Why Retail Transformation Takes So Long

Online retailers get a lot of information about your behavior because your browsing and shopping habits are tracked. Retail stores can’t track you as well but stores are great for exploring and discovering new brands and products.

Wouldn’t it be great if each of those retail channels could have the benefits of the other?

That’s the result of “retail transformation” and it’s the big change happening now in the retail industry.

Retail transformation is technological. Thousands of new companies have been created in recent years and each facilitates one small piece of the changes needed.

If you go to big retail conferences like Shoptalk which took place last week in Las Vegas, you will see an exhibit floor with thousands of technology companies. Each one tells a compelling story about why they are mission-critical for retailers and brands. Most of them are now years old, some more than a decade.

With all these opportunities to evolve retail to the next level, there’s an obvious question: why is it taking so long? Why don’t retailers and brands implement the technology and create the changes they need?

I spoke with a number of experts at Shoptalk and here’s what I learned:

We Know Technology Is Important

Historically, fashion-related businesses were run by people with fashion knowledge. The skills required now are different than ever before. People from outside the industry are having a big impact.

Fashion company True Classic was founded in 2019 not by fashion people but by two founders with experience in technology, Ben Yahalom and Ryan Bartlett. Using the right technology, True Classic has generated over $250 million in revenue since its founding. It is profitable.

There are many other examples.

It’s Like Toothpaste, You See

Why aren’t legacy retailers and brands adopting the the new technology faster?

Here’s why: Imagine if toothpaste didn’t exist and you invented it. You’d have a big job to educate consumers about why they need it. It would take numerous demonstrations and explanations.

It’s easier to compete against something that your customers already use and understand.

Most founders don’t expect that after they build their technology organization they need to build a huge sales and marketing organization on top of that. But that is exactly what they have to do. It takes time.

Time Is Money

To pay your salespeople and keep your technology staff during that education period, you have to raise a lot of money.

As one founder told me, raising money is not just time-consuming, it’s “soul-sucking.”

The last ten months has been one of the worst times in the last 50 years for growth companies that are not yet cashflow-positive to raise money. It’s even harder now than has been historically and fundraising adds to the time it takes to build a business.

Retailers Are Slow

Jarred Goldberg, Co-CEO and Managing Partner of digital strategy advisor D.Luxury, explained that if you saw a customer in a supermarket pick up bananas and flour and put them in her cart, you’d know they’re likely making banana bread and you could market other related things to them. That kind of personalization is a huge opportunity.

But retailers are resistant to taking risks on new technology, every retailer wants to be second so they can see it work before they try it.

The result of all that technological reluctance according to Sam Kliger, CEO of retail POS and tech company KWI, is “hodgepodge systems glued together that don’t enable unified commerce.” Those creaky systems compound the problem of technological adoption.

Jaysen Gillespie, Head of Data and Analytics at marketing technology firm RTB House, said that organizational structure itself can be an impediment. “There are retailers where they still have a team that thinks about what happens in stores and another team that thinks about what goes on online,” he said. You can’t be customer-led when you’re channel-led, it doesn’t work.

Brian Walker, Chief Strategy Officer at personalization technology company Bloomreach, said about retailers that “it won’t be easy but they have the pay the price at some point.” He added, “retailers are not the employer of first choice for someone wtih the technological background that can do this.” He adds, “it doesn’t have to be this way,” but it requires a culture change.

Too Much Change At Once

There are so many new technologies on the exhibit floor of Shoptalk and other retail shows, there isn’t a retailer or brand in the world that has the capability to asses every one of them and decide which ones to adapt.

And if a retailer could figure it out. the implementation would be impossible. Software from multiple providers often interacts unpredictably (tech people call this “Frankenstack”).

Technology change in retail is also more complicated than it looks. Todd Klein of venture firm Revolution explained that it’s not just about stores and websites. For transformation to be effective, he explained, it has to happen “across networks, manufacturers, pricing schemes and supply chains. It’s the entire system being changed and it has to be done piece by piece.” And that takes time.

And when they’re all done with the changes, retailers and brands need to go back and look at the technologies they previously passed over and see if it’s time to implement those too.

So the process starts all over again.

That’s not all. After tech companies convince their customers to adopt, the departments that weren’t involved in the process often become territorial and defensive. The sale process gets extended to a larger audience and takes more time because the culture wasn’t built to adapt this way.

So… Why So Much Time?

Retail transformation is simple: All you have to do is create a new technology that no one has ever seen, prove it out, explain it to people whose culture is resistant to technological change, overcome their objections and the objections of their colleagues in different departments who are threatened by it, build a sales and marketing team alongside your technology business and raise and manage all the money you need to do it all.

So simple.

What The Future Looks Like

You almost can’t find a retailer who doesn’t say that technology is key to the future of retail. But what you don’t see is organization charts that include the senior technology people as part of strategy.

Hari Valiyath of artificial intelligence company Pixis said on a panel at Shoptalk that “data science and marketing teams will converge and combine into one” and that is where organizations have to go.

Retail is as connected to technology now as it is to marketing and product. It will take a long time but eventually technology people will be part of the strategic planning process.

Valiyath continued, “either you dismiss it or lean into it and get ahead of the curve.” When that happens, the culture will adapt to change and the next transformation will just be part of the normal course of growth and evolution every day.

It’s just going to take a bit more time.