GUEST COMMENT Thriving, not just surviving through change

The outlook on the global retail economy is quite sour considering recent signs of a tightening job market, rising inflation, and global business activity hitting a new low. Consumers are feeling this pinch as 44% of consumers earning over $100K (USD) reported that they are in a worse financial condition now compared to this time last year. On the business front, Walmart and Tesco –– two of the biggest retailers in their respective US and UK markets –– both slashed their forecasts for full-year profits indicating a lack of faith in the broader economy and its influences.

In the UK and the US, over 60% of economic activity is contributed by consumer spending. This means that consumer spending plays a massive role in holding up even the strongest of economies. Understanding this, retailer leaders must assess their ability to address current and emerging economic challenges by focusing on optimising their operating costs, developing continuity strategies, and future-proofing their value propositions through agile commerce technologies. The latter allows retailers to adapt to evolving economic circumstances, pivot based on customer behaviours, and innovate as needed.

Adapting to the changes

When the Covid-19 pandemic hit, many retailers had to quickly pivot and adapt based on national and regional public safety guidelines. There was an immediate and forced shift to ecommerce, whether it was consumers purchasing household necessities through delivery services, or wholesalers and manufacturers buying items from their distributors online. During this transitionary period, the majority of retailers learned what their operational, risk management, and technological gaps were. 

And many of those learnings were very public. For example, major stores under the Arcadia Group including Topshop, Burton, Dorothy Perkins and Miss Selfridge collapsed during the pandemic. Some might say this occurred due to their slow response to migrate digitally, with strong competitors such as Asos rising in popularity.

There was a lag between what consumers wanted, what retailers were able to provide, and  how quickly they could provide it. In order to retain customers, they needed to quickly master deploying agile digital processes and technologies, as well as optimise operations. However, this was no easy feat. Many companies experienced difficulty in being operationally flexible and were unable to pivot to remote operations due to their reliance on using outdated legacy technologies and inflexible organisational structures.

Investing in commerce technologies

As indicated, consumer behaviour is unpredictable. One negative tweet has the power to completely upend the public’s perception of a brand. Companies can avert brand crises by investing in advanced modern ecommerce technology that enable the flexibility to seamlessly meet customer expectations, simultaneously capitalise on other revenue generating opportunities, and lower operational costs. Using slow-moving technology to today’s fast-paced issues is not practical. However most brands are slow to opt-out of outdated technology due to familiarity, and internal resistance to change and innovation. This comfort induces drops in brand loyalty. 

Retailers can instead achieve longevity and promote loyalty through leveraging microservices, which are Lego-like software components that can simply be joined together to do end-to-end ecommerce functions and processes. It’s a cost-saving way of operating, that allows you to be more nimble and adaptable in your approach. 

Rarely, if any, are there instances in which a retail leader should ignore the technological or consumer behavioural frictions that hinder business growth (i.e. market share, revenue, scaling opportunities). A business can’t thrive if it’s leaving money on the table.

How to achieve business agility with microservices

Manufactured and designed in the cloud, microservices are highly flexible and adaptable, allowing you to scale operations up and down when needed. This enables you to respond to unpredictable market forces without missing a beat. 

Using microservices does not mean that large teams of developers are needed to design, build, and maintain new commerce software operations. Instead, modern commerce software only requires small, nimble teams. By adopting an advanced commerce software, different features and offers can be spun up much quicker. This is particularly important when customers are chasing new touchpoints. For example, with the ability to customise software there are more ways to up and cross-sell consumers in the payment process than there ever were before. While older systems were available to provide a more standard payment function, it left customers with limited options. Meanwhile, updated ecommerce systems are more advanced in personalising these offers in a form that serves customers much better, and can include options like Buy Now Pay Later schemes or cashback, which can result in more sales.

Lastly, in order to reduce the total cost of ownership (TCO) businesses should leverage modern cloud architectures and infrastructures. On-premise legacy technology is difficult and costly to maintain and needs to be continuously upgraded, which puts a significant strain on resources. Optimising business models not only reduces costs, but also increases operational efficiency and the brand’s value.  

Thriving for the long-haul 

The true resiliency of digital commerce was put to the test during the pandemic, and the effect it had on economic growth is notable, especially in the context of the current cost-of-living crisis. 

High-growth retailers should focus on improving the end-to-end customer experience and uncovering new ways to provide value. As challenges continue to arise, companies should invest in innovations that enable long-term growth and resilience. 

Dirk Hoerig is co-founder and CEO, commercetools