Retail enterprise modernization—surviving and thriving in an era of upheaval

Your customers aren’t everything, they’re the only thing

Fulfilling the needs of your customers is why you’re in business. But these days, those needs are changing at a pace and in ways you couldn’t have imagined even 5 years ago. Digitalization, globalization, innovation, continued economic pressure and disruption from COVID-19 have caused unprecedented swings in the retail pendulum. Just four years ago, stores were closing at a record pace. Now, the Gartner CIO and Technology Survey indicates that opening more stores is the investment priority for 79% percent of retail CIOs in 2024.

The landscape in front of you may be unrecognizable, but that’s because in many ways, it looks like a greenfield opportunity. Old rules, old habits are changing; customers want new experiences. Capitalizing on the possibilities is going to take more than a few tweaks to your distribution model, it’s going to take rethinking how you do business and then figuring out which technologies you need to bring these new strategies to life.

Invest for success

It’s no secret that your legacy Java enterprise is not doing you any favors when it comes to creating a memorable and delightful experience for the modern consumer. And while you might not be ready to modernize everything, there is a lot you can do to become more agile without starting from scratch. But technology is no different from other investments—the quality of input equals the quality of output. And the pressure to digitalize for the sake of digitalizing may be hard to resist. So don’t do it. Smart technology investing can ensure that your business gets maximum value from a minimal investment.

Where is the smart technology money being spent in retail these days? First, let’s take a look at a few of the major socio-economic factors that are impacting retail businesses right now:

1. Inflation and consumer price sensitivity – Decreased consumer spending and an increased focus on value means you need to redouble your efforts to increase customer loyalty and do more with less.
2. Rapidly evolving customer behavior/expectations – Modern consumers have an unprecedented choice of what and how to buy. As a result, they’re not only becoming less loyal, they’re demanding more conscious experiences from their retailers including higher levels of personalization, transparency and sustainability.
   • Case in point: European sports retailer Decathlon has implemented RFID-based solutions in store that dramatically streamline the buying experience for customers, including allowing them to scan and pay for items with their smartphones. In the back office, the technology enables real-time product tracking throughout Decathlon’s global supply chain. This traceability not only improves supply chain operations, it helps Decathlon deliver on its promise of sustainability by tracking the origin of materials, manufacturing processes, and standards compliance.
3. The labor shortage – The Great (global) People Shortage is hitting retail the hardest. In the U.S., for example, there are currently 5.5 million more retail job openings than there are workers to fill them. I don’t need to tell you how disruptive this is to retail operations.
4. E-competition/technological disruption – Over the past two decades, technology—from e-commerce and social media to contactless payments and big data—has profoundly transformed retail commerce and consumer buying behavior. As AI and augmented reality come more into focus, the one thing you can predict is even more rapid transformation.
   • Case in point: Spanish clothing retailer Zara continues its tradition of industry disruption with its recently launched concept store in Madrid, which perfectly melds online and physical shopping experiences. In store, customers have the option to browse the store of their choice online, consult available stock, shop online, and collect their purchases in just two hours. The store also offers features such as Pay & Go mobile phone shopping, an automatic online returns point, and fitting room reservations in-store or via the Zara App.

Succeeding in spite of the pendulum

In order to meet these challenges, I like to talk about four keys to longevity in modern retail: efficiency, visibility, scalability, and flexibility. For many retailers in the Netherlands, these words can’t be applied to the enterprise systems currently running their businesses. Maybe one or two of them apply to one or two applications, but that’s usually as far as it goes.

Let’s look at how each of the four keys helps mitigate negative impacts from the socio-economic factors described above:

1. Efficiency – Providing efficient service across all channels means operations are automated, seamlessly integrated, and streamlined from the back to the front of the store and beyond into online channels. Processes are simpler and faster, delays and costs are reduced, and errors are minimized for both customers and employees. Giving employees integrated tools that simplify and automate processes in all areas of operation will boost productivity and customer (and employee) satisfaction while lowering costs. For example, empowering associates to use mobile apps that are seamlessly integrated with back-end systems to service customers in-store.
2. Visibility – The ability to provide real-time access to up-to-the-minute data to any party that needs it (employees, partners, and customers) will make every aspect of your business more effective. On the back end, it will enable things like just-in-time inventory, demand-driven restocking, and lean operations. On the front end, it will help provide the transparency customers are demanding, not only to enhance their shopping experience but to learn if the business is making good on brand promises such as sustainability.
3. Scalability – Scalability is essential for growing without losing performance or efficiency. Opening more stores, expanding online, increased transaction volumes, larger inventories, and more complex logistics can only be supported by scalable systems that take full advantage of a cloud-based infrastructure and services. Scalable systems ensure that a business can grow without needing to completely overhaul (or even change) its infrastructure.
4. Flexibility – Flexible technology systems allow retailers to easily introduce new channels and technologies, personalize the customer experience with AI-driven recommendations, and integrate online and in-store channels, enabling seamless consumer experiences such as buy-online-pickup-in-store. Flexibility also includes the ability to respond quickly to supply chain disruptions or seasonal shifts, empowering retailers to pivot their strategies to meet customer needs in dynamic environments.

Finding the right approach

Figuring out how well your legacy systems satisfy each of the four keys is a great way to start planning your enterprise modernization journey. And whatever your needs, modernization doesn’t have to be an expensive, disruptive, monolithic undertaking. There are numerous high-efficiency, incremental approaches that give you control over how to achieve your goals at a pace and cost that’s right for you.

Maybe you’re ready to start rebuilding in the cloud with a unified commerce platform that provides a seamless omni-channel customer experience, or a supply chain management portal to support just-in-time supply chain operations. Or maybe you simply want to extend your existing applications to the cloud with flexible, customized add-ons and integrations. Whether you start big or small, a modernized, cloud-enabled enterprise will give you the ability to not only avoid the devastating swings of the retail pendulum, but to succeed wildly in spite of them.