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Insight

Where should retailers invest in technology?

Luke Ritchie
By:
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“Digital Transformation” is a common refrain amongst retailers grappling to respond to the explosion in online shopping brought on by the pandemic. Shrewd retailers understand this means far more than throwing money at a fancy website.
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Receiving a customer order online is the easy part. Delivering that order to customer on time and in full is much more complex. With so many stores shuttered during COVID-19 lockdowns, retailers faced the problem of large volumes of stock being located behind shuttered doors. For many retailers, this presented an opportunity to use stores as warehouses from which to fulfil customer orders. Target (US) had online sales growth of 155% in September 2020, and pivoted to fulfil more than three quarters of those orders directly from stores. Similar models were followed by David Jones, Myer and Target in Australia.

Inventory visibility is fundamental to being able to meet customer expectations in the face of rapid increases in online volume. Retailers with disparate legacy stock systems risk being unable to fulfil customer orders, eroding loyalty and increasing costs. Prudent investment in technology which brings together a single view of inventory should be right at the top of the list for any digital transformation.

Aside from product, the largest single cost for a retailer is people. So, finding new ways to enhance the productivity of store-based teams can have a major impact on productivity. New technologies like Workjam offer the ability to turn core HR functions into “employee self-serve”. Clocking in and out, accepting rosters, swapping shifts, communication, training and stock counting can all now be performed by clever apps accessed from team members’ own mobile phones.

The logistics costs of fulfilling online orders can quickly erode gains in volume, so retailers must find ways to increase efficiency in this area. We have seen massive advances in logistics automation, with retailers like Coles investing hundreds of millions of dollars into advanced robotics automation to power online fulfilment. Two years ago whilst travelling with an Australian retailer in the USA, I visited a new logistics startup called Locus Robotics. They had developed unmanned robots, which supplement warehouses labour with automated picking. The surge in demand for its solutions has seen the company’s valuation soar above $1 billion.

Traditional information technology spending on systems has evolved away from on-premise machines and even data centres. The agility required to process huge bottlenecks in order volumes is best served through cloud-based infrastructure. Investment in cloud-based tech stacks with sophisticated partners like Google, Amazon and Microsoft can provide retailers with operational efficiencies, higher sales and enhanced customer retention.

Retailers like Woolworths are taking this seriously. Last week the company announced it will invest $50 million into upskilling its employees in technology over the next three years, noting particular focus on data analytics, machine learning and robotics.

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