How can we do more with less? It’s a question that organisations in every industry sector are asking as they navigate their way through an onslaught of challenges caused by a volatile global economy.
This is particularly apparent in the retail and consumer goods industry, where organisations are battling to remain operational and profitable, despite unstable supply chains, inflation and labour shortages. If they want to win the fight to remain competitive, retail organisations must ensure that building resilience is a top priority.
“Whether it’s due to supply chain pain, labour shortages, cost optimisation or other factors, business as usual isn’t really an option,” says Shelley Bransten, corporate vice president of worldwide retail and consumer goods industries at Microsoft. “The retailers and brands that succeed moving forward are going to be the ones that can adapt and embrace the only constant right now, and that’s change. As our CEO Satya Nadella says: ‘digital technology is a deflationary force in an inflationary economy’. That’s why building resilience through digital technology is going to be key today and beyond.”
Certainly, the ability to harness the power of digital technology has been a vital factor for the continued success of leading retailers since the start of the pandemic.
"Despite everything we’ve seen in the past two years, the customer context continues to change at breakneck speed, and I don’t know where we’d be today if many of the brands and retailers we work with had not accelerated their digital technology investments,” says Bransten. “From kerbside pickup to virtual outfitting appointments, artificial intelligence-driven supply chains and more, our customers have woven digital technology into the very fabric of their operations. Not only has this enabled them to weather the storm of the pandemic but it’s also empowering them to do more with less. It’s clear that retailers who laid their digital tracks early were better equipped to respond, recover and reimagine their businesses than those that did not.”
While many retailers recognise that digital transformation is critical to building both short and long-term resilience, many are keen to do more with less by capitalising on their existing technology investments. However, they are struggling to know where to start.
“There’s no silver bullet,” says Bransten. “It’s not just about reducing spend, cutting costs and optimising in the here and now; it’s also about the innovation agenda and investing for the future.”
There are, however, four priorities retailers can focus on to become more resilient, says Bransten. First, she recommends that they learn how to maximise the value of their data.
“Everything we do today generates data – whether it’s scrolling through our daily news feed, completing our morning workout, internet banking, shopping or sharing a special moment from the weekend on Instagram,” she says. “In fact, 40 petabytes of data is generated every hour in retail. Yet, 90 per cent of the world’s data is ‘dark’ or unstructured, so it’s no wonder that retailers tell us they are still struggling with siloed enterprise data, limited operational visibility, anonymous shoppers and more.
“We’re partnering with leading retailers like Walmart, ASOS and many others across the globe to break down those data silos so they can optimise purchasing, distribution, pricing, labour and so much more.”
Once they can capture and aggregate data from multiple sources, retailers and consumer goods firms must analyse it for actionable insights that can be used to elevate the shopping experience.
“Data is the signal not a sideshow – and the more signal retailers have across the shopper journey, the more personalisation and optimisation they’re able to deliver, which will ultimately improve conversion rates and profitability,” says Bransten. “The physical store is the next frontier for digitalisation, so retailers must explore how to transform the in-store shopping experience. Microsoft partners like SES-Imagotag and Ombori are a driving force in this space and I’m excited by AiFi’s vision-powered autonomous stores, which are now open in over 80 locations worldwide.”
Retailers should also invest in building a real-time, sustainable supply chain. “While cost and price have been two of the dominant themes in retail in 2022, the supply chain pains of 2021 are still very real, which is why we recently introduced the Microsoft Supply Chain Platform,” says Bransten. “It’s time to transform supply chain operations by bringing together data, AI and collaboration to tackle our customers’ most urgent supply chain challenges.”
Empowering store associates with the tools and technologies to work more productively and effectively should also be a high priority.
“There’s not a more underserved, or more deserving, group of people than frontline retail workers,” claims Bransten. “Turnover rates in the industry continue to be notoriously high and our most recent research shows that 53 per cent of respondents are more likely to prioritise health and well-being over work than they would have before the pandemic. With that in mind, retailers have never had such an ideal opportunity to better equip, develop and engage their frontline staff.”
Bransten cites Microsoft’s partnership with Australian retailer Coles as a notable example. “Coles is currently deploying Microsoft 365 and Teams to transform how its more than 120,000 employees interact with each other,” she says. “Once the Team Member Engagement Platform is live, Coles will be able to streamline everything from managing rosters and swapping shifts to accessing pay slips, procedure manuals and more.”
Although prioritising these four areas will help retailers to become more resilient, Bransten cautions that they cannot expect to see instant results. “This is going to be a journey not a master move,” she says. “Data is going to play a huge role in a retailer’s success, but it’s crucial that this data belongs to them and only them. It shouldn’t belong to an outside vendor who uses that data to compete with them, create new revenue streams for themselves or sell back to the retailer. Culturally, that’s a big step for some in the industry.”
Another obstacle for many retailers will be to transition from a know-it-all to a learn-it-all mindset. “Retailers need to embrace a culture of continuous learning and optimisation that allows them to try, test, fail and try again,” explains Bransten. “There’s a sea of optimisation opportunities, for example on the demand forecasting side (order less, produce less, markdown less) as well as on the innovation side with concepts like the metaverse.”
Bransten predicts that Microsoft’s extensive partner ecosystem will play a pivotal role in developing solutions that will help retailers to make the most of their existing IT investments. Noting that the partner ecosystem was one of the reasons she joined Microsoft in 2018, Bransten says: “In many ways, our partners are our ‘secret sauce’ and a key differentiator for us. So, as we work to solve retailers’ most pressing needs, it’s only natural that we do it together with our incredible partners.”
Many of these partners deliver off-the-shelf solutions that leverage proprietary machine learning technology to help retailers be nimbler in recognising in-season demand shifts and rapidly optimise inventory, pricing, promotion and labour allocation decisions.
“Partners like SAS, Blue Yonder, Tata Consultancy Services (TCS) and Fractal provide robust analytics that can be rapidly deployed to quickly bring real business value for retailers,” says Bransten. “For example, Microsoft partnered with TCS to help US pharmacy chain Walgreens create an intelligent data platform that can handle a peak of 40,000 transactions per second. This allows prescription dispenses that previously took 48 hours to reach Walgreens’ data warehouse to be updated in minutes, optimising inventory ordering and improving patient care.”
Bransten hopes that this type of innovation will become more common as retailers take control of their data and build more agile, flexible and resilient operating models.
“None of us have a crystal ball, and given everything that has happened since the start of 2020, it’s difficult to look too far into the future,” she explains. “What I will say though is that retail is a bellwether, whether it be for customer sentiment, the future of work or for the broader economy at large. Major headwinds like inflation, rising energy prices, labour shortages and supply chain pain look set to continue for the foreseeable future. And that’s why retailers are asking us how they can use digital technology to ‘do more with less’.
“While the future may look uncertain for many of us, it’s clear that flexibility, compassion and modern digital tools are going to be the seedlings for success.”
A variety of Microsoft partners also contributed to this feature: Blue Yonder, Diebold Nixdorf, Flooid, Infosys, Nuance Communications, RSM and Tollring. Read about how they are using Microsoft’s technologies to help retailers and consumer good businesses to overcome supply chain and other operational challenges.
This article was originally published in the Winter 2022 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.