Retail CIO Outlook – Perry Kramer, senior vice president and practice lead at BRP, retail consulting firm, shares his insights on agile retail technology.
Retailers that are thriving – and there are lots of them – anticipate and react to consumers’ demand for an enhanced and continuously changing retail experience. Retailers that have successfully anticipated the changing customer experience have created a technical platform, with the supporting process changes, that allows them to react quickly enough to stay ahead of a new set of customer expectations in an increasingly competitive digital retail environment.
Increasing Pressure on the Retail Model
One of the greatest hockey players ever, Wayne Gretzky, said “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” The retailers who are profitable and continuing to grow are executing this same philosophy.
The pressure on physical stores continues, as more than 7,100 retail locations have closed this year and additional closures are expected after the holiday season. With an estimated 15% of holiday shopping moving to digital this year, the competition for share of wallet has become more intense than at any point in the digital retail era. As retailers shift more of their sales online, additional pressures are exerted as retailers deal with the lower margin generally associated with digital sales and the need for modified business process, organizational and technology changes to remain competitive.
For retailers to succeed in the future, they must transform their business with agile technology and new processes that adapt to current and future customer expectations. Retailers don’t have the luxury of time. They must act now to survive.
Focus on Agile Technology
The first step is to migrate the current budget and focus expended on maintaining legacy commodity systems to a model that is focused on advanced, agile systems that drive a distinguishing customer experience and/or improve margin.
Moving commodity systems such as finance, HR, asset protection, network, mobile device management and monitoring to a SaaS model is a critical first step. In addition, the business needs to refocus (not eliminate) resources on migrating the distinguishing business-focused systems to a more agile technology platform. More efficient technology and processes are critical to enable retailers to adapt quickly and anticipate rapidly changing retail dynamics. With a narrower set of internally supported applications, retailers have a greater focus on the key systems that have the greatest impact on the customer experience and product margin including, analytics, merchandise planning and allocation, digital commerce, CRM and customer engagement (mobile and POS).
The major obstacle for retailers in transforming their technology has been the short-term budget impact of shifting capital budget funds to expense budget funds that is associated with moving to a SaaS model. Savvy CIOs have been able to build a strong multi-year story and convince the CFO and other C-level decision-makers that the short-term financial impact is key to their long-term success. The business needs to understand the value of the investment as a proactive strategic initiative, not a cost savings initiative. Leading and fast following retailers are beginning to realize the urgency of this transformation. According to BRP’s 2017 POS/Customer Engagement Survey, adding omni-channel integration and POS functions were the top two retailer initiatives, which indicates that most retailers are focused on the ability to deliver an exceptional customer experience.
The Need for Real-time Data and Analytics
Developing an agile technology infrastructure and organization is critical to leveraging the large amount of data that retailers collect but fail to use effectively. In many cases, retailers have as much information as retail giants like Amazon and Walmart but have failed to make it actionable in their analytics, CRM and merchandising systems. This results in lower margin because they have not accurately anticipated customer demand and positioned the right merchandise, and people in the right place at the right time.
Additionally, retailers who are trying to play catch up do not have real-time enterprise-wide access to the data needed to meet consumers’ rapidly changing expectations, which makes it challenging to properly allocate their resources – products and people. Customers expect retail associates to have easy access to rich, detailed enterprise-wide product content and consumer preferences in real-time when they are engaging with the customer.To keep the customer at the epicenter of the retail transaction, retailers need to migrate to an environment that offers real-time access to enterprise-wide product information, customer preferences, and transaction history across all channels – and it must be accessible from mobile devices.
Flexible Processes are a Requisite
In addition to adopting agile technologies, such as micro services, winning retailers anticipate changing demands and leverage a more narrowly focused, and more flexible set of processes to work with their business units to quickly build lower cost proof of concepts and learning centers. By reducing development costs and time to market, they are able to budget for and work with the business units to build proof of concepts and learning-focused pilots. This is a critical difference between the leaders and the followers. Other moderately successful, and slightly more conservative retailers, are leveraging these changes to position themselves as fast followers.
For retailers to be successful they need to stay ahead of customer expectations and their significant use of mobile technology, by building flexible and reusable technologies with aligned processes that are focused on areas that are impactful to the consumer while still maintaining margin. Agile environments allow for a lower cost structure and the ability to leap frog the trends of online pure-plays opening brick-and-mortar stores and traditional retailers experimenting with new store models – and be where the customer will be.
Read full magazine: Delivering an Elevated Customer Experience Requires an Agile Retail Technology Platform (page 8)