Must retailers turn into technology companies to remain successful?

The way consumers interact with brands and retailers has changed. Our shopping behavior has become more conscious, more connected, and more demanding than ever. This also changes the way retailers need to act and think. Agility has become a must to keep up with the ever-changing consumer behavior, with instant product availability as the main driver to ensure a pleasant shopping experience. So how does technology help retailers keep track and keep consumers satisfied? 

Getting "phygital" - or the 50/50 economy

We are entering the world of "phygital" - where retail is physical and digital at the same time. This has been true even before the COVID-19 pandemic. Growth rates of online retail have been massive everywhere, so we can assume that a split of 50% online and 50% offline retail will be real soon. Therefore, the significant opportunities for the future of retail are digital. 

IT as the enabler for customer centricity

While customers have the power – literally – in their hands with their smartphones, retailers are looking into technology to find new ways to differentiate their products and services and stand out. In addition, new commerce strategies need a new digital focus and every process should be reviewed and optimized to provide a higher level of service and experience. As a result, nearly every change a retailer might make needs technology.

50% of consumers reported that they would only shop at retailers with flexible omnichannel order, fulfillment, and returns processes (IDC)

The future retail experiences will be propelled by technology in order to become more efficient and meet growing consumer expectations. Here are some of these technology priorities :

• Improve the shopping experience through a frictionless customer journey
• Avoid manual errors through automation and touch-free processes
• Increase product availability through improved supply chain processes
• Create a single view on the stock, resulting in more agile, faster, and more sustainable fulfillment

COVID-19 as an incubator for retail technology

The COVID-19 pandemic's disruption has turned retail upside down. The fact that stores were closed and customers were looking for alternative ways of shopping brought unparalleled technological innovations, specifically in terms of connecting the online and offline channels. While services like BOPIS/Click & Collect or other pickup options were a necessity (rather than an innovation) they found widespread adoption. Technology, in general, emerged into the retail environment proving it to be the foundation for any future retail service or shopping experience.

Retailers with a strong IT heritage were able to benefit from their existing systems. For example, Lululemon came out of the 'pandemic year' with a strong performance: 2020 YOY net revenue increased 11% to $4.4 billion. In addition, gross profit increased 11% YOY to $2.5 billion (IDC)

While those retailers with advanced digital maturity adapted quickly to changing market dynamics, others used this phase to increase their investments in technology. As a result, retailers have a new set of business priorities driven by consumer behavior and subsequent retail performance/outcomes.

Looking back: The role of Retail IT in the "old days."

Back in the '00s, when I started to work in the retail technology world, the IT department had a very different role. Back then, people were busy purchasing, deploying, and maintaining infrastructures like computers, telephone systems (or fax), and servers. Luckily, this is a thing of the past; in a world where software is moving to the cloud, SaaS solutions are immediately available, and data can be easily connected.

Looking ahead: agile teams in the new Retail IT

IT departments can now focus on business benefits instead of just technical features! For some time already, retailers who want to stay ahead of the pack and drive business results through technology have been rethinking the setup of their IT organizations. Modern retail organizations are increasingly becoming innovation hubs, meaning their interaction with software and solution providers is changing. These days I experience the role of IT as more integrated than ever.

Example: Adidas 'Own the Game"

As part of their future strategy, Adidas has defined two enablers that form the foundation for success. The first is applying a mindset of deep and broad innovation. The second is using the speed and agility of Digital throughout the entire value chain. By 2025, the company’s digital transformation will have been driven forward with investments amounting to over 1 billion Euros. To achieve this, the company will expand its data and technology expertise internally and increase the size of its tech team. In 2021 alone, Adidas will hire more than 1,000 tech and digital team members.

Areas of modern retail technology

For many traditional retailers, digitization and the shift towards omnichannel require changing from a classical to a modern (technology) organization. In this new environment, small and agile teams provide technical support for specific business processes, e.g.:

📊 Shopper analytics

👔 Assortment planning

🛍️ Customer experience

🏷️ Predictive Pricing

🔎 Supply Chain visibility

Common pitfalls of adopting technology just for the sake of it

The most important thing to keep in mind before implementing any technology is whether it contributes to my organization's values and ambitions. Typical reasons behind most failures include:

• Organizational struggles, e.g., not enough people and/or know-how (➡️how to improve: develop talent management and continuously train people)
• Silo structures (➡️ how to improve: eliminate the invisible walls between the IT department and the business)
• Not aligned with customer expectation (➡️how to improve: align technology and business)
• Fighting alone (➡️how to improve: solution providers can help with scalable software and professional services)

First and foremost, it is clear that adopting technology just for its sake has only limited chances for success. Many current practical examples show that close cooperation of IT and the business needs to be established to make sure that technology and its practical benefits go hand in hand. As with any transformation effort, planning and governance are vital. Without close cooperation, the IT group will experiment with new technologies, while the business will always ask how to make money with it.

Omnichannel needs a strong technological foundation

As omnichannel shopping is becoming the new norm, brands and retailers must be ready to deliver impeccable customer service. Omnichannel services must be customer-centric by design and require real-time stock visibility. Customers expect to receive their products anytime and anywhere with a very short time between order and delivery, excellent service, and high convenience. At once, stock information must be accurate and consistent.

RFID is a key factor to ensure stock visibility. Once products are equipped with RFID labels, ideally applied during the production process (the so-called source tagging), they can seamlessly be tracked and traced through the entire supply network. As a result, all systems have access to one single stock pool, and online orders can be fulfilled directly from any place.

In this context, a shift to cloud platforms and SaaS solutions is inevitable to ensure scalability and allow for rapid change. Further, most companies are breaking up their monolithic architecture and moving to microservices with a clear API-first strategy. Integrating with RFID technology enables error-free, real-time efficiency and visibility throughout the operations. RFID read events are then synchronized with an EPCIS repository, which – as a consequence – acts as a (real-time) stock visibility platform.

Are you ready?

Technology affects every one of us in our everyday life. However, implementing new technology and changing the organization takes time. Therefore, the change must be considered and managed as a long-term transformation. Modern technology organizations will only succeed if the top management team stands behind the journey wholeheartedly.

The modern technology organization is not a large IT department organized in groups by systems anymore. Instead, small teams of developers provide technical support for specific business processes. So, take a step back and think about how the customer journey has changed, benchmark yourself against best practices, and adapt accordingly.