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Retail Sector Confronts IT Innovate or Die Challenge

Mike Vizard

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Retail historically has been a laggard when it comes to investing in IT because the profit margins generated by the average retailer tend to be razor thin.

But faced with stiff competition from online juggernauts such as Amazon and the rise of a new generation of digital savvy customers, many retailers are now investing in everything from mobile applications and marketing automation platforms to artificial intelligence (AI) and augmented/virtual reality technologies.

The degree to which those investments will stave off what appears to be inexorable decline in the number of physical retail outlets remains to be seen. But at the very least, savvy retailers are clearly focused on staying as relevant as possible by taking advantage of a raft of digital technologies to transform their end customer experience.

For example, a recent survey of 50 retailers conducted by Symphony RetailAI, a provider of AI-enabled platforms for retailers and consumer products goods (CPGs), finds 56 percent of the organizations surveyed now target customers based on location. Nearly half (48 percent) report they now also track customers in real time. A full 80 percent of the survey respondents say they now target customers across different communications channels, but only 16 percent say they have successfully integrated personalized marketing across all those channels. But nearly half (48 percent) say being able to provide precise messages to consumers at exactly the right time based on their communications channel preferences will increase over the next 12-24 months. Today, nearly three quarter of respondents (74 percent) claim they are adept at personalized digital marketing using, for example, social media outlets, but only 18 percent claim to be able to personalize mobile content.

The survey also notes that more than one-third of U.S. retailers consider the establishment of a usable set of data-backed customer insights a personalized marketing challenge and that more than two-thirds are open to changing their personalized marketing and campaign management provider to achieve that goal. Reducing the effort associated with manage marketing campaigns was cited by 44 percent as a reason to switch providers.

Because many retailers are now faced with making a massive digital transformation in a short period of time, Jeff Warren, vice president solutions and strategy for Oracle Retail, says retailers such as Gap Inc., Group Dyamite, Moleskine, Samsonite Europe, Nahdi Medical Company and Wyevale have decided to employ cloud applications that are readily accessible today versus building customized applications or deploying packaged applications on-premises that could take years to build and deploy.

“Knowing your customer is an imperative right now,” says Warren.

Oracle last month also unfurled a Customer Experience Cloud Suite spanning everything from applications for managing customer loyalty programs to data analytics infused with AI and claims to have rolled out over 30 cloud services aimed at retailers in the last 18 months.

Much of the investments retailers are making are squarely focused in tracking customer lifecycles to identify, for example, which customers generate not just the most sales, but also the most profits, says Warren. Retailers can then fine-tune their marketing efforts aimed at those specific customers, explains Warren.


Beyond the cloud, one of the areas that retailers are investing in is deploying wireless networks across not only their existing physical locations, but also “pop-up stores” that are now easier than ever to connect using an LTE-based wireless network, says Jim Hilbert, chief revenue officer for Cradlepoint, a provider of LTE-based wireless networking infrastructure.

Much of the data collected via mobile applications and point-of-sales (PoS) systems is then being fed into advanced analytics applications running in the cloud.

“Retail is the largest segment of our customer base,” says Hilbert. “And it’s only going to get larger.”

Most customers now expect retailers to provide some form of wireless access as part of the shopping experience. If the retailer doesn’t provide access to a wireless network, then they miss an opportunity to more closely engage with that customer by, for example, enticing them to download a mobile application.

But as compelling as such technology investments may be, retail organizations would still be well-advised to consider the relative maturity of some technologies before investing. AI applications, for example, are still in their infancy and some debate over how effective augmented/virtual reality applications might be. Deloitte Digital contends such applications represent a trillion-dollar opportunity, while research firm such as GlobalData caution that in the case of food and drink brands, consumers would lose interest in augmented reality relatively quickly. In addition. GlobalData notes that retailers will have to continually refresh those experience to keep consumers interested, which can be an expensive proposition.

Despite all the reports concerning the imminent demise of retail, Bob O’Donnell, chief analyst at TECHnalysis Research, says what’s really occurring is a transformation of the customer experience, otherwise Amazon would not have gone to the expense of acquiring Whole Foods.

“It’s all about providing a better customer experience,” says O’Donnell.

Clearly, however, many retailers will not make the transition into the digital age, especially if they can’t find ways to appeal to a younger generation of digital-native customers, says Patrick Moorhead, principal analyst for Moor Insights and Strategy.

“It’s about instant gratification,” says Moorhead.

To achieve that goal, retailers are investing in IT more than ever. Those investments may be lead more by the marketing department inside those organizations than traditional IT. It’s not uncommon these days for marketing organizations to have their own internal IT staffs that operate independently of centralized IT departments. But regardless of the source of funding, it’s apparent that rather than viewing IT as a cost to be contained, a significant portion of the retail experience is being reinvented using a broad range of advanced technologies.

The good news is that as the economy continues to improve, many retailers are beginning to see a financial respite. Less clear is how many retailers will invest in IT to modernize their business processes in a bid to get closer to their customers at a time when competition among retailers has never been fiercer. Arguably, the only real choice retailers have now is to either innovate in the hopes of achieving that goal or suffer the ignominy of a long, lingering death.


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