The past few years have significantly disrupted people’s everyday lives due to the ongoing effects of COVID-19 and the impact of social movements and political unrest in many areas of the world. At the same time, many people now have the freedom to work remotely and explore new ways of living in areas that offer lower costs and the opportunity for more disposable income and spending. These changes have also impacted how consumers interact with brands and retailers. For example, more people are now shopping for groceries and consumer products online and spending more time online overall. Retail businesses, on the other hand, are struggling to adapt to supply chain strains, rising costs, labor shortages, and an increased focus on environmental and social issues.
Traditional retailers are also faced with growing competition that often has a significant advantage of having a digital-first mindset from inception. In the UK, more than 725,000 businesses were formed in 2020, with retail seeing the largest increase. Other new competitors to retailers are consumer brand manufacturers who increasingly see the direct-to-consumer (D2C) sales channel as an important method of gathering consumer insight to help defend market share and innovate products to regain momentum. These brands are not afraid to invest heavily to ensure success in their D2C operations.
Retailers must take urgent action to remain visible and relevant to customers and build the internal competencies needed to adapt and thrive.
As customer spending habits have changed, retailers must adapt to retain visibility, relevance, and authority. This demands immediate action from retailers. Many business models are dependent on predictable patterns of consumer behavior, which goes far beyond footfall, and all retailers must evaluate the means (both physical and digital) in which they reach customers and transact with them. They must understand each customer as they move across multiple platforms, channels, places, and mindsets and be able to combine their customer, market, and product knowledge to design relevant new products and services.
As customers increase their screen time, retailers also need to understand which specific platforms their customers are engaging with and learn how to meet them there. This means connecting to new platforms, like TikTok, and adapting strategies to fit how consumers interact with brands on the platform. This demands new or adapted content, and new forms of digital engagement (such as live stream shopping or video shopping assistance), or new partnerships to bring fresh products and services to life (such as subscriptions or celebrity-designed items).
Each retailer will undertake a unique journey, but some key elements will be the same for all of them, including:
– Building an understanding of the customer by gathering and associating information from owned channels, social channels, and third-party data sources
– Developing a deep competency in managing this data, analyzing it, making factual inferences and testing hypotheses derived from it
– Creating a culture of customer focus and breaking the siloed thinking of channel-specific experiences and performance
– Designing new customer experiences and redesigning product lines and services to serve an evolving customer base
– Working with the supply chain to bring these new experiences and products to market rapidly
– Making radical changes to outdated commerce technology
The Outdated Commerce Technology Landscape is Slow and Expensive to Change
Most retailers have historically used eCommerce as a single, stand-alone channel that has evolved through multi-channel retailing, omni-channel retail and digital.
Decision making on software and systems has been dependent on what is best for a channel, not the enterprise as a whole. This means compromises have been made and many core transactional and customer engagement systems have been implemented, leaving a legacy of many applications to support, an explosion in the number of integrations, and complex and inconsistent business processes. This makes business processes subject to error and delay, and insight hard to extract.
Making application changes in such an environment is slow and expensive. Even first analyzing where a change must be made and identifying the impacts of that change is time-consuming and prone to error. After making code changes, significant regression and performance testing is then needed to ensure no unintended consequences.
High attrition in technology teams due to the buoyant market for software skills further slows down rate of change because length of service is a key factor in both productivity of technology staff and in the quality of their output.
Despite this, as discussed above, retailers need to make significant changes to their systems to survive and thrive, and they need to make these changes quickly. A completely new approach is required to make this possible.
Come back tomorrow for part two of this piece where Martin Ryan shares his vision for Unified Commerce in 2022.
The author, Martin Ryan, is VP of Retail Consulting, EMEA at EPAM Systems with a wealth of experience advising retailers and brands on their technology strategies, software selection and operating model, covering all aspects of retail, ecommerce and D2C business models and operations.
