If retailers are going to survive the future, they need the infrastructure that can take them there

Published on September 28, 2018 in Retail • Digital Transformation

Today, retailers find themselves embroiled in an almost philosophical dilemma. What does their existence mean?

Look around, and you see that everyone is armed with much the same set of tools and the same set of technology. Purchases of pretty much any kind are a click away. Convenience has become a given.

The global-local dichotomy is rendered almost null – everyone’s local now. The result for retailers is that their customers are now weighing their purchase options according to more intangible things like brand and service.

We’ve all heard about how millennials are more values-driven in their choices, but I’d argue that the shift is more than merely generational.

Take a look at the high street today and you’ll see it changing in a way that many people aren’t fully appreciating. The shift is from a ‘shops that sell things’ environment, to a ‘shops that offer services’ environment. Because people can get their ‘things’ on the internet.

In my local town, people bemoan the fact that there’s more coffee shops and hairdressers springing up. But to me, the root of the shift seems pretty obvious: you can’t get a haircut delivered next-day from the internet.

What does this mean for what we think of as traditional retailers?

Clearly there’s an option for online-only, but it’s a tight space and one that’s already dominated by a few big players (anyone who works in an office will recognise the steady stream of Amazon and ASOS packages arriving at reception).

On the other side of things, bricks and mortar will always have a part to play – particularly for more specialist items; the kind of thing that you really need to try on and get a feel for. But those stores, by their very nature, will only ever occupy a niche.

The answer, in my view, will be something more akin to the ‘bricks and clicks’ approach that marries elements of online – personalisation, convenience, etcetera – with the more experiential aspects of instore shopping.

Online can never entirely replace physical interaction with products and helpful staff, as well as newer ideas like concept stores and even technology-enhanced experiences such as augmented reality dressing rooms.

So how do we get there?

Let’s take supermarkets as an example.

When Tesco’s Clubcard and other similar loyalty schemes were first introduced, they offered a revolutionary way to understand what individual customers’ buying habits were – and to upsell them on items that they didn’t usually buy but perhaps, according to their purchase history, might be open to trying.

Fast-forward to today and the options for collecting data are vastly greater. Facial recognition, eye tracking, footfall – all of this data can easily be gathered (and anonymised) to form an intricate image of how a store is functioning.

This of course also means stores can apply this greater understanding to be able to provide an enhanced experience to their customers – typically via an app.

Sounds simple enough. But where does all that data – terabytes of the stuff – go? Where is it stored? How do you keep it safe and secure? And then how do you make good use of it to deliver that enhanced customer experience?

An infrastructure issue

The challenge in all of this lies in the fact that the networks aren’t fast enough to support all of this data. Everyone assumes that the solution will be to simply shift everything into the cloud, but it’s simply not possible to put a network connection into a store that can handle that much data at a time.

This means – if retailers like supermarkets are going to keep pace with the digital revolution – there’s an imperative to install infrastructure in the stores that can process all of this data locally, filter it, work out what the insights are, and then centralise them in the cloud.

We need to treat these stores like the data centres they effectively are.

If you go into an average store today, what you’ll probably find is – in the back office, underneath the manager’s desk or next to the cleaning cupboard – there’ll be a rack of old equipment.

Old PCs – they’ll probably have ‘Compaq’ written on them, they’re that old. There’ll be a piece of networking equipment there, and the likelihood is that no one in the store knows how to use it.

Herein lies the problem. The potential for retailers to use data and digital applications to improve their customers’ instore experience is huge, but the infrastructure is lagging in the distance.

For a developer to be able to roll out a new application across a network of stores in any kind of quick or seamless way is currently pretty much unthinkable. But, crucially, it’s not – or at least it shouldn’t be – impossible.

Where are your apps going?

As applications continue to proliferate, and their components depend more and more on a cherry-picked selection of cloud support, retailers need to consider more strongly how their back-end infrastructure supports that.

What’s more, the solution is ready and waiting for them. It’s already possible to install a single piece of infrastructure that offers storage, security, and centralised management without totally upheaving a store’s day-to-day operations.

It doesn’t have to be difficult. And at this point, it’s hardly worth dwelling on what can (and will) happen if retailers don’t act on this quickly – digital disruption isn’t waiting around for anyone.

A board-level concern

The mandate for this has to come from the top. It requires strong leadership at the CIO level to say “this is our strategy, this is what we’re doing.” It requires the ambition to be the retailer shifting how people think about their shopping experience, and the only way you’re going to do that is if things work as customers expect them to.

Amazon Go is an obvious example of this being done well (if only at small scale), as is the till-free experience in Apple stores, but for me the thing that sets them apart is that the back-end is clearly working to allow these innovations to flourish.

An easier task for these big tech companies to achieve, perhaps, but with co-creation and co-innovation across sectors increasingly becoming the norm there’s no reason why traditional retail brands shouldn’t be able to deliver a similarly seamless new experience.

Unlike so much of the retail market – which is squeezed and squashed by competitors chasing down niche gains – there is a space out front that’s wide open for the taking. The industry is at a pivotal point in its history, and the opportunity to tip the balance in your organisations favour is too big to miss out on.

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