Describing 2022 as a dull year in retail would be incorrect. Some businesses were still in the midst of a digital transition process ignited by Covid-19 while working hard to solve supply chain issues when new challenges knocked on their door.
The impact of global crises led to higher prices for energy and raw materials. At the same time, inflation and an overall feeling of uncertainty made consumers more careful in their spending, and higher interest rates complicated growth plans for retailers.
A Chinese proverb describes a crisis as “an opportunity riding a dangerous wind”. Despite the challenges, these crises present opportunities for businesses to gain a competitive edge and outsmart others in the market. There are three growth paths to counter these challenges: diversifying, scaling and innovating.
Diversifying by spreading investments across multiple markets can be a good approach to managing risk, especially in times of uncertainty. It allows businesses to offset losses in one market by gains in another. Moreover, it offers the opportunity to ‘cross-pollinate’ and learn from experiences on the growing side of the business that can be applied on the less flourishing side.
Similar to diversification, scaling requires investments. The difference is that you invest in parts of your current business; doing more of the same rather than starting something new. This may be a clever approach for retailers, especially in a market that is ripe for consolidation. Efficiencies of scale combined with a larger footprint typically increase both profit margins and total revenues.
Innovation in retail is often driven by the consumer and it pays to be ahead of the game rather than a follower. Within your retail concept, are there ways you can offer new services to your customers to make them happier, so you can retain them better and make them spend more, while saving on the average cost per transaction? Innovation represents a less disruptive approach than the two described above, and lets you improve customer and staff journeys in a controlled way.
These three strategies have one thing in common: they can deliver true success by having a very flexible, scalable and open IT infrastructure. Together, they will help you ride the dangerous winds whenever they occur.
Let’s have a look at three examples to make it all a bit more tangible.
Electric vehicle (EV) charging comes to mind when thinking about diversification. Suppose you are a convenience retailer with fuel pumps in front of your stores. You are suffering from high prices which have resulted in a lower influx of customers. What if you installed EV chargers next to your fuel pumps, so drivers can charge their cars while spending money? Given the number of government incentives to promote e-mobility, and the current attention for sustainable retailing, the time for entering into EV charging may be now.
Next up: readiness to scale. Reaping the true benefits of scaling up may be more complicated than it looks at first glance. Adding new stores or taking over a competitor is already complex. Scaling successfully depends on how well processes can be aligned to lower costs and shorten throughput times. Software plays a critical role in scaling up businesses, as it connects customer-facing, store and back-office processes. Before you start, it’s good to ask yourself how to unify the various software systems so that data from all parts of the business can be consolidated and used to optimise processes and better serve customers. You’ll find that openness and standardised interfaces are crucial for successful scaling.
Examples for retail innovation are ubiquitous, and typically aim to enhance customer-facing processes, for example, by adding self-checkout or self-scanning options. These types of innovations increase the convenience of the shopping experience. However, other innovations can directly lead to revenue increase and improved customer loyalty, such as introducing digital receipts. This not only saves on paper and ink, but also lets you connect the current transaction with the next by offering visually attractive and highly targeted promotions on the digital receipt that can be redeemed later.
With Diebold Nixdorf as a retail partner, businesses can diversify, scale and innovate the way that they want. We offer a cloud-native software platform with specific vertical solutions for fuel and convenience, grocery, and speciality and fashion. We provide open application programming interfaces that allow retailers to easily integrate our cloud software running on Microsoft Azure with their existing IT landscape, while providing the possibility to introduce store innovations quickly using our open partner ecosystem approach.
Besides software, we also offer modular checkout hardware as well as in-depth technical service expertise from engineers who live and breathe retail, giving you the freedom to care about customers instead of the technology installed in the store!
Reint Jan Holterman is product marketing manager for retail at Diebold Nixdorf
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.