‘Retail’s tech transformation doesn’t have to be all or nothing’

Many of the reasons for such persistent, pervasive disruption in retail lie at digital’s door.

From the rise of real-time retail and retail media, through to new platforms, marketplaces and the explosive growth of social shopping, board meetings should be positively packed with these agenda items.

However, the industry continues to suffer from chronic underinvestment in tech – and, in my opinion, there are three reasons why.

Retailers aren’t taking tech decision-making into the boardroom

Our 2024 Digital Disruption Survey recently found that, in retail 81% of technology decisions are made solely by tech teams without involving the c-suite compared with a 69% average across all sectors.

Tight margins and short time horizons to deliver return on investment make sizeable, early-adopting tech investments an awkwardly shaped pill to swallow. The sheer weight of physical stores tends to focus tech investment on bricks-and-mortar retail rather than digital channels.

So, rather than using tech to drive overall enterprise value, it is more often seen as a cost to be managed down rather than a driver of business strategy and the associated benefits.

Even when business leaders make tech decisions, they’re not talking about the right things

Outside of retail, one in three of those businesses taking tech decisions in the boardroom are positively disrupting their business and market. They are leading.

By contrast, in retail only one in 10 of those decisions with c-suite involvement is related to disruption. The retail c-suite doesn’t appear to discuss the positive potential of technology and its ability to drive business growth – rather the instances where it has become a problem area. Driving value from digital investments has never been more urgent, but the payoff therefore remains elusive for many.

“The retail c-suite doesn’t appear to discuss the positive potential of technology and its ability to drive business growth – rather the instances where it has become a problem area”

Retailers dread technology transformation, viewing it as all or nothing

Technology’s role in retail growth is indisputable. Our survey found that almost all retailers that say they have legacy IT under control expect growth to follow, yet only 53% of those who say they don’t have their arms around this expect the same upward trajectory. Retailers often dread and resist multi-year tech-transformation programmes for many reasons, but how can they expect to grow without this foundational infrastructure fully in check?

The good news is that tech transformation doesn’t have to be all or nothing.

Instead, keep the best of what’s already working and make progressive changes focused on value maximisation. Blend different best-of-breed products through creative tech strategies and take a step-by-step approach. Look at best-practice examples from leading retailers and tech companies and build a capability around modern engineering standards.

Lastly, you can – and should – deploy AI, particularly around customer experience and cost efficiency, without having to rip out the core of your business. AI should be a practical part of your solution set, rather than a centralised end in itself.

“AI should be a practical part of your solution set, rather than a centralised end in itself”

I recently heard Tesco’s chief technology officer talk about the journey the retailer has been on to evolve its technology capability. Incremental builds, minimum viable products, and the sharpest focus on customer or supplier requirements and expectations are all contributing to value creation without the need to turn the business upside-down.

You learn from the process and build business benefits along the way, without the significant risk of jumping from one legacy system to another monolithic undertaking. De-risking progress without compromising on tangible evolutions is a smart play.

The results won’t be perfect – when are they ever? – but Tesco’s approach has the retailer building faster and deeper and, critically, this is happening hand in hand with the rest of the business. That’s where you can isolate and accelerate performance where the opportunities are greatest and then integrate as seamlessly as possible in the organisation’s existing tech landscape.

Technology is the future of retail. As a retailer, controlling your own destiny and growth is absolutely within your gift, but you need the right people calling the shots. If tech decisions don’t come from the top, how can they be expected to benefit the top – and bottom – lines?