Jonathan Stern discusses how APIs will help retailers adapt to the new environment they face.
Right now, retailers are beginning to realise that 2016 will be a year full of challenges.
On one front, the arrival of new international competitors is creating fresh choice for consumers, but they are making it more difficult for incumbents to retain their market share. Backed by large marketing budgets and sophisticated merchandising, these big names are turning up the heat in what’s already a highly competitive sector.
On another front, customers are demanding new ways of shopping for goods and services. Already very comfortable with online shopping, they are increasingly using mobile devices to research, compare prices and make purchases. Any retailer without a mobile-friendly web presence risks alienating a significant proportion of their customer base.
Meanwhile, retailers with bricks-and-mortar stores are racing to figure out how to counter the competition of online-only operators. Many are investing in new internet storefronts to augment their existing operations, with some offering the option to purchase online and then collect goods in store.
Interestingly, at the same time Internet-only retailers. such as giants Alibaba and Amazon. are establishing physical store presences. They see value in being able to let customers touch and try goods but then make purchases online for home delivery.
To support these kinds of initiatives, retailers need to be working hard behind the scenes to re-architect their supply chains. They must ensure stock is always available and inventories are able to meet constantly shifting consumer tastes. Supply chains also must be able to deal with a one-to-many distribution system rather than the more traditional warehouse-to-store model.
The need for change
Faced with these fundamental challenges occurring in their sector, retailers are increasingly realising that their old methods of operation are no longer sufficient to ensure ongoing competitiveness. They must thoroughly examine all existing processes and procedures to ensure they are still adding real value to day-to-day operations.
Work must also been completed within physical stores. Targeted investments need to be made to ensure point-of-sale systems are tightly integrated with back-end warehouse systems. This can help to monitor sales activity in real time and enable suitable stock levels to be maintained. It also reduces the risk of having too much inventory in stores which must then be sold later at a discount to clear shelves.
Customer data also needs to be efficiently and effectively collected, often through the roll-out of enticing loyalty schemes. Data collected through these schemes can then be analysed to allow more tailored services to be offered to customers. This, in turn, will lead to improvements in retention rates and revenue levels.
At the same time, retailers must evaluate opportunities offered by emerging technologies. These include things such as in-store targeted marketing via mobile devices, including features such as location-based discount coupons offered to customers while they are in or near a store. Such approaches need to be trialled, evaluated, and then implemented more widely where deemed appropriate.
The role of APIs
At the heart of these challenges lies a fundamental need for retailers to undergo a wide-ranging digital transformation. Existing IT infrastructures must be overhauled and linked to new resources, both inside and outside the business.
To be successful when faced with new competitors, retailers must also create better linkages with their suppliers to ensure supply chains can operate more efficiently. Empty shelves mean lost customers.
This is where APIs play a critical role. They allow links to be established between existing and new systems quickly and effectively, without the need for expensive changes to the underlying architecture. Should these links need to be changed again in the future, APIs allow this to be achieved without disruption to operations.
To support this evolution, IT departments within retail firms must transform from their traditional function as a technology provider into an adaptive, responsive and nimble group that adds measurable business value.
The new links and flexibility achieved through the implementation of APIs can provide a range of other benefits to a retailer. Data collected from linked back-end and front-end systems can be used to create a complete view of each customer. Buying patterns, product preferences and even favoured locations can be used to create tailored experiences and promotions.
Marketing can shift from being a typical one-size-fits-all approach to being highly personalised. As a result, customers will feel a much stronger relationship with a retailer’s brand and be far more likely to remain loyal in the future.
Successful retailers are establishing a whole new set of business partnerships, from those who open up new routes-to-market (examples being electrical retailers selling their goods via online e-tailers), through to co-marketing and co-branding initiatives. APIs are the secret sauce. They allow partners to access the functionality and data they need, securely and effectively without the need for bespoke system development. When things change – and they will (new products, new pricing, new business models, and so on) – the composable, modular nature of the infrastructure means that functional changes can be isolated. APIs allow the retailer to become a “platform” on which partners can access, innovate and offer new products and experiences to an expanded range of customers.
To achieve these benefits, the old IT approach of developing, building and then running systems is changing out of necessity. Instead, APIs are being used to link together existing and new resources to create the flexible and responsive infrastructure that retailers require to flourish in a world of constant change.
Jonathan Stern is regional vice president, Australia/New Zealand, MuleSoft.
