As Covid-19 saw UK shops shut and people unwilling or unable to venture outside, a record amount of retail spending migrated online – accounting for a third of all retail outlay.
The UK’s retail sector might have appeared well positioned to withstand the business fallout.
British retailers invested years and billions of pounds in developing digital with omnichannel, customer analytics, in-store analytics, web and mobile experiences. The UK has gone further than any other country in adopting online shopping – 20% of the UK’s consumers shop entirely or mostly online, according to a June 2020 report by consultant McKinsey.
During the past year, online pure-play retailers saw sales growth of 20-40% as traffic to their sites surged.
But for others – particularly those with a strong high-street presence – lockdown was a disaster: we saw big names such as those in the Arcadia Group slide into administration.
None were new to digital – so where did they go wrong?
The difference was operations: the internet pure plays had done more than simply develop successful online shopping channels and digital experiences; they had invested in the behind-the-scenes people, processes and procedures that allowed them to develop successful digital operations.
Digital operations enable IT teams building and managing digital services to respond to changing customer demand and business conditions. They also allow IT teams to respond quickly to technology emergencies, such as outages, that can see customers go elsewhere.
As the UK prepares to leave lockdown, we will see the competition for the affection, loyalty and spending power of the nation’s shoppers intensify. Now, then, is the time for high-street retailers and digital hybrids to look to those pure plays for ways to get their own digital operations match fit.
Seeing the end?
Covid-19 has accelerated longer-term changes in retail, placing an even greater importance on digital.
Consultant McKinsey expects more people to conduct their shopping online than before the first lockdown in March 2020. McKinsey, which bases its findings on the post-pandemic retail experience in China, also expects shoppers to be less loyal than before, thereby placing greater pressure on retailers to serve customer demand and employ smarter digital channel initiatives.
That’s not all. Covid-19 has introduced a new challenge for retail: the rise of the homebody economy. Employers have had their eyes opened by the cost-saving potential of having a greater number of staff work at home, away from expensive, centralised offices. This has resulted in what’s been described by one CIO as historic deployment of remote work and digital access.
The homebody economy is mixed news for high-street retailers. It means all retailers must be geared not simply to better digital merchandising and online shopping but, also, fulfillment and delivery.
The hard part
The takeaway would appear to be to invest more in sophisticated web and digital channels, customer experience and advanced analytics, to understand customers and predict buying habits.
The digital pure plays, though, have gone deeper. They have capitalized on the thing that makes digital attractive: its agility. New services, store fronts and experiences are built as software, meaning they are easier and faster to build, change and update than physical buildings and stock.
But software architectures are changing: cloud and technologies such as containers, orchestration and microservices are the building blocks of digital. Such is the appeal of cloud and cloud-native technologies that most companies aren’t limiting themselves to one cloud – they are running at least two. “Enterprises understand the benefits of cloud computing and are plunging forward with multi-cloud and hybrid cloud architecture,” saysIDC research manager Chris Kanthan.
But multi-cloud is complex: it means applications on different service providers and running in different data centers. Microservices are difficult to deploy, manage and scale. Such are the technology hurdles that 79% say are not releasing the synergies they’d expected from the move to cloud.
Why? Rather than run multi-cloud as a single infrastructure, more than half, 55%, have chosen to run their applications on separate clouds with only just over a third using the kinds of management tools that would unify this, according to Flexera’s latest State of the Cloud report here.
Fragmented operations undermine IT teams’ ability to deliver the performance and availability demanded by digital and that’s a concern. Many digital services struggled during lockdown: PagerDuty found a surge in the number of daily digital incidents – up 47%. PagerDuty defines an incident as an outage, service disruption or “other” major event from start to resolution.
This has also damaged companies’ ability to build exactly the kinds of new digital services needed to win customers and keep their business on the front foot against rivals. An average of 7.6 planned projects were cancelled or delayed because the IT teams who’d otherwise be building them were called in to solve technology firefights such as outages, PagerDuty said.
Digital operations have allowed the internet insurgents to overcome fragmentation by using consistent processes and procedures, automation and analytics. Digital operations founded on this trio have allowed digital retailers’ IT to respond to events faster and to effect business changes quicker; it’s freed them from tending individual technologies and fighting fires.
Processes and procedures
Consistent processes and procedures have long been an established part of running data center operations. As a result the data center is considered a resilient and well-run computing environment. According to the Uptime Institute, a specialist in infrastructure performance: “Having and maintaining appropriate procedures is essential to achieving performance and service availability.”
Pure plays haven’t imported existing procedures to the cloud – they have built them for the cloud. They’ve done this by analyzing procedures in areas such as software development, deployment and management, breaking them down into stages and outcomes, and instantiating them as code for use by their cloud management tools.
Automation is central to building a digital operation. The challenge with conventional operations is that they are either manual or only partially automated. Events and incidents are managed using manual communications between people; they rely on individuals’ knowledge of a system or problem, and they depend on people’s willingness to be available to fix problems. This doesn’t scale, it delays fixes and it means incidents such as outages will impact customers.
With automation, the machine cuts through the complexity of multi-cloud. It provides a solid basis for teams to build, provision, deploy and manage digital services and systems; to maintain their lifecycle; a basis for IT teams to monitor systems and pre-empt events and respond in real-time; and a means for organisations to respond to customer service requests.
Says IDC’s Kanthan: “Without extensive policy-based automation, cloud customers can be burdened with rapidly escalating costs associated with management and IT operations.”
There’s no shortage of system data and alerts in digital operations and cloud. If not managed properly it can breed analysis paralysis among the IT teams expected to manage the system, or a frenzy of alerts, notifications and false positives. It can mean incidents go undetected, or that staff burn out.
Effective digital operations means capturing the “right” data and using it to alert the “right” people – so there’s no mushrooming of alerts to overwhelm teams. This data can provide IT with the basis to better understand their digital infrastructure and a means to analyze events and respond with the information they need. They can identify and address incidents before customers are impacted – thereby preserving the customer experience, saving brand reputation and helping the bottom line.
UK retailers may have spent years investing in digital commerce and experience but when Covid-19 hit, not all were ready for the challenge as business moved online. The result of the pandemic will be to accelerate the national move to online shopping, meaning high-street brands will go up even harder against the very same insurgents whose businesses benefited from lockdown shopping.
Retailers should learn from the insurgents: invest in integrated, cloud-based digital operations – but invest, also, in the people, processes and procedures to do more than just change delivery and experience.
Steve Barrett, vice president EMEA, PagerDuty