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A year of joining the dots in retail technology

Simon Ratcliffe

Simon Ratcliffe
Principal Consultant, Advisory

In a recent interview with Retail Gazette, I shared some thoughts on what would be important for the retail sector over the coming year.

The biggest challenge facing retailers is still the effective operation of online businesses. The selling element is now pretty much addressed by most retailers. Much money has been invested in the consumer experience, the analytics and the behavioral understanding. Through the use and advancement of technology and turning data into meaningful insights, we know why and where baskets are abandoned, and much money and time has been spent in addressing this.

Where there has been less investment, however, is in the logistics of stock management, deliveries and returns. For many retailers, these are still optimized for bricks and mortar or are outsourced wholesale to third parties, removing a level of control. These backend systems are often built on legacy foundations and so there needs to be continued and significant investment in more effectively connecting the front-end user experience with the backend logistics.

Continuous evolution of the customer experience is key

We now need to extend our care of the user experience to the whole transaction – baskets will be abandoned if the online experience is poor, but customers will also abandon a retailer altogether if the overall transactional experience is poor.

In terms of other trends to be aware of, customers are buying more and more from organizations that have social and environmental values they can demonstrate. Good technology alone is not enough for many customers. They want evidence of commitment to ESG initiatives and values, and they want to spend their money with organisations that they can identify with. Beyond simply publishing a stated policy, now it is time to show how that commitment manifests itself. In response to eco-friendly products, Deloitte research found 55% of consumers purchased a sustainable product/service and 32% did so despite a longer waiting time or lower-cost alternative..

” For a better, more inclusive and sustainable future, retailers must continue to incorporate ever-evolving consumer, shareholder and boardroom needs and expectations into their strategies.” Evan Sheehan, Global Retail, Wholesale and Distribution Leader, Deloitte

One important element of this is the upcycling market. Many people are looking to resell items which have led to a burgeoning pre-loved market. If original retailers were to connect to this market there could be some interesting dynamics to explore. There would also be logistical challenges to make this a consistently good experience for customers, but this can be achieved through connecting the dots in the other technology areas referenced previously.

“Up to now, brands have been aware of their customers’ drive towards sustainability, but they are only beginning to understand that this represents a fundamental change in the way people want to shop.” Wired

There is also an enormous opportunity to bridge the retail behavior gap between generations. During the pandemic, people of all ages were driven online, but the end of restrictions means that large numbers of boomers and Gen-Xers are reverting to older habits of in-person shopping and developing new habits about where and with whom to shop. Of course, shopping on the high street is a crucial part of the retail experience for many people, but it is one that could be transformed through technology. Perhaps one of the greatest opportunities is bringing the digital experience into the stores. Physical sites could become hybrid stores where you can see, touch and feel items, while still clicking to order and have them delivered from central hubs– maximizing digital efficiency while accepting the need for stores for those wanting them. Retail generates a lot of waste, with returns accounting for a significant proportion of this. If items can be seen and tested before they are purchased, the number of returns will decline;  if returns can be made  in-store, then packaging waste will also be reduced. The technological components of such experiences aren’t necessarily new, but it is not widespread and could be a great new opportunity.

Connecting new digital technology

The challenge that exists in making this model work is connecting new digital technology to the backend logistics. As the front-end digital technology evolves to fully embrace virtual reality and other forms of reality, the connections with the backend logistics will also become ever more complex. As with the currently successful digital retailers, those that succeed build the complete customer journey from browsing to successful return.

The significant improvements in technology infrastructure discussed here don’t have to come with enormous spending. As retailers cut budgets it is understandable that many are looking to more cost-effective ways of improving processes and technology.

The key to improving standards while reducing costs is using what you already have effectively and investing in the small things that join the dots between modern technology and legacy infrastructure to drive growth, resilience and efficiencies across the organization. Too often this connection has been viewed as too difficult and so the master plan has been to sweep out the legacy. That’s expensive and just creates a new legacy.

In essence, 2023 is a year of dissolving technology siloes, connecting processes, and using them to provide customers with a truly seamless experience from selection to purchase, through delivery and returns—an experience aligned with their personal values and generational preferences.

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