With the festive season over and 2018 now very much upon us, it’s a great time to look back at last year’s events for the retail industry. The sector in the UK has experienced consistent growth over the last 10 years (£286 billion in 2006 to over £360 billion in 2016), but it has also faced numerous challenges. Brexit’s impact has been felt, both from a consumer confidence perspective and through the weakening of the pound. Inflation has been rising, and with the National Living Wage being increased, retailers are feeling the pinch. This has hit household names such as Jaeger, and Jones the Bootmaker, heavily, with the likes of Debenhams, Mothercare and House of Fraser coming under increasing pressure from shareholders due to poor forecasts and results. Furthermore, Deloitte have highlighted a 28% increase in retail administrations in 2017, the first rise for almost five years. However, it isn’t all bad news as large supermarket chains such as Tesco, Morrison, Sainsburys and Waitrose all had very strong year-on-year results in 2017. E-commerce was the big winner, with Manchester-based online retailer Boohoo seeing profits grow by 97%.
A significant part of retailers’ growth over the last 10 years has been based around seasonal events. Personally, I have long found events-based retailing very frustrating. I want to decide when to shop. Just because it’s Valentine's Day, do I have to buy flowers? “What about the other 364 days of the year?” I hear my other half scream!
So, will we see a change in the industry’s approach to these events? We know these events take a lot of planning and preparation, causing operational and IT teams headaches they would rather not have, but it has long been seen by the industry as an essential way to boost sales and keep pace with competitors. In today's landscape, planning is not the only headache, as retailers must fight to keep up with the continuing emergence of so many new events scattered across the year. Whilst Valentine’s Day, Easter, Halloween, Christmas and the New Year dictating our shopping in previous years, we now have the likes of Black Friday, Cyber Monday, Amazon Prime Day and Back to School influencing the retail calendar.
Our experience is this shift is already taking place, and seasons are becoming more and more blurred. The mobile-equipped, always-connected shopper is no longer dependent on retailers to dictate the timing of product availability and the best deals. Being frugal and hunting for a bargain is no longer deemed unfashionable, and if anything, the total reverse has happened. They shop anywhere, anytime, all the time. As such, consumers expect, or even demand, an always-on approach. So, with this, retailers must shift their focus away from planning for large seasonal events to create a seamless omni-channel approach that embraces new technology, giving consumers a constant and frictionless shopping experience.
Analysing the results of Black Friday and Cyber Monday showed us that, whilst overall sales increased, the majority of this uplift was through digital channels. This further underlines the point that retailers need to maintain the relevance of their bricks-and-mortar stores in a digital world. As such, we can safely say that retail has changed forever, and that the industry will continue to shift as technology becomes more and more integrated with our day-to-day lives. Whilst seasonal events will still very much influence retailers’ offerings, the dependence upon the calendar will greatly reduce.
Our clients’ IT Teams are now faced with 24×7×365 firefighting, spending a large proportion of their budget on keeping the lights on, which usually sits at around 80%. Whilst the sector has a great opportunity to embrace innovation, whether that is Big Data, Chatbots, the journey to the Cloud, or the rapid development of effective internal and customer-facing applications, the 20% left of the IT budget leaves very little spare resource for these innovative technologies.
So, by investing in, and embracing technology to more effectively manage the general maintenance of your critical IT systems and applications, you naturally free up more resource for innovation. Let’s look at House of Fraser, who recently announced a significant investment in a restructuring of their IT systems. Despite this cash injection, online sales were down 7.5% in the six weeks prior to the 23rd of December, which some analysts have attributed to the lack of previous innovation in IT. With a reliance on legacy systems during a busy retail period, the company had experienced slow website performance and a delay in stock level updates, which in today’s day and age is simply unforgivable with modern consumers.
In our experience, moving either fully or partially to the cloud has enabled retail companies to scale their computing resource up and down depending on demand, keeping the lights on at all times whilst avoiding the under-utilisation of IT systems during quiet retail periods. As such, cloud infrastructure has allowed our clients to make the shift away from the 80:20 split, to being closer to 60:40. Had someone like House of Fraser invested in technology earlier, they may have seen a growth or maintenance in their online sales figures through customer satisfaction with their online buying experience. In today's modern world, infrastructure resilience during surges of demand is ultimately a critical success factor and differentiator for retailers
Whether you see further traction in events-based retailing, or you see its demise, the need to have flexibility and adaptability in your critical IT systems is clear in maintaining availability and performance throughout the retail year, A move to the cloud could be the right approach for you as a retailer in the modern digital era, and we’re here to help you with your cloud strategy and database estate - every step of the way. Take a look at our recorded webinar to find out more.
Written by Tim Baskett, Retail Account Manager for Xynomix