Retail Automation: How to Automate Business Processes for Your Store?
The potential consumer base for businesses in the retail industry is virtually infinite, and anybody who has bought something online can attest to the impact that automation is having on the experience with faster delivery, advanced targeting and so much more. In this article, I will discuss our experience in retail automation and the creation of IT solutions that cater to this area.
At SECL Group, we have been working on retail and e-commerce projects for quite some time, and with such work constituting over half of our portfolio, this type of development can be said to be our primary area of expertise. Amongst our output, we have been responsible for several projects that include high-traffic web portals attracting over 10 million monthly users, and we have also developed IT solutions for well-known brands like Kia.
And we can certainly see that retailer demands are evolving. A decade ago, we were often tasked with developing a kind of showcase: i.e. the externally visible components of e-commerce projects that buyers could see. However, today, we are frequently asked to go much deeper in creating a variety of internal corporate systems for retail companies, most often including automating various business processes.
Did you know that the typical modern retail company comprises only 10% of an external storefront, while the remaining 90% is dedicated to internal IT systems designed for personnel? This trend has emerged due to the increasing complexity of existing businesses and the intensifying degree of competition in the market.
It is safe to say that retail automation is no longer simply a tool for facilitating a company’s activities, but it has become a crucial factor in determining its competitiveness. Take Amazon as an illustrative example, which not only established itself as a pioneer in the industry but has since set the standard for others to follow.
Undoubtedly, the company’s lightning-fast, available-worldwide shipping services have played a significant role in its meteoric rise, and its warehouses and logistics IT systems have been crucial in helping to deliver this remarkable competitive advantage. Like Amazon, many other companies now make use of a dizzying array of IT systems to help them ensure continued retail success; constituting an entire complex internal ecosystem designed to allow goods to move at such high speeds. Think of a car; yes, a beautiful, comfortable interior is always attractive, but the primary innovations are located under the hood. Therefore, industry leaders strive to have advanced retail back-office software firmly in place to stay ahead of the game.
In this article, we will take a look at the IT mechanisms in use in modern retail, and we will consider the main types of IT systems developed for retail chains. As usual for me, I will share my experiences and case studies from working within this industry, and I will also touch on the current trends in retail automation and advise on how to follow them.
Main Types of Internal Retail Automation Systems
We recently analyzed the internal IT systems used in the retail industry and compiled a comprehensive list of the primary solutions. This was a relatively easy task for us, as we develop many of these systems daily, particularly for large offline store chains. However, it’s worth noting that, these days, there are almost no exclusively offline store chains left, as the modern business model has evolved to become omnichannel.
Indeed, the reality of retail’s transition online is ahead of even the wildest forecasts. According to statistics, almost 19 percent of global retail sales occurred through e-commerce in 2021, and it’s predicted that by 2026, almost a quarter of the total volume of global retail sales will be made online. Even traditional brick-and-mortar stores have opened up to digital innovations and transformed into brick-and-click retailers. This is also reflected in the data, which shows that on average, 46% of retailers plan to increase their investments in digital sales channels in 2022.
But what does omnichannel mean? It’s not just about the close relationship between online and offline sales channels, especially in the post-Covid world where many people’s consumption habits have shifted. No. Much more than that, omnichannel in retail refers more broadly to the seamless integration of all communications and sales channels, both online and offline.
Nearly 50% of brands identify the integration of data and operations across e-platforms and in-store as their biggest challenge. Therefore, any retail automation system must take an omnichannel approach firmly into account, as getting it right ensures uninterrupted communication and a seamless customer experience across all channels. Finally, having a unified brand experience is no longer just a lofty goal, but a concrete reality.
Without further ado, let’s take a look at the main types of internal IT systems for retail automation. I’ll explain the purpose of each of them:
- Enterprise Resource Planning (ERP) software. A tool that enables businesses to manage their major business processes, typically in real-time. The leading ERP software vendors, such as SAP, Oracle, and Microsoft, can all be found in various IT or business rankings. However, ERP systems are typically costly and time-consuming to implement, so it is essential to consider the pros and cons carefully. The introduction of ERP provides management with a comprehensive overview of the company’s state of affairs in all areas, without any blind spots. It also facilitates broad-based analyses of activities since changes made to one module of the system are automatically synchronized across all other parts of it. Practitioners also appreciate the standardization of processes and reporting, as well as the ability to maintain and use a single database, and once mastered, it is much easier for company staff to apply and support a single software system.
- However, there are some concerns that businesses should be aware of. Custom modifications to the system are expensive and challenging to implement, and it is unlikely that the ERP system will be tailored to the specific needs of the company. Additionally, the IT infrastructure requirements and the loads placed on it are increasing significantly, and the need to change business processes may conflict with the existing software’s functionality. To address these issues, businesses may develop or purchase specialized software modules that can be integrated with the ERP system.
- Customer relationship management (CRM) software. One of the most commonly used automated business tools across various industries, including retail. In brief, this type of software is built on the following principles:
- a single database where all information about all cases of interaction with the client flows;
- synchronizing interactions with customers through multiple channels;
- constant analysis of customer experience to generate appropriate management and marketing solutions.
You will find all of the corporations we mentioned in the list of ERP vendors are also leaders in the CRM space but don’t forget to add Salesforce to the list as well.
- Helpdesk/Customer Support software. A mandatory part of any modern customer-oriented business, not just in retail, functioning as a channel for receiving and solving buyer issues, as well as for improving customer loyalty and retention.
- Customer Loyalty Program software. These systems strengthen the brand and take customer engagement to the next level. Relationship Retailing pays for itself a thousandfold.
- Product Recommendation Software. A personalized product recommendation system can save buyers time and money by generating recommendations based on all available information it has about the user.
- Furthermore, to be sure of making an informed decision, consumers may consider seeking advice from a reliable retailer on prospective purchases, and fortunately, there are various digital solutions available for this purpose. One option is to create a web application or chatbot that can be integrated with instant messengers and social networks, but there are many solutions available that you ought to consider when discussing with your software development partner.
- Marketing Automation Software. As your chain of stores grows, it’s only a matter of time before the abundance of information makes it difficult to rely solely on manual marketing efforts. At this point, it’s worth considering implementing an IT solution that can be tailored to your specific marketing goals and priorities. Automation can significantly enhance your marketing and customer service endeavors by enabling personalized promotions, automated email, and social media campaigns, customer surveys, and more.
- HR Management software. A widespread automation tool, the importance of which is difficult to overstate given a large number of personnel that typically work in retail chains.
- Employee Training software. Such web-based systems usually combine the functions of creating, conducting, monitoring, and managing training courses for staff.
- Document Management Software. After carefully selecting and training staff using all of the tools described above, you cannot now let them waste time compiling documents. Implement an electronic document management system and let employees focus on what makes the company money.
Retail is very diverse. Before a satisfied customer picks up the product from the shelf or the courier, there are many different stages and operations. Let’s list retail automation solutions related to specific processes.
- CPQ (Configure Price Quote) software for generating quotes for orders. The configurations of products and prices in this tool are flexible, and you can change them depending on the needs of the buyer. It is helpful to use this automated retail solution in conjunction with a CRM system, so you can synchronize all stages of interaction with the client: from quote to closing the deal. In this regard, it is no coincidence that CRM platform vendors often offer CPQ programs. Here’s an example, by the way.
- Order Management (OMS) software. Thanks to this system, you can always track and adjust the formation and execution of orders, as well as evaluate processes and counterparties.
- Purchasing software automates all stages of the procurement cycle, from finding a supplier to paying for the selected product.
- Warehouse management systems (WMS). This software helps to account for stock balances and manage the storage of goods, as well as providing access to up-to-date data from warehouses and distribution centers. Fast data processing and avoiding the confusion previously caused by manual inventory control in warehouses benefits all supply chains. Alongside its delivery automation, Amazon, with its warehouse network, was one of the first to recognize the advantages of warehouse automation.
- Inventory management software. An example of an integrated system for automating core retail business processes. Advanced inventory management systems are based on demand forecasting during automatic order formation, take seasonality into account, and help to conduct promotional campaigns. When using such software, you can prevent lost sales and the freezing of cash in surplus stock.
- Shipping software allows you to optimize the timing and cost of transporting goods. Integrating this type of automated system into your software development company can provide you with enormous benefits. The integration process should begin with the platforms of partner companies involved in shipping, which would enable shipping estimates to be available immediately and ensure a smooth transportation process for goods. Additionally, integrating Shipping Software with your IT solutions such as an e-commerce web portal, warehouse management system (WMS), and order management system (OMS) can be quite helpful.
- Distribution Management System (DMS). The structure of today’s retail chains is not always simple and cannot be imagined as necessarily consisting only of warehouses and own-brand stores. The business models of some brands provide for operating through partner stores that autonomously form orders. In such cases, distribution units interact with partner retail outlets. DMS serves to manage these complex distribution systems and relationships with partner stores.
- Product Information Management (PIM) software is a toolkit for creating and managing product content for promotion across all channels. Such a system stores all the information on products that customers need, allows you to identify each SKU (stock keeping unit), creates and makes available catalogs, provides search, and so on.
- Automated Point of Sale (POS) systems are designed to simplify customer transactions by providing an easy-to-use, interactive interface where customers can check out quickly and securely. In fact, with the help of these systems, which are also known as point of purchase (POP), a retail transaction is completed when money is paid, and goods are taken. It is not for nothing that the term high-speed retail appeared.
In general, there are many exciting, high-profile innovations in this segment of retail automation. For example, customer-facing digital displays, robotic shelves, RFID (Radio-frequency identification), and contactless tags can all be used to provide a more interactive customer experience while tracking shopper movements and interactions in-store, making checkout faster and easier. It is thought that RFID tags and customer kiosks can boost purchase accuracy by up to 20%.
- Payment processing software. As the number of payment methods available to customers increases, there is a growing demand for automated tools that offer speed, security, and convenience during the payment process. Payment processing systems play a crucial role in meeting these demands by providing a range of functionalities, including online payment gateway operation, credit and debit card payment system transactions, mobile payment options, digital wallet support, and even cryptocurrency payment options.
The internal information systems I have previously described are utilized across different industries, while some are exclusive to the retail sector. Nonetheless, based on the list I have compiled, you now have a comprehensive understanding of the primary types of software that modern retail and e-commerce companies employ in their day-to-day operations.
Our focus has been on automation systems for the main business processes that determine the efficiency of companies. I did not aim to cover the entire range of tools that automate individual features or points of interaction with customers. Nonetheless, such solutions, which can be very eye-catching, are continuously being developed. For instance, retailers have recently introduced novelties such as:
- An endless aisle that allows the buyer through special devices with screens to select and order goods that are not on the sales floor.
- Webrooming and showrooming, through which buyers select their desired product through one channel and receive it through another.
- The virtual fitting room provides the option of having a fitting without a need for physical contact, etc.
While there are certainly other automated systems and subsystems used in retail that could be discussed, attempting to compile a comprehensive list of these would require a separate article or even a series of articles. If you’re interested in learning more about specific automated tools for stores that haven’t been mentioned here, we invite you to reach out to us for advice. We’ll be happy to provide you with the information you need.
Furthermore, the range of new automation options is constantly evolving and expanding. This should not come as a surprise, as many of the latest advances in web development, artificial intelligence, augmented reality, and other IT fields can also be applied to retail and e-commerce. In 2022, 70% of retailers began adopting machine learning technologies, and the average conversion rate of shopping sites across all industries increased by 30%.
Perhaps you’re wondering which IT products to choose for your e-commerce platform or store chain? Look no further, as I will provide you with expert guidance on this matter, along with practical steps for retail automation. Let’s dive into it!
Retail Automation: How Does it Work?
Now that we have reviewed the list of the most popular retail software products, let’s talk about the practical aspects involved. How does retail automation work in businesses large and small?
I’ll begin by discussing small online stores since their operations are generally simpler. Typically, these stores use an out-of-the-box platform that includes all the necessary modules for small sales volumes. It’s similar to a start-up business, where at first you remember all your clients by rote because there are only a few.
Then, as you get a bit bigger, you might begin to write information in Excel or Google spreadsheets, but when the number of customers increases significantly, and the workload becomes too heavy to manage manually, it’s time to switch to a professional CRM system.
These platforms come equipped with all the necessary built-in modules, which is sufficient for a company at this stage of its life. Furthermore, small businesses often use only a part of the available modules, without customization, exactly as the vendor offers them. This approach is normal because start-up companies usually lack established business processes. When starting from scratch, it’s possible to use generally accepted patterns as a basis.
For medium and large companies, automation is more complicated. Such stores and retail chains already have well-established business processes. It follows from this that you need to either change the business process itself, retrain employees, or customize the IT system for the business process. From my automation experience, I can say with confidence that the second option is usually simpler and cheaper. Therefore, medium and large companies usually order a lot of custom developments, and often one main platform is additionally integrated with separate ready-made solutions for certain priority tasks. For example, large e-commerce companies often use external PIM Software or order the development of one from scratch.
Regarding existing platforms and technologies, there are many different e-commerce platforms for retail today. There are both global solutions, some might say the «huge monsters» like SAP Hybris, small CMS, or even online store builders. Typically, a retailer chooses a platform based on business needs and then customizes it to fit their established business processes. As a rule, not everyone has a budget of several million dollars for solutions like SAP Hybris. Therefore, many companies choose cheaper alternative systems or even develop custom ones from scratch.
All of the solutions that I have listed previously in this article can be either built into a common platform or connected separately. If these are third-party solutions, then they may use their technologies, and in such cases, it can take some time to connect an external IT system. Any software development company can carry this out without any problems, and it is best to involve a professional team at the platform selection stage, which will help you make the right choices and understand the justifications for them.
Integrations of third-party systems are a key element of retail automation. I will never tire of repeating that the quality of a web development company is based on its ability to integrate different solutions. I’m proud to say that at SECL Group, we have integrated hundreds of IT systems and do so daily.
Being skilled at integration helps clients find optimal solutions. Often, businesses already use different IT systems and need to integrate online sales as an add-on; or vice versa, online sales have already been set up for a long time, and the company is simply improving one of its business processes.
For these purposes, we help the customer choose an external IT system and evaluate the possibility of its integration. The development team then embeds that software module into the client’s business. Almost all third-party «out of the box» systems have a built-in API, which makes it possible to integrate them well.
A further essential task is to study what kind of ecosystem the client is currently using and what the integration requirements are. If there are no requirements, then it is better to draw up technical specifications for the development team, for which you need to involve analysts. For example, when we integrated a CRM system for Kia, the integration requirements documentation came to 80+ A4 pages provided to us by the client. In other cases, our analysts prepare such documentation in conjunction with the client. In any case, the idea that integration requirements are very significant and should be clear is fundamental.
The question of what to do if out-of-the-box products are not suitable for your tasks periodically arises. Very often, a client’s requirements are so specific that there are simply no suitable ready-made IT solutions, or they satisfy them only partially. In such cases, the company needs to either modify a third-party product or create its software.
It is wise to assess potential labor costs and possible extenuating scenarios for customizing the out-of-the-box system in advance. Otherwise, you may well run the risk of getting involved in a process of endless refinement of some third-party system, which can be more expensive than pursuing your development.
At the same time, do not forget that it is always easier for a development team to create something from scratch than to modify someone else’s code, especially in the absence of software documentation or where there is poor quality. Remember: the larger and more diverse a client’s business, the more often it turns towards the custom development of retail automation systems.
Having studied the market, you will see that high-quality ready-made solutions simply do not exist for every task of retail automation. For example, worldwide, there are no more than five vendors of high-quality «out-of-the-box» PIM software. Yet large retailers still lack the functionality supplied by such software, and so they very often decide on custom developments.
When striving for successful retail automation, the following points are key:
- Invest in the right technology. Choose automation solutions that suit your business needs and provide a good return on investment. If you lack your staff and sufficient technical expertise, then you should choose an experienced software development company as early as possible. In this case, you can define the methods and technologies of automation in such a way as to create the IT basis of your retail business at no extra cost.
- Update your customer service. Incorporate automated client service solutions to reduce shoppers’ efforts and enhance their satisfaction.
- Optimize your checkout process. Implement automated checkout solutions to increase efficiency and prevent customer abandonment.
- Monitor customer feedback. Measure customer satisfaction levels to ensure your automation systems are working effectively.
- Understand the regulations of the jurisdictions in which you operate. Review any regulations and guidelines that affect your retail automation, such as data security, privacy, and compliance requirements.
- Invest in analytics. Incorporate analytics into your automation solutions to gain insights into customer behaviors and preferences.
- Train your staff. Make sure your staff is adequately trained in the use of automation solutions to ensure they are maximally effective. For example, we always pay attention to the training of a customer’s personnel, since this is the only way to get the most out of the operation of retail automation systems.
- Test and adjust. Conduct pilot tests of different automation solutions and adjust according to customer feedback to ensure the best possible results.
As you automate your retail business, you can use the approaches described in our blog post on business process automation. As you consider scaling up your e-commerce platform or chain of stores, you need to put together an automation strategy. At the same time, it is also advisable to supplement your potential with the capabilities of a software development company. It is impossible to make the right choices from amongst the abundance of the latest technologies without specialized expertise. Profile studies show that retail automation has become a requirement, not a choice, and it is possible to automate about half of existing operations. The knowledge gained from this article will certainly help you to follow this trend successfully.
Retail automation is a broad and diverse topic, on which it is surely possible to write more than one book and still not be able to cover all of the relevant detail. Certainly, this cannot be done within the framework of one article. However, I hope that after reading this piece, you at least now know in which direction to move: towards automating retail.
In this article, you have also learned which IT systems are used in retail companies and how to embark on your retail automation process. Now you need to analyze the specific tasks of your company and build an individual strategy. Remember, in collaboration with competent software development teams, you can go on to create the kind of automation tools that will greatly enhance your retail network. If your business specializes in retail and e-commerce, come to us for a consultation, and we will be very pleased to help you automate your business processes.