An estimated 9,500 retail shops are due to close this year and according to The Centre for Retail Research, 20,000 store jobs are set to disappear by 2020 – on top of the 150,000 that have gone since 2016. And that’s just in the UK. Elsewhere in Europe, closures aren’t as common but experts predict they will come under pressure soon as well. It all doesn’t make for easy reading.
The largest and most established are no longer immune, as troubled times have also arrived for the likes of House of Fraser and Marks & Spencer – high street favourites who face store closures and financial uncertainty. In this era of digital disruption and fierce competition, nothing is a surety for those who don’t invest in their future.
The good news is that the winners of this battle are not the ones with the fattest wallets. Those with the brightest thinking, agility and key differentiating services will come out on top. The question then becomes: how does a business become top of the pile in this respect?
The key is speed. This may seem obvious, but it’s where that speed is applied that makes the difference. As retailers investigate new services and technologies, they need to be able to test and implement them quickly. They also need to effectively and efficiently appraise their current business models to see how they can become more efficient and innovative.
With requirements for a faster pace of project delivery needed to both survive and thrive, most businesses already know about the technologies they need to embrace. In 2018, few firms require an introduction to cloud computing. The technology is already available and many companies in retail and otherwise have adopted a “cloud-first” strategy.
Be that as it may, we see large numbers of businesses in the retail sector that aren’t currently using cloud to its full advantage, or, even worse, are misusing this powerful, enabling technology to their detriment.
Cloud is a key instrument in delivering on-demand products and services, which is fundamental to success in modern retail. Self-service compute enables developers to innovate ahead of customer demand and rapidly integrate customer feedback into future releases. However, many businesses struggle to bridge the gap between the traditional, resource-constrained datacenters they are in now and the cloud-driven approach they want to adopt. When so much must be done to evolve, it’s difficult to know where to start. This is the dilemma facing many of the retailers that I speak with.
New digital services that directly connect with customers have levelled the playing field in some regards. Newer players have moved quickly and even built entire business models around new ways for consumers to engage with and buy from stores. Established players have more clout to put behind new services but legacy IT remains a bottleneck. And while the front end of ecommerce services can be moved to a cloud service such as AWS or Azure quickly, the back end can’t.
This means the sales order management applications and ecommerce supply chain functions are quickly left behind and risk breaking the newer systems that depend on them. This hinders retailers’ agility and responsiveness to customer demand. Retailers must look for ways to optimise the supply chain, while also dealing with technical debt and older back office systems that are not agile. Retailers must also consider how they deal with modernisation of their back-office systems to support their digitisation ambitions. Both multi-channel and omni-channel remain priorities for many retailers as well.
Added to this is the issue of growing market share. According to research from Gartner, 44% of retail businesses placed growth and market share as a strategic business priority for the next two years. Retailers are diversifying and looking to enter new territories that better connect with younger, tech savvy shoppers.
Global expansion is another priority and with it comes federated IT models with compartmented stacks for each country, reflecting the specific needs for each region, while also offering a common experience for all shoppers. Some retailers are having to undergo considerable investment to move from a centralised IT model to a decentralised one, country by country, as they expand internationally.
Stepping into the cloud
The needs are vast and varied but I recommend the same starting point to each retailer I meet. Modernising your business applications and moving them away from on-premise locations and into the cloud can deliver numerous benefits. But the key to success is to modernise iteratively, by breaking your journey into realistic, attainable segments.
We’ve seen enterprises achieve success by using a progressive approach of first modernising infrastructure, then software development processes, and finally the architecture of core applications themselves. Innovation comes from evolution, not overnight change. Although all companies are looking at ways to modernise quickly, a big bang migration is neither helpful nor feasible for most.
Traditional applications are designed only for vertical scaling. They are built in-house using older development methodologies such as waterfall. Their architectures are often monolithic and highly coupled, meaning that it’s difficult to change individual components without also changing the many other components they are tied to.
The goal, then, is to evolve these traditional applications to act more like new, cloud-native applications that employ a microservices architecture in which components can run on multiple platforms and can be replaced independently. Businesses can become more efficient and fleet of foot by modernising their applications, which will enable them to innovate at a time when innovation is essential.
An iterative approach to modernisation means taking incremental steps towards your goal. First, migrate your existing systems with as little change to the underlying applications as possible. After successful migration, use the self-serve resources the cloud offers to enable new processes across development and operations teams. Once that’s done, it’s time to work on the actual applications. In other words, containers, microservices and other major changes to your core applications come last, not first. Continue to repeat this process with slightly more complicated, less self-contained systems each time.
It’s important to create an infrastructure that will form the springboard for new, rapidly delivered services. There’s a lot on the line and no retailer wants to disturb daily business operations by biting off more than it can chew. High performing businesses are those who commit to positive change that benefits both the company itself and its consumers. But this change only works if executed at a rate that the company is capable of and with technology well-suited to its unique business needs.
By Chris Griggs, GM for EMEA at Skytap, which accelerates enterprise innovation by modernizing traditional applications with cloud-native development and services