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3 Trends in Retail IT Investment

Colby Creger
9/22/20 3:53 PM

The world's most integral companies exist because they have the world's most integral customers.

As one of the world's most integral companies, you know that now, more than ever, you have to be focused on delighting your customers. COVID-19 has changed consumers' demands and behaviors, with an estimated 20% increase in online sales since the pandemic began. We aren't just talking groceries and cleaning supplies; nearly every category expects to receive a ~15-30% increase in online purchasing compared to activity before COVID-19. These online sales are great news for major retailers and top consumer packaged goods manufacturers (CPGs). Despite restrictions on store hours, new cleaning standards, and less foot traffic at brick-and-mortar locations, many retailers reported better than expected earnings in Q2 of 2020. Again, great news for those retailers and the CPGs that provide them with their inventory. But forward-looking executives are already asking,

"What key investments do we need to make to connect with our customers and meet their demands today and in the future?" According to a McKinsey survey, top retail and CPG executives will focus on these top 3 capabilities for investment over the next 12-18 months.

  1. E-commerce & Omnichannel
    Selling through online and digital channels is nothing new for global retailers. Some saw online sales make up as much as 50% of total sales revenue before COVID-19. However, the pandemic's dramatic shift has retailers rethinking their strategy to better serve their customers and keep up with the aggressive competition fostered by a predominantly online marketplace. Companies need to upgrade their online-merchandising capability and implement social-commerce strategies to interact with customers. They need to be able to do this across multiple channels with differentiated messaging specific to each channel. The top challenge is that most retailers have legacy platforms disconnected from their omnichannel marketing approach. Technology investment in back-office platforms drives customer-facing success and generates loyal customers.

  2. Digital, Data, and Analytics
    The online and digital marketplace allows firms to take data and create personalized marketing through multiple channels to gain customer loyalty. Identifying and reacting to these trends places heightened importance on advanced analytics and machine learning. There is an opportunity to learn from the data to create a personalized customer experience and gain loyalty. There is no question that companies have a multitude of data. Still, now they must focus on the quality, management, and use of the data.

    Most importantly, are top executives able to make decisions and implement new strategies with the current state of their data management and analytics? When you can bring all of your data into view, you can make specific business decisions that provide value.

  3. Flexible Supply Chain
    Reaching customers through omnichannel sales is part of the challenge, but delivering to the new customer expectations is another. Consumers are not only changing where and when they shop, but they also want to be able to choose where and when they receive those products. This trend forces supply chains to become flexible enough to support the changing preferences for delivery, demand for product offerings, and speed at which consumers expect to have these products. Behind the scenes, this can require managing shipments direct from vendors or suppliers to end customers, creating stressful vendor and inventory management for retailers. Companies are also having to look at what new products their customers are searching for. If your technology is advanced enough to predict consumer trends, then you need a supply chain that is flexible enough to act on those predictions. Focusing on automating vendor management and merchandising is key to meeting consumer demands now and in the future.

The Resource Allocation Challenge

McKinsey suggests that an average retailer allocates only 6-9% of its total full-time equivalent resources to the three capabilities mentioned above. That number is even lower for CPGs who estimate a 5-7% allocation of their FTE resources to those capabilities. To succeed in the Post COVID-19 online marketplace, top retail and CPG executives believe they need to increase their capabilities in omnichannel, digital, data, and analytics omni-supply chain by 2-3 times.

The world's most integral companies are reporting better than expected earnings during a worldwide pandemic. Still, to see consistent growth, they need a fresh look at using data and technology to identify customer expectations and satisfy them. To do this, top retailers and CPGs need to focus on modernizing the platforms they use in merchandising, supply chain, marketing, and, most importantly, the customer experience. This modernization is going to require significant and targeted investments in technology, data, and analytics. As a top executive, it's not a matter of if you're going to make these investments, but how can you make them happen. We have over 20 years of experience working with integral companies.

Let's find some time to chat.

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