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.
How does focus on IT modernisation drive success for the retail business?
Today’s retailers – be it virtual or brick-and-mortar – need to enhance their IT capabilities to cope with the strong headwinds and stay ahead of the curve. Here is a perspective…
Digital at the core
Omnichannel has been a focus area for retailers for years. Factors driving this include an increased demand for services such as click-and-collect and the realisation that store and ecommerce operations need to operate seamlessly to deliver customer expectations in an efficient manner. However, the reality is, many retailers have not yet got their omnichannel offer right. Organisational silos need to be broken, supply chains need to be designed in such a way that digital does not remain as standalone or “tacked” onto the store supply chain, and technology integration challenges need to be overcome.
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.
Typically, we see retailers wrestle with monolithic and legacy IT systems and lack of modern-day ways of working, creating barriers to agility, speed and quality, thereby compromising business outcomes.
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.
The meaning of ‘innovation’ may vary from person to person. But certain things remain standard: an adroit leadership, a risk-taking culture, a tech-driven workforce - always mapping innovation to business value rather than implementing cool technology. Innovation needs to be in the context of solving real-world problems at scale for it to be a differentiator. Progressive retailers are already rethinking their strategies and shifting the overall mindset within the organisation.
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.
Expand the ecosystem to enhance business potential
Retailers need to be able to expand, contract and externalise their capabilities seamlessly to enable new business models. IT capabilities in “as-a-service” frame can help drive new business models via ecosystem expansion or monetising capabilities through services that can be offered externally.
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.
Embrace technology trends
Considering the current pace at which retailers are experimenting with new technologies, the retail landscape can only get more unpredictable in the near future. Retailers more intent on performing than perishing, should put customer convenience and speed on top of their agenda. How? By embracing technology, for instance leveraging mobile technologies to enable self-service checkouts. Even as next-day and same-day deliveries are fast catching up for both virtual and offline retailers, early adopters like Amazon are already exploring the possibilities of drone delivery with Prime Air.
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.
True customer obsession
The modern-day consumer is an empowered and intelligent lot. Armed with 24x7 access to tech-driven, connected devices, they have high expectations from retailers. They want to research about a product, purchase it, inquire about the status of their order, receive or pick up the product, even return it – anywhere, anytime! Hence, retailers need to focus on customer-centricity and deliver immersive and engaging experiences. That calls for not just listening to or knowing the customers but understanding them to such an extent that the retailers can offer products and services to them even before they need them.
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.
Data at the heart of all business decisions
Future-oriented retail businesses must consider data as their Holy Grail. Today’s consumer expects highly contextual personalised experiences. In this era of data explosion, retailers need sophisticated and mature data analytics and data science capabilities to decipher patterns and leverage them to enhance their revenue and profitability.
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.
Modernising IT is a journey that entails several facets. Retailers need to embrace the latest technologies in their context to craft cohesive and robust solutions that can drive compelling customer propositions, optimise costs and explore new business models, delivered in a product mindset with agility, quality, speed and at scale. Further, the ability to drive change – be it in the context of mindsets, ways of working, or breaking organisational silos, is crucial to the success of any modernisation journey
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.
The thoughts and opinions shared here are of the author.
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