How (and when) did retailers become technology companies?

The disruptive presence of Amazon makes the link between retailers and tech firms extremely hazy
7 June 2021

Amazon will soon add a ChatGPT-style search to its online store. (Photo by DENIS CHARLET / AFP)

In a recent article, we discussed how retail companies are in the midst of a transformation driven by new technology and changing consumer behavior. And leading the way is Amazon.

The rise and rise of the e-commerce giant has changed everything. Yes, it sells stuff, but it is first and foremost “a technology company with deep pockets, an appetite for disruption, and constant dissatisfaction with the status quo,” says NBK Retail founder Natalie Berg. “It is a fierce competitor not only because it is infatuated with its customers, but also because it has the advantage of playing by its own rules, shunning short-termism and other traditional constraints faced by public retailers.”

Amazon is, for instance, the global front runner in the research and development space. RIFT Research and Development recently looked at the total spend by companies on R&D as well as what percentage of revenue this accounted for. Amazon clocked in at £17.5 billion (US$22.5 billion) in a single year.

“The development of delivery drones must be expensive although it’s money well spent, with Amazon’s evolution ensuring that its giant R&D spend equates to just 13% of revenue,” RIFT Research and Development observes.

Staying relevant as technology companies

The age-old recipe for success in retail has not really changed in that what is sold has to be relevant, it must be seen to be fair value, and convenient to purchase to ensure the customer comes back, observes Andy Burton, CEO, Tryzens. “What has changed are the ways you can achieve this, the scale of the potential markets you can reach and the impact of consumerization of technology on customer preferences of how to shop. It is an exciting time in retail, an industry at the forefront of innovation.”

So how can legacy retailers stay relevant and thrive as Amazon and other innovative pureplays snap at their heels? It’s a massive challenge, made all the tougher by the fact that most lack digital and tech-savvy boards. Bosses are often given to short-termism and the result is poor investment decisions and resource allocation, a lack of vision, and weak omnichannel offerings.

There are a few honorable exceptions, such as Starbucks and Walmart. Yet even in those cases, when it comes to deciphering which innovations to implement, there is no hard and fast rule – it all depends on what the retailer is selling, their brand reputation and how they operate today.

H&M’s new leadership team is planning to turn its 5,000 stores into logistical hubs for online shopping. But this isn’t the way forward for all legacy retailers. The fashion venture has the benefit of a vast store network to start with, and engaging these stores as fulfillment, as well as customer experience centers, is wholly logical and appropriate to join up its online and in-store presence.

Burberry, meanwhile, is set to make several new hires as it ramps up investment in its data and analytics capability. “You’ll be joining a growing team with an ambitious, well-funded, and exciting roadmap,” says Daragh Kelly, VP, Data & Analytics in a LinkedIn post. “You’ll use the most modern tools in the market without legacy tech holding you back. You’ll have a rare opportunity to apply data in a creatively driven company, combining art and science to create beautiful things.”

Successful candidates will be supported by “an amazing technology team – a true partner in delivering our strategy”. Burberry is already using the likes of deep learning, machine vision, and NLP, Kelly added. “You’ll be working for a business that is optimistic, tolerant and respectful but also audacious, ambitious, and driven.”

Note the reference to legacy tech. Not something that Amazon has to flag up with potential employees. Or indeed fashion pureplay Boohoo, whose stock market value overtook Marks & Spencer in 2019 thanks to strong Christmas sales. Retail today is a battle for the hearts and minds of the target consumer, building great experiences that engender loyalty.

Legacy tech and short-term thinking are major roadblocks here. A good example of this is Macy’s announcing plans to close approximately 125 of its least productive stores over the next three years. Trying to cost-cut your way to prosperity highlights an unfortunate truth, namely that many traditional players just don’t have it in them to become technology companies and will likely go the way of Blockbuster.