When we look back in 10 years time, it’s clear that 2018 will be seen as a pivotal year for retail, and especially for the convenience sector. Amazon.com's pincer movement strategy of buying Whole Foods and launching Amazon Go has the potential to fundamentally change the industry. It sets the two retail imperatives as customer convenience and reducing the cost to serve, be that through radical approaches to the checkout line or to home delivery. This will change the roll of the store, and will drive established retailers to increase their own focus on convenience and cost to serve.
But competing with Amazon is tough. It has substantial capital and operational advantages, greenfield sites in which to experiment, and the luxury of getting things wrong without jeopardizing core revenue streams. If you’re an established retailer, funds are usually more limited; you have a complex and sub-optimal technology legacy to take care of; and experiments that may interrupt checkout cash flow, even momentarily, aren’t acceptable to shareholders.
There's no doubt that the stakes have been raised, and the do-nothing option just won’t cut it anymore. Retailers must consider how existing stores can be leveraged and adapted in order to reduce the cost to serve and create an appropriate customer experience that can challenge for the long term without breaking the bank in the short term. The retail battleground has moved to the "edge."
But what is it exactly that retailers should be focusing on?
Encourage Continuous Innovation
Retailers are seeking new ways to reduce cost to serve, improve store uptime to drive optimal efficiency, and drive faster innovation at a cost-effective price to meet the demands of customers. Amazon has taken this path by exploring frictionless checkout with Amazon Go and integrating Whole Foods with Amazon Prime to build convenience through home delivery and build brand loyalty. Time will tell if this is a true panacea.
The truth is, no one has the complete answer. Therefore, we should expect continuous innovation. This demands experimenting and testing with new applications and services in order to ensure they deliver results once rolled out across stores. However, this can be a real challenge for retailers, especially those with large store estates over a highly distributed geography. If each implementation across each store needs to be slightly different, it can be extremely difficult to know whether each technology will behave correctly in every store.
What’s required is a solution that allows retailers to perform centralized experiments in a replicated, risk-free environment before the technologies are used publicly by customers. This naturally enables retailers to adopt new technologies quicker than before, and to keep up with the pace of change.
In addition, the IT estate needs to be treated as an integrated whole, rather than as a collection of disparate devices. This means that store technology updates are created centrally and then distributed, that delta updates and patches are centrally managed, and that all possible support functions are carried out at the center and automated to reduce support costs. Solutions which employ this approach move away from the management of individual stores to the management of a store ecosystem, which in turn makes the whole infrastructure significantly more cost effective.
Prioritize the Point-of-Sale Experience
Convenience is king for the modern shopper, and point of sale (POS) sits at the heart of convenience. Whether it’s having to wait in lengthy lines at the cash register or tap away at slow and unresponsive self-checkout machines, customers can quickly be driven to frustration. What’s required today is a frictionless POS experience that allows customers to pay in multiple ways to suit their preferences and situation.
If retailers want to keep pace with the likes of Amazon, they must focus on the POS experience as a top priority. There's no one fix-all solution here as audience preferences are broad. One business might choose to equip staff with mobile POS tablets, while another might optimize its payment mechanism to ensure any delays are as minimal as possible. The less friction during the purchasing journey, the more satisfied customers will be.
There's no doubt that Amazon’s launch of frictionless checkout in Seattle and its move into brick-and-mortar retail represent a significant moment for the retail industry. But it doesn't mean that the world will change overnight. Rather, it's a signpost that points towards the kind of retail future we can expect to see. It's a welcome wake-up call that will spark new innovation in customer convenience. This should be seen by established retailers as an opportunity to reassess how they optimize innovation and customer convenience in-store. There will be many different ways of rising to this challenge, and retailers should adopt and adapt technology according to their own business needs. What can be guaranteed, however, is that a change is coming, and all retailers need to prepare themselves to stay competitive.
Nick East is the CEO of Zynstra, an intelligent infrastructure for retailers that is transforming edge computing.