It cannot be denied that we are currently witnessing an ongoing retail crisis. Several reports have predicted that this year will see retailers across the UK struggling with cost-cutting, store closures and job losses, and this year we have indeed already seen several large companies including Toys R Us and Maplin fall into administration.
This has caused retailers all over the country to re-examine how they can leverage their key asset — the store. Despite the fact e-commerce is taking an ever-growing fraction of the industry, the physical store will continue to play a primary role in building both brand and customer relationships. In fact, physical retail will still account for 80 per cent of all sales globally by 2025. With this in mind, retailers are redefining the store’s role and ensuring that the in-store experience they offer can meet the incredibly high standards for convenience expected by today’s shoppers.
There is a wide range of opinions on what ‘the store of the future’ might look like, and what businesses need to do to actually get there and succeed. While a renewed interest in new customer engagement applications and services is driving the debate, retailers need to also ensure they can provide these higher levels of engagement and convenience in parallel with delivering immediate cost savings if they are to survive in today’s challenging environment.
However, despite how retailers might visualise their own idea of the store of the future, from a technology perspective, the most significant obstacle to delivering this is not a lack of budget or buy-in from senior management — it’s their existing store IT infrastructures. These are preventing retailers from offering the forward-thinking store experience that customers now expect and want, and so there needs to be a significant shift in IT approach if the industry is to move forward.
Innovation requires modern IT
There is complete truth in the need to transform in-store customer interaction in new and exciting ways, and this must be built on a solid understanding of customer needs. But we are not yet able to hone in on exactly what the store of the future might look like. What we can be certain of is that retailers will require the agility to support an ever-changing range of services and experiences to engage and delight customers, measure their responses and feed their constant hunger for novelty.
If these opportunities are to be capitalised upon, retailers require an agile IT infrastructure that can deliver the applications on which new services are built quickly, cost effectively, and without fuelling the costly hardware and system proliferation which has already happened in some stores. As well as this, the infrastructure needs to be secure, easy to support and save money.
In order to take these steps forward, both from the perspective of customer experience and cost saving, retailers need to change their underlying in-store IT infrastructure which has been built for a different age.
Many of these existing in-store IT infrastructures are incapable of meeting these ‘store of the future’ requirements. They are not optimised for experiential shopping, multi-POS customer service and other ‘line busting’ models, and they are not easily integrated to deliver personalisation across in-store and online. They are a security risk for brands and customers and above all, they are simply not flexible enough to adapt to constant change.
Aside from this technical point of view, there is a growing realisation that existing in-store infrastructure has resulted in unnecessary and untenable costs, particularly with the complexity of an overlarge bill of IT materials, and ongoing and dated support costs. Fundamentally, the IT bill of materials needs to reduce, not grow with every new initiative.
The future lies in the Retail Edge
So if the biggest barrier to future innovation in retail stores is existing IT infrastructures —the answer to enabling the store of the future might just lie in what is known as ‘the Retail Edge’.
The retail battleground has moved to the edge — in the store where retailers and customers meet face-to-face. From the all-encompassing popularity of the Internet of Things (IoT), to the ‘walk in and walk out’ Amazon Go store in Seattle, the technology enablement of the retail edge is paramount to success. Convenience stores, for example, are becoming increasingly sophisticated retail outlets and users of technology, but to date, the technology industry has failed to deliver the solutions that drive the levels of operational efficiency and the dynamic customer experience that are needed there.
If technology at the edge is to deliver on all of its promises (experientially and economically), it needs to achieve several things. First and foremost, it needs to be designed for a distributed retail edge environment.
The new infrastructure must also be able to deliver at the edge. The dependency on cloud availability and in-built latency is simply too high a cost and risk for retailers to deal with — particularly for Point of Sale (POS), RFID and image data and real-time processing. In an attempt to tackle this, many retailers are looking at ”edge scale” infrastructure – lightweight but powerful in each store, centrally managed and automated from the cloud or datacentre.
While this edge infrastructure must also be secure from cyber threats, as well as being compliant and manageable from a centralised location, it is perhaps most important that it is backed up by intelligent automation. This is the technology that enables the management, control and updating of IT across the entire retail estate; simplifying and accelerating what would otherwise be complex IT tasks, ensuring a consistent and secure IT environment in every store.
New entrants such as Amazon Go may have the luxury of building stores from the ground up, but they must also build a physical store brand and customer experience. Existing retailers are facing the fact that the biggest challenge on their journey towards the store of the future lies in transforming the legacy IT without breaking the bank. However, the answer to accelerating this journey could be much closer than they think.
Nick East, CEO, Zynstra
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