Role of IT modernisation in the success of retail business in the digital era

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Retail businesses today are under tremendous squeeze, given the significant growth and margin pressures due to digital disruptors, intense competition and globalisation. According to a CBInsights report, 40 bankruptcies have been declared in retail since 2015 through March 2018, with 21 in 2017 alone.

A key challenge is the decline of traditional physical retail. With the shift to digital commerce, fewer customers are shopping in traditional ways at big box retailers and malls. Additionally, many of the physical retailers have lost the cache they once had, as new digitally native direct-consumer (D2C) brands with hyper focus on specific products have taken off. Further, retailers who are digital laggards are fast losing ground to Amazon and other D2C brands. Those who do not adapt quickly enough are likely to find it very difficult to compete.

As the winds of disruption continue to sweep the retail industry, retailers need to modernise their front, mid and back office IT systems and their ways of working, to optimise operations and offer differentiated end-to-end customer experiences at much faster speeds to drive growth and retention. Long queues at checkout counters will soon become a thing of the past. So will the shopper’s frustration of waiting for a staffer to return from the back room with information about product availability. Today, customer questions are answered faster than ever before, thanks to the latest breakthroughs in technology that provide store staff insights into available inventory and customer preferences.

Technology modernisation is key to integrating digital and physical worlds. BOPIS/ROPIS/click-and-collect, cross-channel promotions, inventory visibility across the supply chain to deliver to customer promise, apps leveraging location-based technology to enhance personalisation and convenience for online shoppers when they shop in store, colleague applications to improve customer experience and productivity of store associates, are some of the elements to stitch a strong omni channel offer.

Adopters of digital at the core are likely to get their omnichannel customer journeys right and reap rewards: Improved brand presence, enhanced customer affinity and optimised costs.

Retailers need to fast evolve their existing monolithic and legacy systems (particularly front and mid office) to services-based architectures leveraging cloud technologies to drive business agility and reduce costs. However, the North Star of “as-a-service enterprise” is not easy. Retailers are at different stages of maturity of their IT ecosystems and this can be a complex journey that needs to be strategised and phased. Establishing robust API layer, headless architectures to de-couple the experience layer, integrated content-commerce patterns to progressively implementing “as-a-service” ecosystem through functional clusters as services and re-platforming legacy solutions that lie underneath. What adds to the challenge is the urgency to deliver new capabilities and features while the architecture is being transformed.

It is equally important that IT and Business teams embrace new ways of working to realise the modernisation promise. Agile practices, modern-day DevOps, AI and Automation, operational excellence (e.g. SRE adoption), product mindset, building engineering talent, breaking functional silos to think customer journeys, fail-fast culture, are all important constituents of new ways of working.

Amazon, as much a tech company as a retailer, innovated at scale to unveil Prime Now, its mobile app-based service that promises one-hour deliveries of daily essentials to its customers. The concept-to-launch timeframe: just 111 days.

Burberry re-imagined its flagship store in London to compete with online stores that can sell products for up to 25 percent less. Instead of reducing its prices, the British luxury fashion retailer created an innovative, in-person experience at the store. It’s powered by futuristic, on-screen technology, custom-fit digital signage on all floors and intelligent radio-frequency identification (RFID) that provides audio-visual content on selected items. When a customer picks up a product and approaches one of the store’s screens in the common areas or in a fitting room, they can access relevant information ranging from craftsmanship to catwalk looks – all in a jiffy.

Marketplace models are a good example of the former. Product manufacturers would have little choice but to empower their largest retailer accounts to compete with their small aggressive sellers, further pressuring margins. Several retailers are already working on marketplace models to collaborate with small sellers and manufacturers to increase inventory assortments and reduce holding costs.

To illustrate the latter, Amazon’s web services started because Amazon had to build excess computing capacity to support its business during the busiest shopping season; it could then sell that capacity to a host of others. Further, Amazon is now offering a fully-managed service in AI/Machine Learning algorithms (that also drive their own systems) to other businesses.

Having said that, retailers should craft appropriate business diversification strategies while venturing into new sectors. Expansion efforts should not confuse the brand in terms of what they stand for, their connection and relevance to key target segments.

Artificial Intelligence (AI) is another key trend. From Automation to Machine Learning, AI is transforming the way consumers purchase retail brands. Virtual or Digital Home Assistants like Cortana, Siri, Alexa and Google Home have already ushered in an era of voice-generated purchases.

The time is ripe for retailers to take the leap from ‘customer service’ to ‘customer obsession’. A core aspect of this shift is a strong product management organisation that is agile, data-driven and informed by customer and competitor intelligence while devising product/service/category strategies and tactics. Technology again is a key enabler - data engineering, analytics, cognitive technologies, social listening, data visualisation, among others.

Use of data engineering, analytics (hindsight, insight and foresight) and AI technologies are key to enabling retailers streamline their operations and enhance customer experience and loyalty. The onus lies on them to set up the technology ecosystem required for their journey of data-informed business decisions.

British chain of department stores, House of Fraser has equipped its employees with interactive dashboards. It empowers them to visualise data quickly to improve stock management, reduce returns, optimise store layouts, and enhance the overall customer experience.

Retail businesses who get IT right will do more than just compete – they will thrive.

The author is a Group Vice President, Global Service line Lead – Retail & Omni channel commerce at Publicis.Sapient.