April 7, 2022 | 6 minute read

Author: Leslie Hand, Group Vice President, IDC Retail Insights

There's an incredible amount of complexity in the way retailers operate today. Their objectives include enabling new customer experiences, new ways to operate productively, and new ways to inspire customers with a product assortment that always feels right. How can retailers ensure that they are doing the right things to achieve continued success against this set of complex needs? A coordinated bottom-up and top-down approach seems to be the gold standard. This includes implementing the foundational platforms that enable innovation through scalability, adaptability, and speed to value, and moving forward with introducing new experiences for customers, employees, and partners. This strategy works when the retailer can successfully build out new cases designed to leverage existing platforms or those that will soon be in place.

Situation Overview

Retailers are recalibrating to the new reality of serving customers encompassing five generational shifts. Customers still grounded in predominantly physical shopping journeys are at one end of this spectrum. On the other end, the youngest is taking flight into the metaverse and Web 3.0, with a greater tendency to live and shop in digital venues. The extreme variations in individual behavior in today's hyper-connected world mean that to deliver a great customer experience, retailers must figure out how to best engage all those customers—on their terms and when they want to be engaged. Bold, tightly integrated digital and non-digital strategies will be the biggest differentiator in a retailer's success.

To customers, the most valuable contributors to stellar experiences include convenience, inventory visibility, choice (touchpoints, buying, receipt, and returns options), and access to extensive assortments curated just for them along with every point of their shopping journey. Regardless of how customers shop or their journey preferences, retailers need to treat each of these individual experiences with reverence.

Convenience, Visibility, and Intelligence Drive Insight, Action, and Superior Outcomes

To meet consumer expectations, retailers need to serve them more efficiently by providing a wealth of relevant information, expert purchase advice, and convenient and productive service. To achieve this level of service, retail teams need access to predictive insights and information stemming from modernized data platforms, applications, tools, and processes. Digitally transforming a business to make this possible increases adaptability and resilience, creating a virtuous cycle of serving the customer to high levels of satisfaction while driving growth and profitability.

As the world, technology, and industries evolve and shift, so do retailers' challenges. Having the proper foundation in place is crucial for success in a dynamic retail landscape. Possessing a highly available and adaptable SaaS platform with data available everywhere and to all key business processes takes the complexity out of thriving in retail and enables these retailers to lead.

The Most Important Characteristics of Retail Platforms

An ideal retail business technology platform helps the organization become an intelligent enterprise through seamless, modular integration, flexible extensions, and the ability to connect processes with data to achieve outcomes. The platform should enable organizations to extend their enterprise into partner ecosystems. Artificial intelligence and machine learning (AI/ML) capabilities will help the organization analyze how it is doing by measuring performance, providing tailored recommendations, and benchmarking the results against objectives. 

Five key characteristics to look for in a retail platform include the following:

1. Intelligence. A platform needs to drive intelligent behavior and actions, linking human and machine-derived knowledge to yield relevant business outcomes. The utilized data model and AI/ML should improve how well the tech stack runs and how well insights are translated into actionable intelligence and applied to core business processes. Reducing complexity starts with improving access to intelligence.
2. Orchestration. Seamlessly weaving "digital threads" between internal and externally facing processes, systems, and services enable operational performance visibility and deliver insights into core processes to improve business outcomes. By providing capabilities that make it easy to integrate systems, data sources, and (micro) services through open APIs and across clouds, a platform can help an organization build robust bridges between "islands of innovation" as well as enable individual data-powered products, services, processes, and workflows to function effectively.
3. Experience. The quality of experience impacts the customer, employee, and partners. The platform should deliver outstanding experiences in the digital and physical realms and across digital and physical products and services. Retailers must plan for the mix of interfaces (text, graphical user interface, voice, video) and channels (physical, call center, contact center, online self-service) appropriate for multiple audiences — not just customers but also partners, suppliers, employees, and other stakeholders. The platform also must provide facilities for instrumenting the operation and usage of digital products, services, and processes so digital feedback loops can be created, generating insights that then drive dynamic behavior and decisions within those digital products, services, and processes, as well as providing inputs into longer-term closed-loop decision making.
4. Trust. Retail business platforms enable the connectivity between ecosystems of collaborative providers, and they cannot afford to be perceived as a weak link in the digital trust chain. At the very least, the platform must ensure that data and other IT assets are treated to comply with relevant laws, regulations, and corporate policies for information security (e.g., NISD) and personal privacy (e.g., GDPR). Beyond that, digital trust offers an opportunity to build security and privacy into an organization's brand promise. This can be addressed by developing visibility and control over the IT risks inherent in internal IT systems, shared IT resources, retail business process activities, and organizational reputation. Trust plays a crucial role in giving ecosystems visibility into data-powered behavior about personal data or the nature of the algorithms powering critical decisions.
5. Agility. We're not talking about project delivery agility here but rather the high-level adaptability that frees an organization to balance speed with control across the business. A trustworthy platform promotes a portfolio approach to capability life-cycle management, enabling organizations to manage the life cycles of capabilities.

As retailers assess business strategies and technology investments in IT technologies (such as infrastructure, data management, and middleware) and software applications, these concepts should be top of mind. Evolving the platform will provide the best foundation for future business models.

How Can Retailers Better Adapt, Scale, and Pivot to Customer Needs?

Many organizations understand they need to move past reliance on applications that are not built to adapt, scale, and pivot to customer needs. They sense that they are missing out on the substantial benefits of more advanced, modern, and modular cloud-based platforms. Still, they are hindered by too many customizations and no quick way to map their current systems/processes to the new systems.

Any retailer still trying to rationalize moving to a platform that simplifies data access, the generation of insights, and the creation of new outcomes-based business processes should take another look at the long-term metrics for success. foundational retail platforms will enable streamlined portfolio management that maintains lower TCO over time, as integrations will be easier. The ability to scale and adapt to new needs will be more straightforward. Retail platforms are intelligent and apply AI/ML to solve problems humans cannot or improve the outcomes of the processes that humans do complete. An overriding outcome is the better time to value across many business processes.

Organizations should consider implementing the following best practices before moving to a platform:

• Examine how current IT strategies line up with short- and long-term objectives.
• Refine digital transformation and resiliency strategies, aligning them with the new performance metrics for omnichannel retail and considering the TCO of a platform approach.
• Invest in cloud-based real-time data and insights to improve inventory visibility, order management, and fulfillment processes that directly impact the organization's ability to make employees -- and the business -- more productive.