competition, whereas less-known products are likely to command a higher margin.

Therefore, retailers should carefully choose a mix of both types of products in their recommendations. Similarly, a retailer should not just promote popular products to consumers who are using the store app. Starbucks Corp.’s Digital Flywheel — which is an AI-driven recommendation engine that goes beyond just simplifying a customer’s favorite order — is, not surprisingly, utilizing consumers’ prior transaction history and other types of digital traces left by them.

Mistake 3: Fostering Unrealistic Customer Expectations While collecting information on a product online, consumers typically gain two types of intel: factual and impression-based. Factual information relates to concrete facts, whereas impression-based information is the perception one forms by looking at a product. For example, when collecting information about a dress, details like what the fabric is made of and how the buttons are sewed offer factual information. On the other hand, the customer’s perception about the dress based on looking at a model wearing it is predominantly impression-based information.

Consumers generally have an expectation about a product before buying it, and their satisfaction with the product depends on how well that expectation matches with their post-purchase experience. Typically, factual information helps a consumer form a realistic prepurchase expectation, which, in turn, leads to a better match between this expectation and the post-purchase experience. In contrast, impression-based information may result in an unrealistic prepurchase expectation in customers’ minds that their post-purchase experience can’t usually match.

Mistake 4: Focusing on Sales Rather Than Net Sales Retail executives are often just keen on increasing sales. High product returns, however, could negate the effect of high sales — after all, returns amount to about $260 billion per year in the United States alone, according to the National Retail Federation. Hence, retailers should focus on net sales (that is, sales minus returns), rather than sales alone.

Consequently, it is important to carefully consider what types of information consumers are gathering when they use technologies made available by retailers. In particular, many retail websites and apps now have product-oriented technologies that are geared toward helping consumers collect information.

While impression-based information may increase sales, it increases returns as well. In fact, our study of the women’s clothing retailer found that the use of alternative photos — a technology that presents images of models wearing the product from different angles, often in an unrealistic scenic environment — primarily provides impression-based information and not only leads to more returns but also decreases net sales.

In contrast, our research found that factual information reduces returns significantly. As a result, the overall effect of adding technology facilitating factual information — such as the ability to zoom in to view a product’s features more closely — is typically positive.

Retailers need to proactively ensure that the technologies on their websites and apps are leading to desired results. For example, one way to mitigate the negative effect of alternative photos is to allow consumers to upload their own photos and videos showing the product in use. Then future potential customers can form more realistic expectations about the product by seeing how other consumers look wearing the product or how they use it. Not surprisingly, a number of major retailers now encourage their consumers to upload photos or videos. These consumer-uploaded pictures arguably balance any unrealistic expectations potential consumers may form by looking at the retailer-provided photos.

Mistake 5: Not Keeping Pace With Technology Advances AI is going to be a critical part of the next wave of technological advancements affecting e-commerce. The increasing use of digital personal assistants such as Siri or Google Now; adoption of smart home devices such as Amazon Echo; and developments like Apple opening up Siri to third-party developers will significantly influence many tasks consumers regularly do, including shopping.

As a result, retailers must ensure that their apps and websites are ready to serve consumers using AI-driven digital assistants. For example, a consumer may ask Siri to find a pair of jeans. A retailer needs to utilize its data about that consumer to present a set to Siri that fits the consumer’s needs. At a time when Siri is, in effect, a platform through which different retailers supply options to be featured in front of the consumer, only the retailers that present the best options are likely be retained, and others would be removed from the consideration set.

Considering a digital assistant’s overarching focus on gaining efficiency, increasingly through machine learning techniques, retailers face a serious threat of being thrown out of the consideration set, which could put them in a downward spiral with obviously grave consequences. After all, these digital assistants are programmed to collect data and constantly improve their services. As a result, it will become evermore important for retailers to take advantage of their data to offer consumers options that are well-targeted to their needs.

One of our best 2016 MBA theses on transformational leadership

Transformational leadership style : The relationship to companies that are digital leaders

By: Truter, Berdine 2017

Source: http://hdl.handle.net/2263/59790

ABSTRACT:

The objective of the study was to explore the relationship between companies that are digitally mature and the leadership style of their C-level executives, with a specific focus on transformational leadership. Success in the digital era requires not only an investment in digital capabilities, but also a change in organisational culture that only strong leadership can inspire. Transformational leadership instils major changes at the organisational level, through changing attitudes and assumptions at the individual level and creating collective engagement. Moreover, this leadership approach facilitates organisational innovation and learning, and generates a shared, inspiring vision for the future.

The purpose this study was two-fold: Firstly, to explore the relationship between transformational leadership and having higher digital maturity levels – becoming a digital master. Secondly, to determine whether one or more of the transformational leadership factors has an effect on the digital maturity of South African companies (represented by four basic transformational leadership behaviours, or “I’s”.

An online survey, specifically addressing the research question, was sent to C-level executives from South African companies that fit the population criteria, using moderator regression models to determine if transformational leadership and its associated behaviours have an effect on a company’s digital maturity. For the sample population, it was determined that two of the transformational leadership behaviours had a positive effect on digital maturity, namely idealised influence and individualised consideration and that one transformational leadership behaviour, inspirational motivation, has a negative effect on digital maturity.

Keywords:

  • Leadership
  • Strategy
  • Innovation
  • Digital
  • Information Technology

The key to achieving goals: Consistent, persistent pursuit

By: David Meltzer January 17, 2018

Source: https://www.entrepreneur.com/article/307529

I used to define happiness as the enjoyment of the pursuit of your potential. But, my ideas changed as I received more clarity on how exactly to reach your potential, happiness, purpose or fulfillment. I have found that it’s not only the enjoyment of the pursuit of your potential — but the consistent, and persistent, enjoyment of that pursuit of your potential that helps you to crush your goals. Personally, I am focused on pursuing my potential as a philanthropist:

I see a disconnect between people and their attempts to manifest their dreams. It’s that they forget the importance of being consistent and persistent in the way that they pursue them. It’s estimated you have 10,000 new thoughts a day and 40,000 of the same thoughts every day. In order to make sure these thoughts move from your conscious to your subconscious and unconscious, you need to control those 10,000 new thoughts. Change the way you look at things so the things you look at change. You can control these repetitive thoughts through what I call the Cancel/Clear/Connect strategy. When negative thoughts pop up, say to yourself “Cancel.” When the same thoughts keep popping up, work on clearing your mind. If the negativity persists, connect to what inspires you.

Get out of your own way.

We tend to carry on without persistence. Our goals become more difficult to achieve, and we create shortages, voids and obstacles that are tough (if not impossible) to fill ourselves. We can be born with the greatest talents and gifts, but if you’re not persistent and consistent in your use of those skills, then you cannot achieve your fullest potential. In my coaching business, I see this issue quite often. It makes things difficult because hardly anybody is consistent and persistent in their pursuit. We always tend to waiver, get distracted by extraneous things or get in our own way. That is why I created the Gratitude Challenge, to show people that the biggest impact you can make is simply by doing something every day. So, I picked the simplest change that provides great results, saying “thank you” and doing it every day. The majority of the people that take the gratitude challenge are unable to stick to it, though. Be consistent in using Cancel/Clear/Connect and you will change the way you think. Regularly using this strategy is essential in order to change the way you think and enjoy the pursuit of your potential.

Perform a self-evaluation.

Think about how much time per day you are committed to the pursuit of your potential. Are you consistent? Are you persistent? Do you need to improve in these areas? Consistency is a massively important because it allows you to focus on what you want. Focusing on a goal and working toward it every day allows you to utilize the power of intention. That focus yields exponential growth and results. You need to do something every day in order to be great at it. Meditate, use gratitude, practice a skill, work on a relationship, tell somebody that you love and appreciate them. Each of those activities can take as little as 30 seconds a day, if you are efficient, and make a resounding impact in your life.

(Consistent) drive for dough

My favorite example to use when it comes to consistency is golf. If you play golf 30 minutes every single day, you’ll be far better than someone who plays one of two rounds on the weekends. In fact, people who play six hours on the weekend are often worse after one year compared to those who consistently practice. There are many examples of this in sports, people who push on despite being told “no” again and again. They stick to their guns, whether it be during one game, one season or an entire career, and it pays off in the end.

Persistence in business

These same principles hold true for all of the successful entrepreneurs we’ve come to know. Individuals like Walt Disney and Henry Ford (and myself) all had lived in the consistent, persistent enjoyment of the pursuit of their potential, pushing past the many difficulties they faced. You will always run into obstacles, voids and shortages along the way. Sticking to your goals every single day will allow you to increase your enjoyment of that pursuit. In order to reach your potential, it is essential to be consistent and persistent in the enjoyment of the pursuit of it.

Persistence pays it forward.

I want to encourage this mindset in people around the world, so I have started a “50 For 50” campaign with the Unstoppable Foundation to help raise money to bring Entrepreneurship and Empowerment Centers to Kenya, which will provide individuals the resources to thrive as entrepreneurs.

Venezuela was once South America’s richest country. Here’s what went wrong

By: Callum Brodie August 2017

Source: https://www.weforum.org/agenda/2017/08/venezuela-economic-woes-2017-explained/

Until recently, almost all of Venezuela’s mostly urban and educated population had access to clean drinking water, sanitation facilities and electricity. It was an affluent country, with the largest proven fossil-fuel reserves in the world.

But its economy is shrinking at an alarming rate, while at the same time inflation is spiraling out of control. Poverty and violent unrest have ensued.

What went so wrong? Here’s a closer look at Venezuela’s economic collapse.

The heady days of 2001 – when Venezuela was the richest country on the continent – are long gone. The economy shrank by 18.6% last year. In 2017, it’s 35% smaller than it was in 2013, at least in terms of GDP, and 40% lower in GDP-per-capita terms.

Inflation stood at an eye-watering 800% last year and there have been predictions it could reach 1,600% by the end of 2017. The country’s currency, the bolivar, has been devalued to the extent that is basically worthless. The official rate of exchange between the bolivar and the US dollar is roughly 10 bolivars to the dollar. But in reality it’s closer to 10,000. Analysis has shown that, at the end of July, a dollar was worth approximately 10,389 bolivars – up from 8,000 just a week before.

 

How it happened

Controls on foreign exchange and prices of basic goods have caused significant issues. So too have unrestrained public spending and the state siphoning from private industry.

Another key cause is the mismanagement of the state-owned petroleum company, PDVSA, which provides almost all of Venezuela’s export revenues. In its heyday, the Venezuelan economy was fuelled by oil revenue. Venezuelans look back wistfully to a time when oil was priced at $100 a barrel.

The plummeting price of oil, which sank as low as $21 a barrel last year, has come as a hammer blow. This has been further exacerbated by falling levels of production. Output fell by 10% last year and no rise is likely in 2017. Unfortunately there doesn’t appear to be much light at the end of the tunnel. Some hope that oil prices will begin to increase – but the signs don’t look good.

Hunger and protest

Shortages of basic supplies such as flour and rice and spiraling prices have led to food riots and lootings. Many Venezuelans are going hungry. Anecdotal evidence has emerged of people feeding off scraps, with some forced to dig through garbage left outside shops.

The few who are fortunate enough to be able to afford to eat out are unsure how much to pay for their meals, as confusion over currency fluctuations means certain restaurants no longer use standard pricing. Some shops weigh bank notes rather than take them at face value.

With the cost of consumer goods skyrocketing and the quality of life nosediving, it’s no surprise that many Venezuelans are looking to leave the country. This has resulted in long queues at passport offices. It can then take months before applicants actually receive the documentation they need to start a new life abroad. Elsewhere in South America there is a real worry that the sheer number of people trying to flee Venezuela could spark a full-scale migrant crisis. Months of anti-government protests have left more than 120 dead and hundreds injured. And tensions have ratcheted up further over the recent election of a new assembly that could overhaul the constitution to give President Nicolás Maduro sweeping powers.

 

What happens now?

Venezuela is currently on a knife edge. A strengthening of the economy could yet pull it back from the brink of civil war. President Maduro has previously been optimistic, stating that 2017 will be the “first year of the new history of the Venezuelan economy”.

Time is running out for that prophecy to be fulfilled.