The information fulfillment matrix we introduced before, present different ways to interact with the customer. We have Traditional Retail, where the information delivery happens Offline and the Fulfillment happens Offline. We have Pure-Players with Online Information Fulfillment and Online Delivery. But we also see these new ways to interact with the customers and provide Information and Fulfillment mixing the channels. The digital revolution in retail fuel this cross channel initiatives, such as buy Online, Pick-up in Store, or ship to store. Where the information is delivered Online but then the Fulfillment occurs Offline. On the other hand, retail companies opening Showrooms can provide Information in the physical world and then fulfill the orders Offline. But now the question is how to think about what is the best combination of these offerings for a retailer? To answer this question, we can go back to the Digital Intensity matrix that we introduced in the previous module. Remember that in these matrix we have a measure of Digital Intensity of the Market and a measure of Digital Intensity of the Category. Let's say that you are a retailer selling electronics in the UK. Where should you anchor your retail proposition to customers? Where you need to excel? Well, as we saw before, the UK is a market with high Digital Intensity and Electronics is a category with high Digital Intensity. What is the best way to connect and interact with the customer? The answer is given by the overlap of the two matrices. If we overlap the digital intensity matrix, and the information for filming matrix, we will find the answer on where to anchor the retail digital strategy for that category in that market. For this example, selling Electronics in the UK. This anchoring should happen in the Pure-play space. By this, I don't mean that the retailers should only sell the category Online or that whatever the company is doing, the other quadrants of the information fulfillment matrix becomes irrelevant. On the contrary, the other quadrant should be supporting and enhancing the offering in the Pure-play quadrant. Based on the Market Digital Intensity and the Digital Intensity of the Category. The Online store will become the main force that drive growth and happy customers. We can analyze a similar dynamic in other areas of the digital intensity matrix. If we now focus in the US. A market with high Digital Intensity, and we want to understand what may be a promising way to anchor the digital offering to the apparel category, we need to reevaluate that this is an Intensity of the category. The Digital Intensity of apparel is lower than electronics. This would suggest that when we overlap the information fulfillment matrix, we enter an area where the Showroom concept becomes very attractive. Once again, I'm not arguing here for an exclusive approach, but more of an anchoring of the digital retail strategy. The exercise requires to consider how combinations of the fundamental role of the retailer captured by the information fulfillment matrix, and the digital intensity of the category in the market can give a guideline on how customers would like to engage with the company, and where the company can find their strength. On the other side of the Digital Intensity matrix, we find categories like groceries. And let's say we're thinking or rethinking the digital strategy for a Grocery retailer in South Africa, where the Digital Intensity of the market is Low. Then, when we look at the overlap with the information fulfillment matrix, we are going to see that anchoring the offering in the Traditional Retail format is probably the best way to go. Most retailers have a history and an anchoring place in the information fulfillment matrix at the moment they embraced the digital transformation. For those retailers, it is particularly relevant to think carefully how to navigate the transition across quadrants, and how to develop capabilities to support their anchoring quadrant. In the early days of E-commerce, we have seen a number of retailers add to the Traditional Retail format, a Pure-play approach. [INAUDIBLE] been more natural to start with initiatives such as buy Online, Pick-up in the Store or ship to store. It is probably easy to argue this today, but it is a valid question that can help, ask better understand what is going on and make better decisions going forward. In fact, several digital native companies, when developing their physical strategy, explored the Showroom concept. For these companies, a direct jump from a digital to a full physical was overwhelming. However, they were able to explore their ways into the physical world and find how to best serve the customers with the Showroom concept. This suggests that there is a natural way to navigate the information fulfillment metric that is informed by the Digital Intensity matrix. Many times navigating the different ways to interact with the customers is an intentional decision made by the company. The company decides to open an online store, or the company decides to offer buy online pick up in the store. However, the digital transformation of the retail industry can drive changes that are not intentional for some of the companies. This is what happened to Best Buy. Best Buy is a large retail company in the US that sells for the most part products in the electronic category. During 2012, Best Buy was struggling, and the media at the time was reporting on how the days of the company were counted. Several of Best Buy main competitors had filed for bankruptcy, and it seemed that Best Buy was next in line. The disruption of the digital transformation in the electronic category in the United States had a massive impact in the traditional electronic retail companies. The reasons are many. However, one of the main drivers of that struggle was that for all practical purposes, Best Buy had become a showroom of e-commerce retailers. This was not an intentional decision of Best Buy at the time. Store traffic was strong, the store locations were still attractive and the sales associates were providing a valuable service to the visitors. But at the moment of truth and they need to close the transaction, the customers were doing that online. And not at the best bite online store. The customers wanted to experience and see the product before buying online. Customers were visiting the clean, well designed, Best Buy stores, interacting with the product, learning from the sales associates on the different features of the new gadgets, and then going back home and buy online from other retailers. This was not a viable business model for Best Buy. The management of the company was in need to think carefully what to do next. Best Buy management saw that the service they were providing was valuable to both customers and manufacturers. Customers were still visiting the store and the manufacturers were still interested in showcasing their best products at Best Buy. The struggle for Best Buy was that, with the current business proposition, they were able to capture only a very small fraction of the value they generate. The customers were not paying for that showroom service and the companies selling the products at Best Buy, were not paying for the service either. Turning around a company from the struggle to success, require many decisions, and many things needed to change. But one of the main drivers in Best Buy's transformation was the recognition done in the new digital landscape. The traditional model alone was not a viable option. The company decided to embrace the showroom concept, instead of fighting it. By implementing this radical change, they were able to transform their business and return to the growth past. Best Buy reached out to the brands that were selling their products online and showed the value that they were providing as a prime showroom location. They redesigned the stores to embrace the showroom activity of customers and invite the manufacturers to have branded stands where they can showcase their products for the customers. This is a story that can inspire you to think about how to navigate the digital transformation in the retail context. Sometimes, it is not a question of fighting the same old fight by trying to step back and think where and how we can add value today. Next, you want to think how to capture that value. In the case of Best Buy, part of the answer was to reach out to the brands and explain the value that they were providing, and that this value was something they could not easily replicate if Best Buy went out of business. Once this message was understood by the brands, convincing them to pay for that service came as the next natural step. Once again, of course, this was not the only thing that Best Buy did to transform their business. But I hope this example help us understand how the digital transformation cannot be achieved by avoiding radical changes. By embracing the customers showroom in activities the company was able to survive, and more than that thrive again.
