Global insight: Retailers getting increasingly inventive

This story was originally published in Planet Retail's IT & Supply Chain newsletter on Wednesday 2 October.




Challenged by online players such as Amazon, retailers are in need of new business ideas. Moreover, operations have to embrace digital and invest in technologies that help them differentiate. Digital mobility, in particular, has become a main driver for creating new customer-facing applications. Following the example of the world’s largest retailer’s @WalmartLabs, leading players are increasingly taking the development of such crucial solutions into their own hands.

In previous decades, retailers typically commissioned their own IT departments to build their core merchandising systems. However, many have since opted for standard suites from the likes of Oracle or SAP. These packages are not without shortcomings. For instance, there is still no convincing solution for multi-level retailing available from the major suppliers and real-time data access is still a good distance away from becoming a reality.

If nothing else, the massive costs related to developing a complex merchandising system persuaded the majority of operations to opt for a standard solution. Today’s software architecture contains far more flexibility and allows for customisation of packages according to individual requirements. Nevertheless, what too often is missing from the larger players’ offerings is the inventiveness small creative units can provide.

And a wealth of ideas is required in modern retailing to win the fight for today’s demanding customers. Therefore, it comes as no surprise that retailers increasingly fund their own tech labs to deliver innovative ideas. Only last week, US department store chain Nordstrom joined the wealth of retailers taking this path.

In many cases, companies no longer rely only on their established IT departments. Front-runners have acquired start-ups to form the core of their innovation labs, as Walmart did, or are engaging skilled university graduates to work on new digital and physical design concepts. Often these teams will work outside the retailer’s traditional environment. @WalmartLabs is located in Silicon Valley; Tesco’s idea squad operates from London’s trendy Silicon Roundabout.

Unusual ways of identifying novel ideas can also be useful. Last month, UK grocer Morrisons inaugurated a series of meetings with technology vendors, arranged in the style of reality TV show Dragon’s Den, where they can pitch their innovations to the retailer’s staff. Even more recently, Tesco has launched a speed-dating style of events to evaluate fresh business ideas from start-ups.

Whichever method they choose, retailers must identify and develop new concepts to win customers in the digital age. This needs a fresh approach, plus young and creative minds to work it out. The required technology is already here. And, as opposed to traditional merchandising systems which can take ages to implement, modern apps can be developed quickly and deployed immediately, helping the retailer to better compete in a challenging environment.