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Comment: Old technology and legacy systems hinder retailers from growth

Comment: Old technology and legacy systems hinder retailers from growth
Friday January 27 2012

High street retailers have been in the news lately due to more than the holiday season. By Mark Collin

Recently, news said that traditional retailers are losing out on £500m over a three year period because of their inability to keep their online presence up to date. While this statistic is worrying, it is sadly not surprising.

In our experience working with traditional high street retailers, they are keen to make their mark online - but they are being held back by baggage in their technical environment and lack of guidance needed to make their efforts a success. Many of these companies have the same aspirations as pure online retailers, such as Amazon, The Hut and thetrainline, but unfortunately, they have technical debt and legacy systems inhibiting them from growth. Their ambitions are on the right path, but they are struggling to fully grasp the online sector.
The modern-day retailer does have a lot to live up to, and in turn, must react at lightning speed. These retailers are sourcing and selling goods in a global market, providing customer service across multiple channels, all inside a limited budget that needs to be highly optimised, whilst disposable income is shrinking.

Over the past couple of decades, retailers were primarily operating based on their bricks and mortar business models. Previously, technology was in the background, just assisting the retailers with daily activity and was nowhere near their primary focus. Now, having appropriate and functioning technology is ubiquitous for all businesses, regardless of sector.
This change occurred in the early 2000s when a new channel and way of doing business came up and retailers quickly created a new division that could handle that business almost exclusively. From the mid-2000s there has been a rapid proliferation of channels, many of them based on digital commerce; however retailers are hard pressed to break into these newer channels cohesively.

In our opinion, the challenge is not that of performing pure online retailing, but it is the intersection of rapid proliferation of new channels, satisfying a more demanding and evolved customer base while operating in a constrained environment. Specifically, that environment is one they created decades ago, using bulky hardware and bloated legacy software that is just too expensive to throw out and replace.

Creating a new infrastructure for each channel clearly does not make sense for retailers. Instead they are grappling with several questions: What is the best way to take a new channel to market faster? How do these retailers integrate a new channel to work seamlessly within their existing landscape? For some of these big corporations, a complete rejuvenation of software would be a massive undertaking. And if they are to become ‘agile’ what changes do they need to make?

In our experience, of working with several large, well-known retailers there seems to be an overriding factor in their view of the future. We have seen some common themes working with the retail industry. Firstly, a real desire to get their e-commerce and multichannels flying and in synch, a desire to increase their speed and agility in response to changing market dynamics and recognition that there is a new breed of retailer emerging. At the 2011 Internet Retailing conference many attendees cited this as a 'cultural revolution'.

In order to meet this revolution, these organisations need to become more agile and forward-thinking. Specifically, the organisations need to take advantage of the explosion of new markets, channels, products and customer segments which show no signs of abating. The organisations need to be able to adjust and improve its level of customer experience and be able to diversify the delivery of its services.

The future of the retailer lies with three parameters: the ability to adopt and react to the industry’s movements, the ability to provide a seamless omni-channel experience, specifically for its most loyal customers and the capacity to achieve true agility by working with the correct technology.

Companies who are doing it right and doing it best are a new breed of retailer, one that is constantly challenging their business model. Instead of creating huge sunk costs or risk-it-all migration projects, these companies are leveraging legacy systems and data into the future with short, quickly delivered steps that create true value.

Moving forward, online retailing will be framed on customer experience design, agility and continuous delivery in keeping up with the evolution of technology. They are successfully adding their 'secret sauce' to some core Retail principles - quality, value for money, customer service excellence, availability and timely delivery.

Mark Collin is Client Principal Retail -Europe at ThoughtWorks (