Retail IT Challenges for 2024 (and How to Overcome Them)

Cost-reduction strategies don’t have to hamstring the retail sector’s innovation.

In a recent Honeywell survey, 97% of high-level retail stakeholders say their business is keen to adopt high-priced technologies like AI and machine learning (ML), yet 68% of those same people cite the industry’s cost-reduction strategies and “difficulty in demonstrating business value” as primary blockers to future digital transformation. Add in a driving need to create amazing customer experiences with cutting-edge technologies – AI-powered personalized shopping, for example – and managing retail IT is just about as difficult as it has ever been. Finding success in this kind of landscape starts with the approach you bring to problem-solving.

Retail IT Challenge 1: Decrease Costs Without Sacrificing Innovation

Industry sources dubbed 2023 “the year of cost-cutting” for businesses across the sector, many of them reacting to unsustainable growth plans implemented during the pandemic-era retail boom. Numerous leading retailers have kicked off 2024 with sweeping layoffs that impacted IT personnel and deepened retail IT challenges, such as the ongoing legacy skills gap, yet still felt immense pressure to bring innovations that keep customers coming back, according to Honeywell.

Technology budgets are tight as ever, with Gartner indicating 90% of business IT budgets go to maintaining current software. But cutting costs does not have to mean compromising on innovation or the customer experience, and layoffs don’t have to be a standard part of your IT cost-reduction strategy.

In one instance, an alternative software maintenance methodology turned into a major strategic and financial win for U.K. retailer Sainsbury’s. The company had been experiencing crashes and severe performance issues on Black Friday and other peak periods due to poorly supported IBM products, leading to lost revenue. IBM’s recommendation was to perform expensive, disruptive upgrades to Sainsbury’s current estate, which included IBM® WebSphere, IBM® Db2, and IBM® Sterling — three products with a high stickiness factor that made updating as challenging and risky as staying put.

Fortunately, IBM’s suggested track was not the only path forward. Sainsbury’s was able to fix the persistent performance issues, save tens of millions of dollars on support costs, and keep their current software indefinitely with the help of third-party software maintenance (TPSM). This new partnership approach provided more immediate business value, which allowed the retailer to lower software costs and keep what worked without having to sacrifice innovation to get there.

Cutting costs does not have to mean compromising on innovation or the customer experience.

Retail IT Challenge 2: Managing Customer Expectations and Worries

HubSpot says 66% of customers expect the retailers with whom they shop to understand their needs and that customer-centric companies make 60% more profit than their counterparts. This data backs up common-sense thinking, but there’s a catch. It can be difficult to pin down what customers want from moment to moment or what precise traits make for a “customer-centric” company. The unexpected post-pandemic return to in-store shopping is just one recent example underscoring the industry’s need for flexible, reliable technical capabilities that allow retailers to build, maintain, and alter omnichannel experiences.

When customers decide they want to engage with your business in a new or rediscovered space, you must bring as much of the experience as possible over to that channel, a foundational idea behind the industry’s push for omnichannel retail experiences. Rebuilding from scratch every time a new screen or in-store enhancement touches down isn’t an option; not only do customers expect as much of the experience as possible to translate, they also expect the technology they interface with to work properly every time, making it crucial for retailers to lean on what works as they evolve into new spaces.

To meet customers’ omnichannel and performance-related expectations, retailers need the flexibility to keep the current software in their portfolio stable and interoperable with whatever comes next. Focusing on interoperability validation and product hardening can be invaluable for the following reasons:

  • Interoperability validation helps retailers ensure the new products they integrate will work well alongside the current software they rely on. The practice increases technical flexibility – allowing sellers to use existing technologies in new ways – and enables retailers to halt performance-impacting problems before they occur in the live environment.
  • Product hardening is an important aspect of IBM® software security in legacy estates and can also have significant positive impact on performance. As with interoperability validation, taking time to head off potential issues before they become more serious is a smart way to meet performance expectations from customers with the added benefit of protecting the company’s reputation every time a potential attack is deflected.

Retailers need the flexibility to keep the current software in their portfolio stable and interoperable.

Retail IT Challenge 3: Emerging Skills Gaps and Employee Turnover

McKinsey & Company reports that 83% of retailers and other businesses struggle to recruit the right people. Much of that challenge comes from finding skills to suit highly technical roles, considering retail’s need to bridge cutting-edge advancements with trusted on-premises technologies. The same research suggests as many as nine out of 10 retail leaders experience skills gaps that will widen over the next five years, indicating a pressing need to counteract the retail IT staffing challenge before it becomes even more difficult to manage.

For their part, software megavendors like IBM don’t always make it easy to sustain access to crucial IT skills. Support for legacy products (the same ones holding and processing invaluable data) grows more expensive the further the software is from implementation. Moreover, IBM, in particular, has a reputation for moving on from tenured employees who have the most experience maintaining legacy software, which can make it difficult for their customers to receive an acceptable level of care – a secondary skills gap that hampers retailers from finding quick help when they need it, even if they have a support contract.

Stuck with a widening skills gap on one side and highly unhelpful OEM pricing and tactics on the other, leading retailers will need to find partnerships that expand their access to vital skills without overpaying for the privilege – one reason Gartner predicts the TPSM industry will see significant growth over the next five years. Expect services that connect businesses with highly specialized software experts to play a much larger role in supporting, maintaining, and modernizing retail IT portfolios as the years progress.

Software megavendors like IBM don’t always make it easy to sustain access to crucial IT skills.

Retail IT Challenge 4: Building Trust and Enhancing Loyalty

It takes many years for a retailer to build a reputation and one single cybersecurity or performance incident to throw it all away. Already wary of inflation-based price hikes, customers are still willing to spend on brands that take proper care of them, but retailers walk a thin line to maintain that sort of relationship.

The industry has adjusted well so far this year, making “strengthening loyalty programs” a top-line priority for many retail execs in 2024, according to Deloitte. Likewise, Gartner says at least 31% of retailers plan to make IT security a top spending priority. With that level of focus, there are a lot of things retailers can do to optimize their current software in terms of security, performance, and data interoperability – data being both a foundation and core product of almost any successful loyalty offering, such as the highly successful, AI-powered Starbucks personalized rewards program.

Consider Retail Touchpoints’ finding that a one-second delay reduces conversion rates by 7% and customer satisfaction by an astounding 16%. In an industry struggling to gain credibility and trust with customers due to numerous external factors, that makes the phrase “every second counts” a literal and important truth for any online or omnichannel seller. In a retail industry thought to account for 14% of all cyberattacks globally, security also remains a constant concern for sellers and their customers and can quickly lead to a destroyed reputation if not managed properly.

For retailers seeking to capture (or recapture) customer goodwill in a tumultuous 2024, caring for and securing legacy software estates must be a part of the conversation, whatever other innovations are in the pipeline. Widely used software in retail – including IBM® WebSphere Application Server, IBM® Db2, and IBM® InfoSphere/DataStage – can be turned into trusted assets that further digital transformation plans. The trick is in who you trust to manage it. TPSM providers like Origina can take steps to ensure performance and security issues don’t diminish the trust you’ve fought to gain.

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