Retail: doing more with less

Andrew Busby at Software AG explains why ‘mission critical’ has taken on a whole new meaning

 

Today’s retailers face innumerable opportunities and obstacles, challenging the definition of what a must-have, mission-critical investment really is. In the face of recession and sky-high inflation, retailers are having to reduce spend, and that means making tougher choices about what now constitutes a ‘mission critical’ investment.

 

A must-have implies that without it, you will suffer a material disadvantage. At a time when customers are hyper-informed, hyper-skeptical, and facing their own financial challenges, brands must identify which parts of their offering, and their processes, are essential.

 

Businesses must do more with less, delivering more to the customer while straddling a difficult matrix of financial uncertainty and supply chain disruption, not to mention the global mission towards sustainability. Tying together these disparate threads requires knowledge, insight, and – more specifically – data.

 

We are now immersed in the digital age and most retailers know that to survive, they must make the most of technology and data to drive efficiencies. With the right data tied into IoT-connected technologies, retailers are redefining what mission-critical truly means.

 

Must-haves now involve intelligent connectivity driving efficient processes, streamlined services and rich insight. With the world becoming ever more complicated and customers becoming increasingly demanding, separating what is a nice-to-have versus what is mission-critical must be a priority for retailers in 2023.

 

Leaner, smarter, faster, greener

Retail is complex and its myriad processes can harbor numerous inefficiencies that drain resources and frustrate customers. But they are often hidden beneath the surface. Surfacing them requires data. However, despite the importance of data integration having been widely accepted by retailers, awareness has not equalled action.

 

As McKinsey warns, “only a few retailers have built true omnichannel offerings, harnessed data at scale, and implemented agile ways of working throughout their organisations… bold action is needed: retailers must undertake a radical transformation of their tech function—both its architecture and its operating model.”

 

Brands must shave off the trimmings and become leaner, maximise operational efficiency and be able to optimise and rationalise every part of the business. And, with operations in constant flux due to external factors such as supply chain disruption, it is necessary to always have oversight of all processes.

 

This is where IoT retail comes into its own - the more you connect, the more insight and opportunities you will have to identify redundant processes and trim the fat. By connecting store, customer, and inventory, you’ll create a fluid flow of data across your business, driving everything from stock control and asset maintenance to customer loyalty programmes and dynamic pricing.

 

As McKinsey research found, between 2016 and 2020 digital leaders in the consumer and retail industries generated 3.3x the total returns to shareholders than that of digital laggards. The same research explores how a connected, digitised approach can deliver 15-25% spend efficiencies at the front end (e.g. sales analytics, merchandising and promotions) and a 10-15% reduction in inventory costs.

 

With the connected, lifecycle approach, data tells you what is working and what is now before it is too late. Without careful attention being paid to the effects, there’s no way to measure how well a new strategy is performing. It is imperative to have the tools to measure all results of a new strategy, draw insights and use them to adjust an approach.

 

Hyper-connectivity ensures an agile and holistic view of not only processes and inventory but connects to the customer to ultimately deliver on their expectations of connected, seamless experiences. For example, new tools are enabling hyper-connectivity across store devices like queue sensors and shelf-edge labels, as well as legacy and business systems.

 

Not only that, but IoT enablement benefits also helps to meet sustainability targets; what is measured can be modified and this applies as much to net zero goals as it does to inventory management or marketing. 

 

When so many of the core issues affecting retailers are inextricably linked, dealing with them requires a connected, data-driven strategy. Therefore, connected retail is now on the list of mission-critical must-haves. But, even for those who have embraced digital connectivity, there is one issue that might be holding them back.

 

Pay the piper; countering the plague of technical debt

The coronavirus spawned a deluge of digital innovation that saved many retailers from sinking. Digital services and systems were implemented at lightning speeds - a catalyst for much-needed innovation. While this speedy digital innovation paid off, it also created a wave of technical debt that will soon need to be paid.

 

Technical debt has several definitions, but we can understand it as software implemented by retailers which have prioritised speed, simplicity and ease of implementation, over perfection. The debt is the additional work or re-coding that must be done to digital systems after they have gone live. Taking on technical debt is not an issue in itself. It’s a necessary byproduct; the interest you pay on agile innovation.

 

In 2021, 78% of organisations accrued more technical debt than in previous years and it won’t be long before the piper comes calling. This will show itself in the form of bottlenecks, overly complicated inefficient processes, or technical faults that will ultimately affect customer experience and ROI. What was innovative will soon become restrictive, even toxic.

 

Concerningly, nearly six in ten companies don’t feel that they have a formal strategy in place to manage this technical debt - many don’t even know where it exists. Only 42% of companies feel that they have the ability to assess all of their technical debt. While left untouched, this technical debt is accruing interest that just gets harder to pay.

 

So, how can we pay the piper? Again, we must return to data and insight driving process efficiencies. Unintegrated, siloed data/processes are the top barriers to clearing technical debt for nearly one-third of organisations. Gaining visibility is the first step, and this can be supported by technological interventions such as Robotic Process Automation (RPA), which frees up resources by automating tasks, increasing accuracy, and reducing the need for human intervention. This leaves talent free to focus on levelling technical debt.

 

Mission critical for the new normal

From process efficiency to the payment of technical debt, retailers cannot afford to work in the dark. While the idea of normality seems a redundant concept right now, this ‘new normal’ requires a level of insight that goes beyond.

 

The world is in flux and retailers must be prepared to respond to whatever comes around the bend. In this environment, the mission-critical must-have that all retailers need is true connectivity.

 

IoT retail, encompassing rich data, process efficiency, customer insight, smart inventory, predictive analytics and holistic oversight is what will drive success through next year, and whatever the future may hold.

 

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Andrew Busby is Global Industry Retail Lead at Software AG

 

Main image courtesy of iStockPhoto.com