The retail world is experiencing a perfect storm of disruption.
Fuelled by rapid advancements in technology, changing consumer expectations and an unstoppable shift from the high street to online channels. These radical changes are causing retailers to rethink their business models, embrace transformation and adopt a more agile approach to stay competitive.
At today’s ‘Only the Agile can thrive: Exploring digital transformation in retail’ event, we examined how retailers are responding to these challenges and what they need to do next to be ready for the future.
We caught up with one our speakers; Independent Retail Consultant, Justin Fretwell to understand his view on what’s behind the modern consumer’s ever-changing behavior and what he believes is holding back much-needed transformation across the sector.
With your experience in driving the adoption of new tech across leading retailers, what do you believe is still the most significant barrier to digital transformation in the retail sector?
Legacy technology is placing a considerable burden on retailers and is hampering their ability to innovate and move at the speed of the modern consumer. In quite a lot of cases, monolithic operating systems, designed for the pre-digital age, are still at the core of retail businesses. In today’s digital-first world, where retailers need to react super fast to changes in the market, inefficient systems like this are no longer fit-for-purpose.
Take the example of mobile apps; if a retailer relies on one archaic platform, it can be challenging to launch a new app quickly. When everything hinges off one platform, app integration can be complex and the risk of business interruption higher. Also, retailers may not have the right capabilities in-house to perform new app integrations efficiently, so may have to source consultants or partners to help.
It’s not just legacy technology that is causing blockages, it's also legacy mindsets. The old adage ‘if it ain’t broke don’t fix it’ still rings true in some retail businesses today. There is often a disconnect between what the commercial business knows it should do to change, and actually taking the steps to make it a reality.
What do you think most needs to happen to fuel change across the industry?
I think it's about moving away from the traditional ‘tiered’ approach to IT. If retailers decouple business practices and separate them into microservices which serve different purposes like ordering, fulfillment, etc., this could enable them to spin up new products faster, test them, and then reapply the same logic and technology to other aspects of the business.
It's about using the same systems but for different purposes. Breaking vital elements of the business up into component parts removes the need for one main operating platform and reduces the risk of unintended outages i.e. if there is an issue with one microservice, others will continue running.
It’s also about changing habits and ingrained behaviors. There is still a culture of conservatism in the retail industry – an unwillingness to change unless forced to. From an IT perspective, if you can explain to business leaders the benefits of creating microservices, namely you get what you want out of them, you design them to suit your needs, the data is your own, and you can develop and spin up new solutions much faster, it becomes a compelling argument.
With the current speed of change in the industry, retailers can’t afford to follow the same old patterns and approaches, they need to find innovative ways to improve how they operate to become more agile and responsive.
Customer expectations are changing at a faster rate than ever before. How can retailers meet this new kind of demand?
Customer whims and preferences are changing like the wind. When you think about how technology is altering every aspect of people’s lives, this leads them to expect the same or more from every online experience they have, including retail. Consumers are demanding faster services, more convenience, a better user experience, and all at a lower cost. It’s challenging for retailers to keep up the pace. But it comes back to being able to continuously improve and adapt your business to move in the direction you need to.
From an IT perspective, I think it's important to not focus too much on ‘speed’ as a driver, but instead, focus on delivering products in a disciplined way, keeping a close eye on quality. This is where agile methodologies come into play, the ability to develop minimum viable products which can efficiently test changes, and lead to releasing enough new features to capture the consumer’s attention and keep them interested.
It’s about keeping discipline around your delivery cycle and being thorough even at speed. It’s not about chucking things over the wall and hoping something sticks, that’s not what agile is about.
What will have the most influence on future customer demands?
In today’s fast-paced world, I think convenience will be the primary driver of the future consumer experience. When you look at Amazon’s model, it’s leaps and bounds ahead of any other player in the market. Why is this? It comes down to one thing; convenience.
With Amazon, you can order a product, receive a text it's been dispatched and then at the click of a button you can cancel the order just before it reaches you; all without any hassle, any penalty or any time wasted. That is an amazing experience and journey for the consumer. Other retailers struggle to replicate this level of service due to a patchwork of technology systems which are not set up to offer a seamless consumer experience. Also, there is a ‘restocking’ cost impact for the retailer, as in some situations, it costs more to restock an item than the consumer paid for it.
To get ahead, Retailers need to embrace end-to-end digital transformation and look for innovative ways to offer consumers a better experience, saving them time and money in the process.
Will the high street disappear or do you still see it playing a role in the future?
E-commerce still only accounts for 17 percent of the market, but that figure is steadily increasing. I think customers will always need the high street, well, not need, but want the high street in their lives.
Most people still enjoy making a trip to a physical store and getting advice in person before making a purchase. But high street retailers can’t compete with the likes of Amazon on price or convenience, so every time we make a conscious choice to use Amazon over a local store, high street profits take a hit.
It feels like we all want to have our cake and to eat it too, but this is not sustainable. I believe it’s possible for the high street to thrive once again but only if the government and policy-makers take action and focus on leveling out the playing field between physical stores and online, especially when it comes to disproportionate tax obligations and crippling rent costs.
Retailers need to focus on creating the best experiences possible that will keep consumers coming back again and again. If they fail to do this, the high street will struggle to survive.
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