Bas Lemmens, VP and General Manager EMEA, VMware Tanzu
The world of retail has been disrupted, turned on its head and forced into a major rethink when it comes to app modernization. And this was happening long before the pandemic. Indeed, if change in the retail landscape was moving quickly before 2020, it’s in warp speed now.
Retail is relentless
Not least because events of the last 12-14 months have exacerbated the void between the innovative and digitally-based merchants prepared to buck the status quo and those that are not. The demise of UK giant Debenhams is a case in point. As the world was thrust to an online-only model almost overnight, we’ve seen major winners. Amazon, of course, but others too that have been able to quench the desire of shoppers – both in necessity and leisure – or that have been able to pivot operations and flex to market forces. And in a world where on-demand delivery has been mandatory, this has been driven by convenience.
The message to retail has been clear – adapt or die. If they want to thrive they have to go even further and innovate to be ahead of everybody else. This means looking at business models, costs, structures and processes and critiquing which are performing versus which require modernization. Nowhere is this more acute than with technology with everything from data centers to devices being reviewed through the lens of how the world shops today and what this means for a future economy. Of course, the quickest and simplest way to do this is to cease activity. Stop what you are doing, reassess and reinvigorate. But if the retail success stories of the pandemic have taught us anything, it’s that retail is relentless.
Removing friction for shoppers
Retail is an opportunistic market – it has to be – and this is creating opportunities that are simply too good to ignore. It’s often claimed that ‘the customer is king’ but we’ve reached a point way beyond this – the customer is now a Demigod. It is a situation that is prioritizing a focus on the customer journey. In addition, the importance of employees is becoming even more of a priority. With the right tools employs they can be more productive, feel more secure and enjoy their jobs more. Businesses are turning to technologies like artificial intelligence (AI) and machine learning (ML) to support their employees and improve the customer experience to carve out faster routes to revenue.
This process is moving like some rapidly spinning wheel. Not least because it touches – and is therefore influenced – by every C-level individual within an organization. Procurement, CIO, CEO, CTO and CMO all understand that technology improves the customer journey, which improves revenue, but that running different operations at scale and with different workloads needs to be done with software. As a result, we’ve seen many businesses to optimize their operating models and move into the public cloud. Removing friction for shoppers is the name of the game, and it’s a never-ending cycle that requires the freedom and agility that the cloud offers.
Catering for customer change
Agility is a necessity because the level and speed of change within the retail landscape is high and fast. The ability to optimize requires businesses to be always one-step ahead. This means not only understanding the technology but being able to translate precisely what it can do for their specific operations, supply chains, processes and customers.
A good example here is supermarket chain Sainsbury’s, which was rapidly able to develop an app for same-day delivery, typically within four hours, while its customers were at home. On the surface this sounds simple but consider the stock, supply chain, communications, customer preferences, and geography involved in each transaction. Then consider that, at the height of the pandemic some supermarket customers were waiting weeks for a delivery slot. Another good example is Volkswagen. It has developed a partnership with Zalando and DHL whereby customers are able to make purchases in-store and then have their goods shipped to a parked vehicle, the boot is unlocked with a one-time passcode, the goods are then deposited and the boot locked, ready for collection at the customers convenience.
These are just two examples of retailers modernizing apps to cater for customer change. But change has to be both cost effective and fast. Money is not an infinite resource and in order to truly realize this vision, retailers need knowledge.
Complexity and cost conundrum
Learning these new capabilities or adapting an organizational-wide mindset required for the changes in retail can take years. As a result we’re seeing retailers either insource ideas, like an app or innovation, from smaller technology companies, or they’re thrusting their most innovative people together to launch a project. The result is that we’re seeing modern retailers become technology companies and, in turn, software companies. This feedback loop builds better offerings but to stay ahead of Amazon and other players, this has to be done at speed and, right now, retailers struggling with both complexity and cost.
This means getting better at developing software and doing it quickly is a competitive advantage. The challenge comes from large monolithic legacy applications which are fragile, and maintenance is difficult, and scaling beyond a certain limit, impossible. It is even difficult finding people who have the expertise and interest in maintaining these applications. Therefore, modernizing their existing applications portfolio should be a critical part of retailers’ transformation journey. Creating new applications is relatively straightforward, and part of the effort should go into application modernization, even if it’s not easy.
Then comes the cost issue of modernizing these applications (money is not infinite, remember). It needs to be done with an eye on ROI. Retailers need to be cost-effective clairvoyants when it comes to predicting stock and fulfilling sales with rapid delivery – all in a backdrop of low prices and high online rankings. For example, around 2% of retail revenue loss is due to shrinkage and significantly more due to inventory distortion (too many of an item or too few of an item) so this could be the key focus areas for any business looking to modernize as addressing them can provide a rapid ROI.
How to win in retail
Winning in retail requires the ability to innovate daily. This is something that must be part of the culture. If this innovation can be applied to the technology estate the impact can be huge. It will define new enterprise architectures and build systems that are open, or that use open-source, to enable adaption and avoid vendor lock-in. Modernization in retail is as much a state of mind as it is a vision but if retailers and vendors work together, engage the right software and focus on the areas where the biggest benefit to cost and customers will be felt, success will follow.
For more information on how VMware can help on your modernization journey in retail or to talk to our team, please contact Jarek Matschey at email@example.com and Lenka Kanakova at firstname.lastname@example.org or your assigned VMware account manager.
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