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Riding The Waves Of Retail Unpredictability

Riding The Waves Of Retail Unpredictability

CEO of Software AG.

Like the past two years, 2022 has seen retailers feeling shortages of all kinds. Shortages of inventory combined with supply chain disruptions have caused consumers to panic buy or go without basic essential items. The root cause of major shortages in the past year still isn’t resolved, so it was a surprise when Target recently announced it wouldn’t meet forecasted profit goals due to an excess of inventory.

Excess inventory is great news for the consumer but a sign of turbulent times for the retailer. With this uncertainty, business leaders in the retail space need to ask themselves how they can smooth out or increase the efficiency of their business models to meet consumer needs even during waves of unpredictability.

Facing Upcoming Challenges

There are two factors on the horizon that will likely make this challenge even more difficult to address: the 2022 holiday season and an impending recession. We’re approaching the time of year when consumer activity and expectations are at their highest and retailers can make their top line for the year. But at the same time, cost of living increases—gas and food prices in particular—mean consumers will be considering where their hard-earned dollars are going much more carefully.

As a business, going from experiencing product and materials shortages to facing overstocking is hard to correct for easily, often requiring micro-adjustments to level out. This is a challenge that goes beyond the retail sector and impacts other industries as well. Whether a business deals in physical goods, software or services, maintaining just the right operational balance will be crucial for organizations now, through the next few months and into the next few years.

Dealing With Technical Debt

Organizational resilience has been well tested since the pandemic began. During 2020 and 2021, the organizations that previously invested in their digital transformation to remain resilient fared better than those that didn’t make similar investments. But one large barrier to both digital transformation efforts and increasing resiliency is the explosion of technical debt—or the expertise and training needed to keep up with the rapid onboarding of new technologies—from the increase in tech investment.

When properly managed, technical debt can increase the pace of digital transformation and ensure organizations can keep up with the competition. However, much like using a credit card for consumer purchases, the way the debt is managed is critical—if the debt is left too long, it can build up and create an unmanageable situation in which the debt is difficult to pay down. Although businesses may believe updating or maintaining existing systems, processes or technologies can clear accrued technical debt, the reality is any buildup in the wrong places can create much larger problems down the road.

If current technology systems become outdated, for example, and organizations are unable to pay down technical debt, it becomes harder to both integrate these processes and data to deliver an excellent customer experience (CX) and to untangle technical debt in the future, impacting efficiency and resilience overall. The levels of customer service and experiences consumers will demand between now and the end of the year could be met through connecting systems, processes and data—all harmonized and working to deliver an excellent experience to the customer.

Providing High-Quality CX

Superior CX comes in many different forms. Although CX efforts typically focus on aspects like improving customer engagement on a webpage or providing visibility into tracking and shipping estimates, supply chain and fulfillment are also deeply ingrained into CX, whether we like it or not. A customer may have a great experience ordering holiday gifts online, but if they’re unable to complete shopping to pick up the essentials because of empty shelves, their experience will be impacted.

One common frustration for consumers and companies isn’t necessarily a delay in the supply chain but rather the unknown element of when the delays will stop. Some organizations, particularly those prioritizing the connection of people, processes and technology to enable great value from data, allow consumers to track the status of their orders through applications or web pages.

Businesses must position themselves to be able to see all their processes, collect and integrate data and then deliver high-quality CX in a service-oriented way. Defining these goals as mission-critical is a great first step to protecting against budget cuts and efficiency drives, especially for retailers who must be prepared to face the unpredictability of the next several months. As consumers demand this type of visibility and CX, the inability to do so can result in consumers churning out of the sales funnel. When people are deciding what to buy during the upcoming holiday season, they’ll be cautious about where they’re spending money.

Riding Those Waves

With rising prices, inflation and the impending recession, organizations must be able to react quickly to events to remain agile and deliver the CX consumers expect. Building resilience is crucial to combat these factors, and to do so, it’s important to develop a preemptive strategy that considers things like managing and clearing technical debt.

If a proactive strategy isn’t in place, businesses can find themselves playing catch up, which can be detrimental to digital transformation efforts and innovation projects. Truly connecting the business is one effective way to maintain a positive and proactive business strategy that not only builds resilience but allows organizations to successfully ride the waves of unpredictability to remain successful.


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