Wall Street and Consumers Favor the Prepared Retailer

For retailers, pleasing Wall Street and private equity expectations was a matter of a quarter-by-quarter measure of comparable sales and profit margins. And even though retailers did not necessarily balance these short-term results with a long-term strategy, the industry kept moving along – until the pandemic struck.

Now, after years of slack processes and manual workloads, retailers across fashion and consumer goods segments are working hard to dig themselves out of a deep digital debt. The change is difficult, and no one likes it. But it’s the best opportunity to survive restricted foot traffic in brick-and-mortar stores and lower-than-usual consumer excitement and demand.

Going beyond the duct tape of point solutions 
After experiencing ever-tightening margins year over year, retailers have been working tirelessly to moving ahead. For years, they have met strong nontraditional competitors, such as Amazon and Walmart. But the real source of their woes is missing a flexible foundation for responding quickly to change and adapting to one-of-a-kind situations like COVID-19.

It’s fair to say that a perpetual lack of investment has been the downfall of many storied retailers in recent years. If businesses had better prepared themselves for an uncertain future, they could have reacted more quickly and with higher consumer service levels.

Now don’t get us wrong: old measurements are very much still alive – and they should be. But to both survive and thrive in any economic condition moving forward, the topics the industry used to systemically ignore must also be appropriately prioritized to establish operational leadership and empower everyday decision makers.

Take, for example, Wall Street and private equity investors. They want to be assured that the brands they support show a sound balance between financial resilience and long-term consumer loyalty, satisfaction, and growth. In some cases, key indicators that measure and reward the performance of Amazon or Walmart are applied to all retailers.

This growing reality makes it clear that every industry player is expected to prepare for the worst and strive for the best. Such initiatives may include paying back a digital debt and investing in a transformation strategy that is authentically consumer-centric.

Reframing a digital mindset to embrace enterprise-wide change
Although the desire to change to survive in the “next normal” seems to be the obvious reaction, most retailers are unaware of the challenges that are far below anything they can see on the surface of their business.

In response, some retailers have created business cases to put in place the budgets and supporting management practices that can encourage the workforce to adopt a digital mindset that embraces continuous change, standardized processes, and automation. 

These companies are the ones heeding the advice of French biologist, microbiologist, and chemist Louis Pasteur, “In the fields of observation, chance favors only the prepared mind.”

Brands leaping forward in their digital strategies understand that technology and communication gaps can no longer be duct-taped with a new point solution. Intentionally or not, the infrastructure will eventually fall victim to data silos, broken connections, delayed visibility, and limited access to metrics and insights. This approach tends to focus more on departmental and individual goals than the needs of the entire company as one entity.

Keeping the retail business afloat requires more than point solutions acting as duct tape this time.

Processes – which are often undocumented – must be standardized and simplified to gain control and agility to face disruption. This could mean pivoting operations to take on emerging opportunities or scaling back to mitigate risk. 

But no matter the decision, the entire workforce requires the insights and analytics tools to make the right decision.

Energizing transformation that erases digital debt
If retailers do not transform themselves with advanced technology, nothing else will matter. The consequence of this risk is already flowing back through the supply chain, affecting consumer goods companies and fashion suppliers as we wrap up 2020 and prepare for 2021. Although some retailers and their suppliers experienced a boom before the pandemic, their digital debts were exposed once their growth trajectory suddenly and unexpectedly shifted.

So, heed the warning. Your digital debt will eventually surface at the worst time possible. If you don’t invest right now, then the cost is much higher than you know.

Todd Hassell is value advisor – Midwest (US) market unit, SAP; Steve Mauchline is business architect – North America executive advisory and architecture unit, SAP. Their research paper, co-authored with Oxford Economics, “The Responsive Retailer,” explores use cases and the evidence needed to cement a compelling reason for retailers to act now.