In the wake of the COVID-19 pandemic, the retail industry underwent a dramatic transformation. The world witnessed a surge in online shopping, and the convenience of at-home experiences became the new norm. However, a new trend is now on the horizon, with customers expressing a strong desire to return to physical stores, particularly in the grocery sector.
This shift is placing unique pressures on retailers. It extends far beyond the traditional considerations of what products they sell, pricing strategies, and promotions. The new focus centers on crafting the right in-store experience that can set them apart from their competitors.
In response, grocery retailers are diversifying their approaches to meet the evolving demands of their customers. Some are putting a premium on convenience, utilizing in-store technology at grocery stores to facilitate speedy checkouts and automated product information. This tech-driven approach aims to enhance the efficiency of the shopping process. On the other hand, another group of retailers is prioritizing a service-oriented approach. Store associates armed with handheld devices are at the forefront, ready to provide personalized assistance to customers.
This shift in customer preferences presents both challenges and opportunities for retailers. In a recent fireside chat, Kristin Howell Global Vice President, Retail Solution Management at SAP and Darren Hunter Regional Lead for Fashion & Retail – North America at Rizing Consumer Industries delved into some of these trends shaping the retail industry and how SAP solutions are enabling retailers to address these challenges.
Here are some key takeaways:
1. The Growing Importance of Sustainability and Purpose-Driven Retailing
Sustainability has evolved beyond a compliance topic for retailers. It has become a key focus area and a competitive advantage. Retailers are now actively seeking ways to reduce waste.
This shift towards purpose-driven retailing aligns with the changing values of today’s consumers, who increasingly prioritize sustainability. It’s clear that sustainability is no longer an option but a necessity for retailers who wish to thrive in this conscious consumer landscape.
A compelling example comes from a European hypermarket grocery retailer, deeply committed to environmental responsibility. They were grappling with a pressing issue: food waste in pre-packaged goods like salads and sandwiches. Leveraging machine learning algorithms, the retailer was able to predict demand more accurately, considering influencing factors like weather conditions. This allowed the retailer to automate real-time adjustments in food production based on demand forecasts. For instance, if the algorithm predicted lower demand due to bad weather, the system automatically halted production to minimize food waste.
While measuring environmental metrics is a significant step, retailers are going further by taking concrete steps to make their business processes more sustainable, and technology will play a crucial role in driving these sustainability initiatives.
2. Navigating High Operating Costs with Financial Planning Solutions
Retailers are facing financial pressures due to factors like inflation, supply chain volatility, rising costs, and labor shortages. These uncertainties in the financial landscape have led to a greater need for financial solutions and planning tools to simulate different scenarios and manage volatility.
3. Competitive Differentiation with a Clean Core
One of the most talked-about topics at recent SAP events like Sapphire and TechEd has been the concept of a “clean core.” It’s the idea that to fully benefit from SAP’s R&D investments, businesses must keep their solutions as close to the standard SAP offerings as possible, minimizing customizations. This approach ensures a smoother transition during upgrades and facilitates the adoption of new requirements.
“Clean Core and BTP are the architects of operational efficiency in retail, simplifying solutions and enabling them to seamlessly adapt and multiply their impact across diverse landscapes – it’s like the key to unlocking a world of possibilities for retailers”.
The SAP Business Technology Platform (BTP) has been a game-changer in this regard. Previously, it was seen as a toolkit with various components for data movement, algorithms, and cloud integration. However, the perception of BTP has shifted significantly in recent years. It’s no longer just a set of tools; it has become a catalyst for innovation and transformation.
Today, retailers are not starting from scratch when utilizing BTP. Instead, they are leveraging it as an extension of their existing software solutions, enhancing the capabilities already provided by SAP. For instance, BTP helps connect business processes and data flows and facilitates the integration of new offerings such as industry cloud solutions.
Through BTP’s role as an extension of the SAP suite’s capabilities, retailers can drive innovation around their core systems without embarking on extensive IT projects. The outcome is the ability to create a unified view of their operations, consolidating data from both SAP and non-SAP sources to gain comprehensive insights into product information, pricing, promotions, and inventory management.
4. Customer Experience Transformation by Digitizing Back-office Operations
As consumers, we’ve all witnessed substantial improvements in the way retailers engage with us. From personalized marketing campaigns to seamless online grocery shopping experiences, retailers are making strides in meeting our ever-growing expectations.
One example of this transformation is SAP’s Industry Cloud Solutions. Retailers are investing heavily in harnessing the potential of these tools to address their unique challenges around pricing, promotions, or inventory management.
However, what’s intriguing is how these customer-focused efforts often lead to a behind-the-scenes revolution. What begins as a quest for an enhanced commerce solution or better-personalized marketing quickly transforms into a discussion about optimizing back-office processes.
“Being able to reliably, accurately and automatically deliver that experience at any channel at any time with any change really has become a game changer. And I think it’s a great example of how you can combine an industry cloud solution with the power of your back office to really deliver that end-to-end customer experience. The same would apply to real-time inventory, the ability to make profitable, fast accurate sourcing decisions with the right inventory, right logistics, and right fulfillment. They all kind of fall into this bucket that we think of as our Omni-channel industry cloud”.
Kristin emphasized the impact of SAP’s Industry Cloud solutions in bridging the gap between back-office operations and customer-facing interactions. This empowers retailers to significantly enhance the end-to-end customer experience. Notable examples within SAP’s Industry Cloud solutions portfolio center on omnichannel retail:
- Omni-Channel Pricing and Promotion: This provides retailers with the capability to synchronize and orchestrate pricing and promotions seamlessly across multiple channels. The result is a consistent and clear pricing strategy that benefits both retailers and customers alike.
- Order Management Foundation: Equips retailers with the necessary tools to handle orders swiftly and with precision. This, in turn, ensures that customers receive a seamless and efficient ordering experience.
- Omni-Channel Sourcing and Availability: Offers real-time visibility into inventory levels to make informed sourcing decisions that align with customer demands. The result is better inventory management and the ability to meet customer needs promptly.
Mobility is another game-changer in retail. Retailers are now adopting SAP solutions that put the power of data and decision-making directly into the hands of store associates. The conversation highlighted SAP Fiori apps that provide real-time inventory visibility. These apps empower store associates to quickly identify out-of-stock items and address them, ensuring shelves are well-stocked and customers are satisfied. This includes tasks like fast checkouts, online order processing, and even on-the-spot product ordering, making the shopping experience seamless and efficient.
5. SAP’s Composable Architecture for Retail Modernization
When asked about SAP’s vision for the future of retail, Kristin reiterated SAP’s unwavering commitment to composable architectures and their pivotal role in enhancing flexibility. Here’s a breakdown:
- Embracing Choice and Modularity: SAP’s strategy for the future of retail revolves around providing choice and modularity. The emphasis is on a composable architecture, where retailers have the flexibility to choose solutions that align with their unique customer experiences, operational models, and objectives. This approach ensures that retailers can opt for a private cloud, a public cloud, or even a hybrid model, depending on their specific needs.
- The Rise of Machine Learning: Machine learning and predictive analytics are central to SAP’s vision. Retailers are increasingly experimenting with machine learning to enhance their operations and customer experiences.
- Architecture Modernization: Many retailers are in the midst of architecture modernization journeys. They are re-evaluating what to run in-house, what to outsource as a managed service, and how to transition to private cloud environments. The goal is to align their modern architecture with their business needs, enhancing business capabilities while optimizing technology infrastructure.
“Part of the reason we’ve invested in BTP and we work so closely with our solution partners like yourself is because we anticipate that in the near future, many retailers will embark on a hybrid journey. They’re going to need that modularity and flexibility in their architecture, which will, in turn, drive diverse business models, impact financial results, and provide the necessary tools to create that differentiated customer experience”.
The Importance of Business-Led Transformations: Technology cannot exist in isolation; it must deliver tangible business value. SAP’s approach involves tying technology features to concrete business outcomes. This approach aligns well with the core idea that technology should drive improvements in margins, customer loyalty, market share, and profitability.
The Role of SAP RISE: SAP RISE and GROW with SAP has played a pivotal role in helping retailers understand the value of transitioning to SAP S/4HANA Retail for Grocery, It goes beyond being a technical upgrade and emphasizes the substantial business benefits that come with adopting a more transformative approach. RISE has become a critical component of many retailers’ transformation journeys, as it offers a clear path to unlocking value across various business functions.
Interconnected Business Processes: Retailers are increasingly recognizing the interconnectedness of various business processes. Conversations about SAP’s finance-led transformation often extend to involve chief supply chain officers and chief merchants. This interconnected approach aims to optimize purchasing, rebate collection, invoicing accuracy, and cash flow, demonstrating how connecting the dots across business processes can generate significant value.