Retail means change. Hardly any industry is experiencing such an unprecedented wave of change as today’s retail industry, which has already undergone significant transformation over the last few years and continues to evolve rapidly.
According to Silicon Valley Bank, US online sales reached over $200 billion in 2021, contributing 18% of total retail sales, marking an increase from the 10% of retail sales ten years ago. Forecasting further growth in retail, a new report by FTI Consulting indicates that US online retail sales will reach $1.14 trillion by the end of 2023, with nearly 42% of overall growth coming from the ecommerce channel.
External market trends such as technological advancements, shifting consumer behaviors, intensified competition, and the non-traditional expectations of the Generation Z/Millennial workforce are compelling retailers to reconsider their approaches to business. This is why numerous retail companies now focus on modernizing their software technology and overall IT infrastructure.
Many players have taken proactive steps to redefine their digital strategies, placing a strong emphasis on customer experience and technology integration. This drive for change begins with identifying relevant trends and necessitates adaptations in strategies, and business models, ultimately translating into an efficient operating model that brings these initiatives to fruition. In contrast, some retailers have been resistant to the need for adaptation, opting to cling to legacy technology.
And rightly so: staying with their monolithic technology is proving detrimental to their success more than ever before. If your business is in the retail industry, modernization is probably at the top of your list of concerns – and if it’s not, it should be.
What Does Modernization Mean for Retail Businesses & Why It Is Important?
Retail modernization goes beyond merely staying relevant; it’s a strategic preparation for what comes next. It involves embracing new technologies and innovations to maintain competitiveness. Retailers who are taking action today position themselves for future success, setting benchmarks that competitors will struggle to match.
A lot of factors are propelling retail businesses toward modernization. Some stem from large economic forces, while others arise from evolving customer expectations. Together, these forces push retailers to evaluate how well their technology is keeping up. For the majority, sticking with legacy technology undermines their potential for success more than ever before.
Some of the factors that affect retailers include:
1. Growing Rate of M&A
The business landscape is witnessing an unprecedented wave of consolidation, and the retail sector is no exception. When companies come together, they aim to integrate their operations as quickly as possible to achieve economies of scale and efficiencies they hope to create. This is pivotal for determining the status of their existing applications and the optimal trajectory for their evolution.
2. Adoption of the “As-A-Service” Model
Nowadays, retail enterprises are distancing themselves from the traditional model of managing their hardware and infrastructure. Instead, they seek ways to maximize vendor relationships by using readily available, off-the-shelf services.
3. Rapidly Evolving Retail Landscape
The COVID-19 pandemic and its resulting ecommerce surge have transformed online and brick-and-mortar retail dynamics. Retailers are crafting strategies to respond to the new consumer behavior landscape by connecting their frontline workers with solutions that enhance customer experiences across in-person, virtual, and telephonic interactions.
4. Increasing Need to Understand Customer Behavior
As customers and competitors become more sophisticated, recognizing their behavioral patterns becomes more valuable. Knowing where and how customers make their purchases has become critical – and achieving this level of understanding requires refined data collection and advanced analytical capabilities.
What does this mean for future success? And how can retailers truly flourish in this evolving landscape? Amidst these pressures, the call for a modernized technology portfolio becomes necessary.
How to Modernize Your Retail Business
The retail sector is undergoing a profound transformation. The surge of e-commerce is prompting the rapid closure of brick-and-mortar stores or their evolution into showrooms where customers can try products available for online purchase before making an order.
In response to this paradigm shift, retailers are trying to modernize the shopping experience to stay competitive with emerging technologies.
However, the question arises: how can retailers establish a physical environment that is interactive, attractive, immersive, and engaging, especially when consumers have grown accustomed to browsing products from home or via mobile devices?
Given below are key elements they should prioritize:
Retail Analytics
One of the most important factors retailers must consider in order to stay competitive is the integration of technologies such as artificial intelligence (AI) and machine learning (ML). These technologies are reshaping businesses and transforming daily lives across the world, opening avenues for retailers to enhance customer experiences through data-driven sales insights.
Gartner emphasizes that, as the market evolves and competition intensifies, consumer experience investments will be a key differentiator for major retailers. The global management consulting firm believes that big enterprises must adopt advanced analytics to gain insights into individual customer preferences, consumer behaviors, and loyalty patterns.
A recent study by IBM Institute for Business Value indicated that almost 62% of retailers report the use of information, including big data in retail and analytics, is giving a competitive edge to their organizations. Moreover, it is also predicted that the global retail analytics market will exceed $16 billion by 2025, growing at a CAGR of around 22%.
Businesses equipped with a modern data strategy, well-defined KPIs, and well-modeled dashboards can adeptly navigate market transitions compared to their competitors. And most importantly, successful retailers have their KPI dashboard locked and loaded to tackle the uncertain months ahead.
Break Up Siloed Data
Data silos introduce inefficiencies and complicate customer interactions, leading to stressed support agents and dissatisfied clients.
According to the 2023 Zendesk Customer Experience Trends Report, only 22% of business leaders claim effective data sharing within their teams. Siloed data hampers retail operations and makes it challenging for leaders to get a comprehensive view of company data. In short, siloed data is not healthy data.
Removing these data silos often requires new technologies and initiatives. Prioritizing data connectivity and integration across third-party software and diverse business tools is crucial. Yet, breaking down siloed data must align with in-store dashboards and digital tools, offering employees visibility into inventory, real-time logistics support, and sustainability metrics throughout the product supply chain.
Retail Integration
End-to-end retail integration becomes important to interlink complex technologies, facilitate smooth data flow across ecosystems, and optimize their efficiency.
Smart retailers seek to build out their platforms, transcending the use of data for personalized marketing messages. Today, they’re connecting their point-of-sale (POS) systems with everything from CRM systems to email providers, facilitated by direct connections or APIs. This trend, known as “retail integration,” is becoming a top priority. It signifies a shift for retailers to evolve beyond marketing and merchandising into areas that includes customer service and technology.
But how can retailers achieve this? TechBlocks provides retailers with the ability to integrate applications seamlessly — whether in the cloud or on-premises — and apply rules and workflows across all of them.
For example, OEC Group, a global logistics and supply chain industry leader, was being held back by legacy technology & siloed infrastructure. They were looking for end-to-end digital process transformation.
TechBlocks helped OEC Group to build an IT solution to support their business goals, improve decision-making and business agility, streamline collaboration among global stakeholders, and improve operational efficiency across business processes.
Learn how we enabled OEC Group to manage new business workflows — from purchase orders and booking to shipment and delivery.
Digital At the Core
Omnichannel has long been a focus area for retailers, driven by factors like the surge in demand for services such as click-and-collect and the realization that seamless operations between stores and e-commerce are essential for meeting customer expectations efficiently.
However, the reality is that many retailers are yet to adopt the right omnichannel strategy. Overcoming this requires breaking organizational silos, designing supply chains in such a way that digital does not remain standalone or “tacked” onto the store supply chain, and addressing technology integration challenges.
This suggests retail modernization is the key to integrating the digital and physical worlds. Those who adopt digital at the core are poised to build successful omnichannel customer journeys, reaping benefits like improved brand presence, increased customer loyalty, and optimized costs.
Build Business Resilience & Agility With Composable Commerce
Retail businesses must understand that one size does not fit all.
Avoid vendor lock-in that curbs a brand’s ability to respond to market changes with new, agile solutions. A more advanced approach is to seek partners well-versed in the “composable commerce” strategy. This means collaborating with organizations capable of rapidly building and implementing innovative solutions via proven, pre-built software modules and digital components tailored to retail needs.
Rather than relying solely on a single vendor for all business needs, retailers can combine components to build custom tech stacks. These stacks can be autonomously deployed and interchanged, aligning with evolving business needs. Not only does this expand a retailer’s capabilities, but it also empowers them to address specific functionalities without compromising others. Here’s our step-by-step guide to migrating to a composable commerce approach.
Moving Ahead With Retail Modernization
Retailers must understand that modernization doesn’t happen overnight. It requires the skills and patience of a gardener. It is less about technology adoption and more about changing to a new work culture within your organization.
This shift is driven by two core factors: Firstly, retail businesses still work on legacy processes, systems, and cultures that demand attention. Secondly, the pace of technological change within retail, particularly in omnichannel channels and marketplaces, is relentless.
To begin with, retailers must transform their mindset. Technology integration without proper planning and skill integration can do more harm than good. And lastly, successful modernization requires a deliberate, holistic approach to technology transformation.
TechBlocks has helped businesses reap significant benefits by modernizing their applications and retail processes. By unlocking data held within siloed applications and connecting segregated data and locations across their operations, retail businesses that have followed the modernization path have gained significant returns on investment.
Contact us to take your modernization efforts to the next level!
