How technology is changing the backend of retail
- Posted on June 6, 2017
The following blog post was written by Avanade alum Nick Lefkonidjates.
Some retailers are leading the way when it comes to digital customer experiences. Instore, they’re using RFID technology and smart mirrors to show shoppers relevant product information. They’re using augmented reality so that people can virtually try clothes on. Online, they’re investing huge amounts of money in making sure that their e-commerce platforms are interactive, personalised and innovative.
But what about back-end processes?
The fact is, many retailers simply don’t see improving their back-office technology and processes as a priority. Unlike opening a new store, or updating the website’s front-end, the benefits of updating the back-end are less obvious. What’s more, senior management teams often work on an ‘if it ain’t broke, don’t fix it’ mentality. Yet this thinking can lead to disastrous results.
Imagine the worst-case scenario: process or systems failure during a peak trading event. Across the four days of Black Friday through Cyber Monday 2016, Britons spent a record £5.8bn. If critical back-office technologies failed during this retail frenzy, the consequences would go far beyond just revenue loss. Businesses would have to account for a loss of brand reputation, trust and employee productivity, alongside business disruption and recovery costs. A cloud-based platform which can scale to demand can help. Burst capacity means that operations can grow quickly at peak times, with retailers only paying the premium for this capacity when it’s in use. As a result, operations are never over nor underinvested for the rest of the year.
A single view of stock can also help with day-to-day operations. For example, if a customer walked into a store and wanted to know if an item she’d seen online was in stock, the sales assistant could provide meaningful help. Should the item not be on the floor, nor in the stockroom, a joined-up stock system could tell the customer when it would be likely to come in, what colours would be available and what sizes too – either at that store or another. This visibility would mean that retailers could move stock to where it will sell, improving profitability by avoiding lost sales and excessive end of season markdowns.
Machine learning heralds another IT revolution for retail. Coupled with predictive analytics, retailers can learn quickly what customers will want. This is particularly necessary given the rise of online shopping, fast fashion and increase in returns. Data analysis can help retailers understand customer behaviour, return rates, identify fraud and improve personalisation to make sure buyers remain keepers.
Of course, all this presents a challenging task for any IT decision maker. The best starting point, as with any journey, is to clearly define where you’re going. Business priorities and risks must be identified and a back-end digital transformation course set accordingly. Involving key stakeholders at this early stage will allow for wider business buy-in later on. And being agile will allow retailers to respond and react to the changing retail environment as it happens.
Don’t let legacy technology, or a siloed business structure, hamper innovation. To remain competitive, attitudes about back-end systems and investment needs to change. Remember, it’s not about buying more technology, it’s about outsourcing your risk so that you have the space to grow.