Retailers will only retain relevance through digital transformation

Like Mark Twain’s demise, some reports of the death of the traditional “bricks & mortar” retailer have been greatly exaggerated. However, many of todays’ most prominent brands have been unable to transform their businesses in order to compete with online behemoths like Amazon, and in the same timeframe, some of the UK’s biggest household names have begun to disappear from the UK high street, leaving many store fronts empty.  

Today, there are also examples of companies who have embraced digital transformation to change the customer experience and through a combination of technology and forward thinking business strategy, have hoped to see rapid growth.

Sainsbury’s CEO Mike Coupe, for example, recently stated the company is accelerating its investment in technology due to a Q1 sales dip, thereby driving the conversation back towards ‘technology as the enabler’ for profitability. The Co-op has also revealed its biggest digital transformation project to date, with plans to launch pay-in-aisle mobile payments that will help deliver growth and a brand that will result in stronger customer communities, and potentially, loyalty.

Within its recent 2019 Global Powers of Retailing report, Deloitte cites retail revenue increased for 83% of the world’s 250 largest retailers and that Europe had the highest number of Top 250 retailers, with 87 companies based in the region (34.8%). However, such a radical shift in profitability is only possible by effecting a complete technological refit of nearly every aspect of a retailer’s operation, including its IT systems.

Starting with the customer, technology can help to personalise the experience, offering detailed customisation of a product or a service specific to the consumers’ requirements. However,  a recent report from Workday’s Digital leaders: Transforming your business study with IDC has shown that back-end teams, including HR and finance, must be involved from the outset to avoid “digital deadlock”, something which will have detrimental impacts on both the customer experience and accompanying revenue.

As retailers continue to incorporate new and innovative technologies such as touch screens, kiosks, augmented reality (AR) and magic mirrors, whilst promising generous benefits for continuing customer loyalty through discounts or point schemes, the rest of the digital supply chain has to be improved to deliver on the promises of growth. Essentially, the retailer has to keep their side of the deal, because if there’s one thing that customers hate, it’s broken promises.

Digitisation of the customer experience has therefore become a key requirement for many of todays’ retail businesses. More over, a 2018 McKinsey blog found that retail was one of the most mature business sectors in terms of cloud adoption, with a quarter of industry workloads placed in the public cloud and retailers expecting that to rise to one-third by 2020.

What we know is that digital technology is now embedded throughout every step of the retail operation, from the customer experience, through to the warehouse, the inventory systems and within the management of employees. Clearly, retailers who don’t embrace innovation to deliver an improved and reliable customer experience will fall behind. For those finding success, the skill lies with how to identify, deploy and manage the correct technology solution for their business case.

The role of cloud in retail

Cloud computing has been a popular and largely successful means of deploying technology applications in a scalable and cost-effective way. However, it is not always the best fit for legacy business models and moving from one extreme, of non-digitised or local systems, to one that solely depends on cloud, is not without risk.

There is the story of a popular German B2B supplier whose inventory management system was located purely on premise and relied on a “just-in-time” supply model. By choosing to modernise quickly, and without careful consideration of all aspects of the supply chain, they opted for a completely new cloud-based system.

The sad news is that the same brand is now becoming obsolete and bankrupt, primarily because their network couldn’t guarantee the connectivity speeds needed to keep their inventory management system up-to-date, causing them to miss customer orders and let the expectations of many, down.

This story is one that is not often heard and for many of today’s retail technology applications the cloud is an almost perfect fit. However, for the IT and stock inventory systems where speed of response is vital, edge computing can provide a far more reliable solution.

The role of edge computing

For retailers, “edge computing” is not a term that remains at the front of mind. Edge ‘data centres’, for example, are not something that would resonate with many in-store or online shoppers. Nonetheless, these ‘edge’ IT architectures have become a critical, yet somewhat behind the curtain technology, responsible in part, for almost every transaction in the retail business.

What’s more, retail businesses, especially those who are directly consumer-facing, do not want to be bogged down with the complexities of technology, they need a workable IT solution that allows them to serve customers in increasingly innovative ways. This could be in-store via apps, through innovative digital signage, or indeed like many fast-food outlets, through kiosk systems.

From another perspective, EPOS systems have to be protected from outages, as do kiosks and security systems. One cannot remain profitable if one cannot process transactions. More over, such customer transactions create data that has to be processed securely in-store, before being relayed to a stock system, which has to update and provide replenishment for best-selling products in real time. This is exactly where data becomes the primary mode of fuel, allowing the business to stay profitable, retain customers, and what’s more, it’s a great example of edge computing in action. 

Ensuring reliability and low cost for retail businesses

If we dig deeper inside the technology, at a vendor level, pre-integration and standardisation of these IT systems are the key components of edge success. These approaches ensure that technology products from different suppliers will integrate seamlessly, enabling retail businesses to cost-effectively deploy their retail computing systems over reliable and repeatable IT hardware stacks – something extremely important if your brand is growing quickly and expanding into new locations due to customer demand.

These edge computing ‘stacks’ are driven by customer IT use cases and can sometimes require little maintenance. This also enables retail real-estate managers to keep the associated costs both manageable and to a minimum. However, as digital transformation inevitably leads to a greater number of distributed stores, with an increased volume of IT deployments, the issue of maintenance and management becomes absolutely critical.

For retailers, it is far more cost-effective to ensure that systems are maintained via scheduled service calls, as opposed to those that are unmanaged and in need of immediate response. In this scenario the reliability of edge compute, or the in-store IT function, is essential, and tools like cloud-based management software, Machine Learning (ML) and Artificial Intelligence (AI) can play a key role in such keeping service costs to a minimum.

One point we have to agree on, is that for today’s retail businesses to find success and remain profitable, embracing digital transformation through evolving technologies is essential.

Although not a prominent term in the retail vocabulary, edge computing has become a key enabler for todays’ retailers. Put simply, the edge is the IT architecture that sits behind the in-store infrastructure, but it is the architecture that will allow retail brands to innovate, remain profitable and retain customers in an increasingly digitised and competitive industry.