In part one of this two part blog series, we looked at why "bricks-and-mortar" retailers are embracing Digital Transformation in order to compete with the new breed of online retail giants.
In part two, we look at the specific challenges Digital Transformation is throwing up for the high street, and how these challenges can be addressed.
Cyber security is a growing concern for retailers. Working in an unregulated sector, retailers arguably have more leeway when it comes to security than most, but are also more vulnerable than most, in part because of the high volume of payment data and other personal information they handle.
A 2017 report found that Retail was the most compromised sector for the fifth year running, and in 2018 it was widely reported that retail had emerged (in the words of one website) as "the world leader in data breaches".
As a consequence of the anxiety retailers are (justifiably) feeling around cyber security is that many are now wary of using public - potentially hackable - cloud providers such as AWS; most retailers prefer to either rent-to-own or purchase their own private cloud. Private clouds offer more robust security, but also the sort of personalisation that can drive the particular nuances of their business, and that can't be found with 'off the shelf' public cloud options.
So there are now two camps in Retail - those who are happy to outsource for cloud, and those who want the personalisation and additional security that comes with private cloud.
This flags up the fact that Digital Transformation means different things to different businesses. This might sound obvious, but as a business, deciding what it should mean is another, not inconsiderable challenge - and neglecting this decision could lead to opportunities being missed.
Just look at the grocery company Ocado. Like Amazon, Ocado have used digitisation to transform their operations, but their entire business model. While Amazon wholesaled their compute as a platform for other businesses, Ocado are developing an app that can be sold as a white label to other supermarkets.
Whatever the objective of Digital Transformation is, when it comes to methods, our CIOs were agreed that there are certain strategic considerations that retailers specifically need to consider when planning and executing a Digital Transformation project.
The first of these is maximising agility. The Retail market is exceptionally fast-moving and unpredictable, with changes in consumer behaviour often outpacing technical innovation. This means that by the time you bring something to the market, the market is likely to have changed! Therefore, retailers need to be able to bring innovations to market quickly; to fail fast and fail often, rather than striving to build a perfect CX environment.
The second thing retailers need to bear in mind is that data is make or break. Aside from the aforementioned security concerns, intelligent use of data is instrumental in delivering a superior, differentiating customer experience through technologies such as IoT, machine learning, robotics and VR/AR. Digital traceability is also important to look into; by being able to trace their goods back to the source, retailers can guarantee to their customers that their operations are ethical, which – even leaving ethics aside for a moment - is a definite commercial bonus in these more conscientious times.
Customers want to shop with ethical retailers, and this leads into another message that emerged from our roundtable: that, when it comes to Digital Transformation, what the customer wants is more important than what sales or marketing want.
The customer doesn't just want Digital Transformation - they expect it. As Accenture's 'Tech Vision' report, released in February, argued (in the words of Information Age): "digital is no longer a differentiating advantage - it's now the price of admission". But while retailers increasingly understand the need for Digital Transformation, they also are encountering the same technological roadblocks to getting started, including old and inflexible networks that can't support Transformation, concerns around how to stay secure both during the process of digital transition and 'post' Transformation, and a lack of in-house Cyber Security expertise.
These are challenges that retailers are unlikely to be able to deal with without assistance. In order to thrive in the era of digital retail, and to retain and attract customers, retailers will themselves have to become customers. Network and IT services providers have the technology expertise to power Digital Transformation, leaving retailers free to get on with doing with they do best - serving their customers, in ever-more imaginative and convenient ways.