The Candid Voice in Retail Technology: Objective Insights, Pragmatic Advice

Retail Technology: A Reality Check

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The analyst community (including RSR) would have you believe that the retail industry is in the midst of a major wave of new investments in technology. For example, in the benchmark we published just last week (Winning At Customer Acquisition In The Digital Shopping Age, RSR Benchmark, 1/21/22), we noted that while 62% of the retailers in the study told us that while they want “the ability to experiment with new digital touchpoints and determine their efficacy quickly with minimal impact to the overall business”, the same number say that “our current technology is difficult or cost prohibitive to change”.

In our recommendations to retailers we wrote that “the legacy e-commerce platform may be wrong for today”. In the case of E-Commerce, the biggest challenge is the fast pace of change in the available technologies themselves. Consumers and the technology industry have moved far beyond that, and so have today’s retail omnichannel masters. As we wrote in the study, “if retailers aren’t leading with consumer-facing innovations, they should at least dedicate themselves to being fast followers”.

Since retailers are pragmatic businesspeople, it’s not a stretch to conclude that they recognize the need to make necessary investments in new techs. That conclusion has been fairly consistent for the last 18 months in our studies, whether we’re talking about E-Commerce, omni-channel order management, supply chain, AI-enabled analytics, or a raft of other subjects. Quoting Bob Dylan, “you don’t need a weatherman to know which way the wind blows” – the wind is clearly blowing in the direction of new cloud-based solutions to address the challenges that face nowadays. The technology providers are certainly bought into the concept of “cloud-based, API-centric, micro-services based” business applications. Whether those concepts were originally vendor-led or not is no longer an issue – it’s a fact.

Nonetheless, retailers are rarely on the front edge of adoption for any new technology, and that’s not going to change just because analysts and technology vendors think it should. Indeed, when the company that sponsored the recent benchmark – Coveo – arranged for RSR to be interviewed about the study’s findings, there was this exchange:

Interviewer:

I was shocked to read that 40% of retailers are using technology that they have had for 5 years or more. Were you also shocked by this figure given the fast-paced nature of technology?

RSR:

This follows a pattern that has existed for years. … Legacy systems are often highly verticalized, tightly integrated, and heavily customized — It wasn’t uncommon for retailers to spend years implementing a system, and the amount of customization that was done to “base code” often prohibited keeping up with new revisions from the solution provider. The good news is that today’s tech solutions are constructed in such a way that they can be enhanced, modified, and re-purposed much more easily than in the past — as changes in the business environment demand.

There’s always a disconnect between the speed with which tech companies can advance their solution offerings and how fast retailers will adopt them. So, it’s time for some reality checking. Are retailers bought into the need to make major reinvestments in their technology portfolios to keep up with the times?

We’re conducting a new study right now to find out, and while it’s too early to talk about the functional focus of that study, we are seeing some reality checks that are sobering. Here’s some of what we’ve learned:

The top-two reasons retailers choose one solution vendor over another are (1) “a willingness to work with us to control costs”, and (2) that the solution “solves the immediate problem”. Only then is “strength of vision/ proven ability to execute” important;

Most retailers (over 70%) still look to “best of breed” solutions rather than solutions that are a component of a suite. And approximately one-third of retailers maintain the belief that it’s best to have a “multi-vendor” approach to keep costs down;

Even though close to 30% retailers tell us that for the retail applications we are asking about, “there are new requirements that the solution cannot meet” and somewhere in the vicinity of 25% of retailers say that “we don’t think the <current> solution will grow with us”, more than 80% of the retailers in the study tell us that the current solutions meet most or all of their expectations.

From these data points, our initial conclusion is that retailers don’t think they are “on a burning platform” (a term frequently used in “change management” courses to describe the highlight the dire consequences of not changing). That’s not what our other research is telling us, however. Even though a lot of retailers have been experiencing record sales, much of the new business is coming via processes that didn’t exist a decade ago, and that trend is expected to accelerate dramatically.

Simply put, 20th Century retail is over, and the 20th Century solutions that enabled that model probably are too. But the analyst community and solutions providers themselves have more work to do to help retailers through the change process.

 

Newsletter Articles February 1, 2022
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