For the last 15 years, the retail technology landscape resembled a minefield and it still does, but the mines have become more sophisticated. Disparity of costs, features and opinions make technology procurement a daunting and dangerous task for retail business managers.
I’ve heard about an adage in retail that one hasn’t progressed unless one has had a failed technology implementation, but my preference has always been to avoid such painful and expensive lessons.
I’ve dissected my views on the topic into five areas that warrant attention when it comes to choosing the right technology to succeed in a fast-paced and ever-changing retail environment.
1. Customers expect fused channels
I keep trying to defuse the media hype about online retailing, as all bricks and mortar retail will NOT move online. However, the next generation of electronic commerce is with us and retailers must be present in the cyberspace in order to stay relevant.
Customers of today are uniformly equipped with networked mobile computers (we need to stop referring to them as smartphones as we stopped talking about ‘horseless carriages’ some years ago), and this has redefined customer behaviour and expectations of retailers. Customers already assume they will have a seamless experience when engaging with a retailer, irrespective of their chosen channel.
When a customer makes a purchase online and has the product delivered, he/she won’t accept that a refund or exchange is not possible in the retailer’s nearest bricks and mortar store. Likewise, customers who purchase gift cards in-store expect to be able to use that gift card across all channels, online or in-store. Click-and-collect offerings are also becoming more popular as some customers want to pick up goods on the way to or from work, rather than wait for delivery to their home.
The modern consumer – time-poor, impatient and unforgiving – now increasingly expects to be able to buy from anywhere, anytime, conveniently. Customers don’t ponder ‘channels’ but retailers have to.
2. The time has come to pay a heavy price for ‘best of breed’ systems
A number of retailers spend, or have declared their intention to spend extraordinary amounts of money to fix their disjointed retail software to deliver the required channel integration. At Retail Directions we prefer a term ‘channel fusion’ as ultimately this is what must be achieved. Rigid interfaces will no longer do – seamless, real-time connectivity is a must.
The problem is that such fusion is not easy to achieve unless it was thought about before the system was installed, and the retail industry is not the only victim of poorly architected systems. Myki or Eastlink transport systems in Melbourne are classic examples of recently installed systems that have appalling lack of connectivity. It takes up to 24 hours to top up an account after the transaction is finalised online. This is a chilling example of outdated technology being implemented with a multi-million dollar price tag.
In retail, the major department stores in Australia seem to find themselves in a similar bind. They now talk about spending tens of millions of dollars to connect their sales channels, indicating their recently installed computer systems have not been structured to support such retail models.
Organisations that suffer from fractured systems usually try to justify them as being the result of a ‘best-of-breed’ systems strategy; in reality meaning they deployed a range of specialty solutions that don’t play well together. To use a motor car analogy, the idea that a sedan put together by a tradesman from the best parts available would be superior to a well-balanced, purpose-built, fully integrated car is plain wrong.
Retailers need to recognise that their IT systems are no different, and that they will continue to rattle until replaced with an integrated system. Retailers who run multiple, interconnected systems, supported by an army of IT people to keep their clunky contraption operational, will be continuously disadvantaged against those who run a fully integrated and unified retail application developed from the ground up as a single system.
3. Beware the shiny object syndrome
Another challenge faced by the retail industry seems to be an un-abating flood of technology fads, pumped up by the media portending dire consequences for businesses that don’t jump on board. Some technology vendors are quick to roll out and market fad products, as long as customer demand is there. Fear of being left behind is a wonderful sales driver, so it seems.
Right now, cloud computing is the latest frenzy gripping business, yet it is nothing more than a new term with little meaning. It’s an attempt to convince modern technology users to start again, using re-packaged technologies of the 60s because they are supposed to cost less.
Other fads include Radio-Frequency Identification (RFID) tags, which are professed to replace barcodes – another old technology that has recently been rediscovered by the media. So, it goes without saying that the iPad is not going to become the retail device of the future either but is merely in-vogue at present.
Instead of worrying about the revolving doors of ever-new fads, C-level executives in retail need to keep their BS meters on high alert to avoid wasting time, focus and money on projects that bring no real return. If sales are down, ‘cloud-computing’ (or ‘fog computing’ as I prefer to call it) is not going to help.
4. In the absence of information, price remains the gauge of quality
Some retailers continue to spend tens (if not hundreds) of millions of dollars on IT, when 10 percent of that spend would have been sufficient to buy similar or a better solution. What is causing such seemingly irrational behaviour?
When something is not well understood and everyone seems to be doing it, a ‘me too’ reaction follows, out of fear of being left behind. The only way for C-level executives to avoid such a trap is to persistently demand explanation – if you don’t quite understand it, keep asking for an explanation until you gain clarity. Otherwise, don’t spend the money. There is no shame in not knowing – the industry is notorious for renaming everything every five to 10 years, confusing the outsiders.
The key to avoiding burning cash on technology is to buy systems purpose-built for the retail industry, versus an accounting or a manufacturing package retrofitted or expanded to work in retail. Nearly 20 years ago, Retail Directions decided to provide an integrated system solution specifically for retail, and our customers can confirm the remarkable results. They need only one person in their IT department for every 100 cash registers installed in their business. If, like one of the well-known discount variety retailers, you have to have five or six people for every 100 registers, you’re definitely using the wrong technology.
5. Behold the power of unity (and save!)
There are many advantages of having a unified core system in your enterprise. Firstly, a single system to operate all retail functionalities means no disparate and unwieldy system interfaces. All of your data is centralised in one database, making access to the full history of all transactions in your enterprise extremely easy. Then, the cost of software and ongoing maintenance are lower, and there is only one vendor to work with – no demarcation disputes ever!
Ultimately, a unified system means a simple solution: a solution that doesn’t contain non-essential parts, leaving you with more money and resources to spend in other areas of the business.
Is unified system technology enough?
Great outcomes can be achieved with unified system technology in retail but two other conditions must be met as well: the system in place must be reliable and functional, and the retailer must be committed to using it across the entire business.
When implemented and managed correctly, a retail IT system can be instrumental in reducing inventory and operating costs. It can also support value-add essential facilities such as integrated web stores, gift cards, loyalty programs, and sophisticated promotional campaigns – all of which are core to customer retention and improving revenue.
The essential pre-requisite though is to avoid the bygone strategy of buying fragmented systems and trying to mash them together, which is practically impossible to do effectively. A sole IT system that manages merchandising, supply chain, warehouses, POS and online channels is the way forward, and such systems will cost far less than the many millions that some Australian retailers are currently spending on their IT solutions, with little or no gain.