Five Drivers in Choosing Retail Technologies

By Andrew Gorecki | 29 Oct 2012

There’s an adage in retail that one hasn’t progressed unless one has had a failed technology implementation. Andrew Gorecki’s preference has always been to avoid these painful, expensive lessons.

The retail technology landscape has resembled a minefield for the past 15 years. In fact, it still does, but the mines have become more advanced. Disparity of costs, features and opinions are making technology procurement a daunting and dangerous task for retail business managers.

I’ve presented my views on five areas that warrant attention when it comes to choosing the right technology.

Customer Expectations – Channel Fusion

Firstly, I’d like to highlight the fact that not all bricks and mortar retail will move online. That being said, the next generation of electronic commerce is here and retailers must have some presence in the cyberspace in order to stay relevant.

Today’s consumers are uniformly connected with networked mobile computers, which have redefined customer behaviour and their expectations on retailers. Customers already assume they will have a seamless experience when engaging with a retailer, irrespective of their channel of choice.

When a customer makes a purchase online and has the product delivered, they won’t accept that a refund or exchange is not possible in the retailer’s nearest bricks and mortar store. Likewise, customers who purchase gift cards in-store expect to be able to use that gift card across all channels, online or in-store. Click-and-collect offerings are also becoming more popular as some customers want to pick up goods on the way to or from work, rather than wait for delivery to their home.

Avoid Paying Top-Dollar by Buying a Holistic, Integrated System

A number of retailers spend extraordinary amounts of money to fix their disjointed retail software in order to deliver required channel integration. At Retail Directions we prefer the term ‘channel fusion’, as ultimately this is what must be achieved. Rigid interfaces will no longer do – seamless, real-time connectivity is a must.

The problem is that such fusion is not easy to achieve unless it had been thought about prior to the system being installed, and the retail industry is not the only victim of poorly designed and implemented systems. The Myki public transport ticketing system in Melbourne is a classic example of recently installed systems that have appalling lack of connectivity. It takes up to 24 hours to top up an account after the transaction is finalised online. This is a chilling example of outdated technology being implemented with a multi-million dollar price tag.

In retail, the major department stores in Australia find themselves in a similar bind. They now talk about spending tens of millions of dollars to connect their sales channels, indicating their recently installed computer systems have not been structured to support such retail models.

Retailers need to recognise that their IT systems will continue to rattle until replaced with an integrated system. Retailers running multiple, interconnected systems, supported by an army of IT people to keep their clunky contraption operational, will be continuously disadvantaged against those who run a fully integrated and unified retail application developed from the ground up as a single system.

Don’t Get Sucked in by the Shiny Bits

Another challenge faced by the retail industry seems to be an un-abating flood of technology fads, pumped up by the media portending dire consequences for businesses that don’t jump on board. Some technology vendors are quick to roll out and market fad products, as long as customer demand is there. Fear of being left behind is a wonderful sales driver, or so it seems.

Cloud computing is the latest frenzy gripping business, yet it is nothing more than a new term with little meaning. It’s an attempt to convince modern technology users to start again, using re-packaged technologies of the 60s because they are supposed to cost less.

Other fads include Radio-Frequency Identification (RFID) tags, which are professed to replace barcodes – another old technology that has recently been rediscovered by the media. So, it goes without saying that the iPad is not going to become the retail device of the future either but is merely in-vogue at present.

Instead of worrying about the revolving doors of ever-new fads, C-level executives in retail need to keep their BS meters on high alert to avoid wasting time, focus and money on projects that bring no real return. If sales are down, ‘cloud-computing’ or another new buzzword isn’t going to help.

Price Isn’t the Measure of Quality

Retailers continue to spend tens (if not hundreds) of millions of dollars on IT, when 10 percent of that spend would have been sufficient to buy similar or a better solution. What is causing such seemingly irrational behaviour?

When something is not well understood and everyone seems to be doing it, a ‘me too’ reaction follows out of fear of being left behind. The only way for C-level executives to avoid this trap is to persistently demand explanation –if you don’t quite understand it, keep asking for an explanation until you gain clarity. Otherwise, don’t spend the money. There is no shame in not knowing – the industry is notorious for renaming everything every five to 10 years.

Avoid burning cash on technology by purchasing systems purpose-built for the retail industry versus an accounting or a manufacturing package retrofitted or expanded to work in retail.

A retail-designed system requires only one person in their IT department for every hundred cash registers installed in their business. If you have five or six people for every hundred registers, you’re definitely using the wrong technology.

Core Systems Unification

There are many advantages of having a unified core system in your enterprise. Firstly, a single system to operate all retail functionalities means no disparate and unwieldy system interfaces. All of your data is centralised in one database, making access to the full history of all transactions in your enterprise extremely easy. Then, the cost of software and ongoing maintenance are lower, and there is only one vendor to work with – no demarcation disputes ever!

Ultimately, a unified system means a simple solution: a solution that doesn’t contain non-essential parts, leaving you with more money and resources to spend in other areas of the business.

Are Unified Systems Enough?

Great outcomes can be achieved with unified system technology in retail, but two other conditions must be met as well: the system in place must be reliable and functional, and the retailer must be committed to using it across the entire business.

When implemented and managed correctly, retail IT systems are instrumental in reducing inventory and operating costs. They can also support value-add essential facilities such as integrated web stores, gift cards, loyalty programs, and sophisticated promotional campaigns – all of which are core to customer retention and improving revenue.

A sole IT system that manages merchandising, supply chain, warehouses, POS and online channels is the way forward, and such systems will cost far less than the millions that Australian retailers are currently spending on their IT solutions, often with little reward.

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