The Modern Retail CIO–Balancing Cost and Innovation
In today’s retail environment, the typical CIO is faced with a challenging remit – if you don’t innovate you die, if you do innovate conventional thinking is you need a lot of time and money. This is especially true for CIOs with a substantial physical store estate.
The reality is that the age-old debate around cost versus innovation soon emerges as CIOs balance the ever-important elements of improving the customer experience, while reducing cost to serve. Very often, success for the retailer lies in adopting innovations and new technologies – especially when it comes to digital transformation of the physical store, table-stakes in order to compete. The focus on new technologies can ensure the store has the agility and flexibility to embrace new in-store experiences and provide a measure of competitive advantage.
But financial health for retailers is a key concern, so to try and achieve this balance can often leave retail CIOs between a rock and a hard place. How can they optimize efficiencies in the short term for immediate impact on the bottom line, while delivering innovation for the long term benefit of the business?
Legacy infrastructure is a barrier to innovation
One of the key challenges faced is that while retailers have ambitions to drive innovation in-store, the truth is very few actually have the infrastructure in place to support their vision. The legacy store infrastructure that many still rely on was built for a different era, and it has grown organically over time without any strategic investment in centralized management, automation and control. Not only does this make it slow and expensive to launch new services and applications efficiently, but it makes it equally difficult to save money on staff and technology.
This leaves the retailer in a tricky scenario. It used to be the case that CIOs relied upon dedicated in-store technology devices to support operations, but this device-oriented approach creates IT sprawl and management complexity, and is not conducive to rapid innovation.
Ideally, CIOs need to reduce the complexity of IT in-store and thereby the IT bill of materials, as well as enable relevant workloads and data to be processed in real time at the edge – in the store.
Don’t get left behind
Customer behavior is changing with high expectations for convenience and speed and a greater need for more immersive experiences in-store. From frictionless checkout to augmented reality and artificial intelligence, there is no respite for the modern day CIO when balancing technology requirements against the needs of customers.
Retailers that don’t adapt run the risk of being left behind as consumer spending is being squeezed and brand loyalty is hard earned. Customer lifetime value is critical for long-term profitability and it will be those retailers that consistently surprise and delight their customers that will be the winners.
And it’s not just about the customers. Technology impacts store associates on the ground, so it’s important to deliver the right technology in-store to drive staff productivity.
While it’s true the replacement of existing hardware can be costly, the answer to many of the issues described above lies in incremental changes. Or implementing complementary technologies to help retailers overcome the challenges.
Cloud has been viewed as one of these solutions for many years, enabling retailers to move systems and applications off their premises. The benefits here include scalability, flexibility, cost savings and agility. However, there are also issues with cloud migration, such as security and compliance concerns, as well as latency.
There are also new edge technologies out there that enable retailers to innovate without incurring substantial costs. Edge technology, listed in Gartner’s top 10 technology trends for 2018, offers retailers the best of both worlds by enabling them to capitalize on IT capabilities in-store, while also enjoying the benefits of control and flexibility of cloud-based services.
Using edge technology in the retail space ensures that information processing, content collection and delivery are placed closer to the source of the data – in the store – and closer to customers and store operations. In the same way, retailers have the in-store infrastructure that can support the running of multiple applications without increasing the IT footprint and associated overhead costs. New services and innovations can be quickly and effectively rolled out, with management made easier because they are managed as software, with automated in-store updates and upgrades carried out remotely and securely from the centre. Edge technology can enable the software-defined store.
Automation can play a key role, ensuring known security patches are applied and removing the risk of human error. Intelligent automation enables all patches, updates and upgrades of IT infrastructure across all stores to be automated and reliable, delivering a more secure and consistent system – as well as simplifying the on-going maintenance and management of large retail store estates for the IT team.
It’s a challenging time for the retail CIO. Having a significant push on both cost and innovation isn’t easy, while keeping customer experience, cyber security and other challenges in mind. They have to ensure every dollar of technology investment delivers immediate and measurable ROI, and enables business innovation. Edge technology, along with a new approach to management and control, can help the CIO differentiate their retail organization from the competition and cement their success in the market.
Nick East is CEO of software company Zynstra.
Dick’s Sporting Goods uses data to gets its product right
Dick’s Sporting Goods is using predictive analytics to optimize its merchandise assortment.
With a focus on getting its product right, the retailer announced a multi-year expansion of its partnership with First Insight. Dick’s has been using the company’s consumer-driven predictive analytics for nearly three years to make design, buying and pricing decisions on its branded and private label products in multiple categories, including sports equipment, apparel, footwear and accessories. The platform has helped the retailer better understand how to capture market share and has helped it to make more informed product assortment, initial price and price promotion decisions.
“First Insight is a critical element in the success we have achieved as a company over the last three years,” said Will Swisher, senior VP, merchandise planning, allocation and replenishment at Dick’s Sporting Goods. “They have helped us rationalize our product assortments and are an instrumental partner in the day-to-day decisions of our product development and merchandising teams.”
First Insight uses online social engagement tools to gather real-time preference, pricing and sentiment data on potential product offerings. The information is filtered through the company’s predictive analytic models to determine which products and price points present the greatest opportunity. The solution is enabling Dick’s to evaluate a greater number of products and thus make a larger investment in products that are predicted to perform well, while eliminating those that won’t, according to First Insight.
Amazon extends delivery, pickup service to more Whole Foods locations
Even more Whole Foods Markets customers can now take advantage of Amazon’s online delivery options.
The online giant on Wednesday said it has launched free two-hour delivery from Whole Foods through Prime Now across Annapolis, Maryland; Cleveland, Ohio; Louisville, Kentucky; North and Central New Jersey and Pittsburgh, Pennsylvania. It will also be expanding into more areas across New York City, Seattle and the San Francisco Bay Area.
The program offers Prime members two-hour delivery for free and ultra-fast delivery within one hour for $7.99 on orders of $35 or more. The service is now available in 53 cities, according to Amazon.
In addition, the online retailer now offers its grocery pickup service in Whole Foods Markets stores operating in Louisville; Dayton, Ohio, and Omaha, Nebraska. The service enables Prime members to pick up their order at a local Whole Foods Market store within an hour — without leaving their car.
Customers can choose free pickup within an hour on orders of $35. A $4.99 fee applies orders ready within 30 minutes. Including these cities, the service is now available in eight markets. More cities will be added throughout 2018.
Amazon’s curbside service takes a swipe at rivals Walmart and Target, as well as supermarket operators, including Kroger, Publix and H-E-B, which also offer drive-up grocery pickup options.