Omnichannel isn’t just the future of retailing. It’s the now of retailing. Retailers know they must leverage their stores to offer a superior, seamless, omnichannel experience. The pressure will only grow more intense: Forrester predicts that in Western Europe, for example, the web will influence 45% of offline sales by 2020.
So what’s standing in retailers’ way?
Many blame siloe’d backend systems that are not well integrated enough to execute the intricate dance required by a “simple” transaction such as buy online, pickup in store – and oops please switch the size and take back this mobile order return.
But it’s more than that. Retailers’ own technology partners are also standing in the way.
Some of the biggest retail tech brands out there have significant gaps in their solution sets, as well as multiple, overlapping products. The path forward is unclear, so their users turn to systems integrators to pull together the pieces and parts and layer on functions in an attempt to mimic fully omnichannel solutions.
The truth is, legacy software – even knit together to facilitate some omnichannel functions – just isn’t nimble enough for an omnichannel world. Instead, retailers need solutions that provide faster time to value, easy migration and native integration. That is found only in retail cloud solutions built to work seamlessly across channels.
A new blueprint for a new world of retailing
Two of the most important considerations in charting a path to omnichannel are time and money.
Time: The average cloud project takes six to nine months. Trying to achieve omnichannel functionality by layering on top of multiple disparate legacy solutions takes at least double that time: 12 to 18 months. Speed to value is vitally important as consumers’ omnichannel expectations evolve at lightning speed. It’s hard to think of a retail category in which it will still be okay to operate siloe’d channels in 2019.
Money: The CIO of one US big box retailer estimated that for every $1m they spend on multivendor software, they spend 20 to 30 times more on integrating that software into their omnichannel platform. So if the CIO wants to purchase a $3 million solution, the board must approve $63m or more. The vast majority of this spend goes towards making sure that omnichannel journeys can work and scale through the disconnected assets. And this problem isn’t static, it changes and expands as the vendors update their solutions and become less friendly in multivendor environments.
That’s not all. Research by Accenture found software is either the first or second largest category of the typical company’s IT spend. Of that, 50 to 60% goes to maintenance and support. These fees are the real bread and butter for many top retail software companies. Most software companies are not willing to part with these support revenue streams, so they resort to a number of tactics to retain the cashflow, including irrevocably linking various support payment commitments and only temporarily suspending the commitment when a customer moves into an emerging cloud solution. Retailers should consider getting a completely fresh start by using a fully integrated cloud solution which eliminates these substantial payments and complexities, and delivers significant operating savings. Given the urgency, retailers must choose a path to omnichannel that will minimize both their time and cost investment.
Evaluating the omnichannel tech vendor
There’s no disputing the wholesale shift of enterprise software toward cloud and all of its iterations. A recent Gartner survey shows more than half of new enterprise software subscriptions use alternative consumption models including SaaS. For retailers seeking to lay solid foundation to support omnichannel demand now and in the future, here are three key considerations when evaluating cloud-based retail technology solution providers:
Support and maintenance of customer journey paths. A customer shopping journey might start on a device and end in a store, start in a store and end at the call center, start on mobile and end on desktop, or undertake many other variations. Mapping customer journey paths is perhaps the most difficult but important step in transitioning to an omnichannel solution, and most retailers are mapping 20 to 100 of them.
In a multi-vendor environment, mapping customer journeys is not a one-time task. Retailers must rework them every time there is a change in one of the four to five underlying systems they touch. This is precisely what causes much of the 20x to 30x cost requirements of implementing these solutions, most of which goes to the systems integrator.
When the omnichannel solution is fully integrated into the cloud and sold as a service, more of the responsibility is on the vendor, rather than the retailer, to maintain those common journey paths as the solution evolves. In fact, some cloud solutions have many customer journeys already built across the solution set. When the vendor is maintaining the solution, they natively address other issues where in-house management complexity is onerous, such as keeping up with evolving security and confidentiality regulations, removing that burden from the retailer.
Role of Enterprise Order Management
It is the enterprise order management (EOM) platform that supplies the connected intelligence that makes omnichannel customer journeys possible. Many retailers are making the mistake of focusing on one element of omnichannel, such as re-platforming ecommerce, implementing mobility, or purchasing a new POS platform. While the commerce platform and to some degree the POS become touchpoints, the EOM does the heavy lifting, order managing, order brokering and touching every system involved in omnichannel. Unfortunately, most retailers still buy ecommerce and POS platforms without fully considering the wider implications of customer journeys. There are surprisingly few order management options, and the legacy solutions that exist require costly systems integration work to connect to other systems. An order management platform should be at the centre of any well-designed cloud solution, already integrated with supporting applications and perfectly situated to orchestrate complex omnichannel customer journeys.
Integration and fit: Buying an integrated cloud solution requires the same due diligence that software purchasing has always required: Ensuring features and functions meet the need, checking references, fully vetting the vendor’s viability, ensuring solutions can easily integrate with your other software, and so on. Deal terms are also critical: It is very important to make sure the contract does not limit your ability to change vendors or products, or incur costs increases when legacy applications are used in a new way.
Turn retail tech back into an enabler: Omnichannel has rapidly evolved into retail table stakes, with digitally nimble retailers already gaining significant advantage over those not yet able to deliver a fully seamless experience across channels. That puts retailers under tremendous pressure to shift away from siloed IT infrastructure. But legacy software products – and notably, the big brand IT vendors that provided it – are standing in the way due to gaps in their solutions, too many products and diversion of resources into immature, me-too cloud offerings. Layering omnichannel functionality on top of this foundation costs too much, takes too long and produces unsatisfactory results.
To attract and serve today’s omnichannel customer, retailers need software architecture designed to support their complex customer journeys. And they need it right now. Fully integrated cloud solutions deliver two-times-faster time to benefit while decreasing operating, licensing and maintenance costs and shifting maintenance responsibilities to the vendor. Retailers adopting cloud solutions gain the nimble, modern IT infrastructure essential to meet omnichannel demands, and can adapt faster as omnichannel expectations inevitably change.
Frank Lord is chief revenue officer at Aptos