Retailers urgently need to overhaul their tech architecture to keep pace with the speed of change. Focusing on headline-grabbing technologies like artificial intelligence (AI) risks distracting from fundamental issues with existing IT environments like data silos, legacy systems, and security threats. And these are precisely the issues that hinder the ability to leverage the full potential of AI.

The key IT systems are known as a business's ‘digital core’. They store crucial data, inform decisions, and are used every day across critical business processes. However, many retailers have ignored their digital core for too long, resulting in several challenges.

Many lack a 360-degree view of customers and stock levels. This is in large part caused by having to deal with legacy systems and disconnected datasets that prevent retailers from offering the best possible service. At the same time, deploying new products simply adds more complexity to already creaking systems.

So, while it’s always tempting to focus on the new, the truth is that realising the full potential of technologies like AI in retail is impossible without first modernising the core systems. To see the most impactful long-term benefits, it’s time to stop chasing the hype and get back to basics.

Today, we’ll explore how you can do that and prepare for the future of retail by prioritising the digital core.

This combination of changing markets and new tech can blind us to the fact that the basics of retail remain relatively simple. Fundamentally, every retailer needs to achieve three things:

1. Understand why people buy and what drives customer loyalty.
2. Know who the best customers are, what they like, and what they don't.
3. See where stock is, what is selling, through which channels, and why.

But for various reasons, current IT systems don’t help achieve these essential business functions. In many cases, they actively hold retailers back. Does that sound familiar?

What is preventing impactful retail transformation?

Deep down, you probably understand that focusing on a solid technical foundation would allow you to improve internal efficiencies, enhance the customer service, and better prepare for the future. So why hasn’t your organisation invested in strengthening and modernising that foundation?

In my experience, the reason might be because many retailers habitually overlook their digital core and simply patch or add new solutions instead, resulting in disorganised, unhelpful, and complicated systems. This happens simply because the drivers for change haven’t been strong enough yet. Dated systems work. They toil away behind the scenes. They allow retailers to continue ‘as is’...until they don’t.

Now though, we are reaching the tipping point where complex IT systems prevent success rather than contribute to it. Specifically, there are three key things preventing retail transformation:  

Combined, the above issues severely limit opportunities versus more agile competitors. This is especially critical at a time when a UK retailer's average pre-tax profit margins have halved since 2016.

This trend shows little sign of improving — at least in the short term. For many, the mounting cost of technology and the delay of ROI are significant contributors. With paper-thin margins, endless new tech, and outside factors squeezing retailers, we’re seeing the impact of flawed IT systems more than ever:

1. Decreased service levels, reducing sales and missing out on upsell opportunities with customers leaving for competitors.
2. Rising IT management costs for multiple systems and the associated security risks.
3. A lack of preparedness for future technologies, shifting the competitive edge to more proactive rivals.

You may have tolerated monolithic systems for years, but now that they finally pose an existential threat to your business, it’s time to act. So what can you do to improve things?

These solid foundations will then support you both in business functions and when adopting modern technologies. If you get it right, the rewards on offer are substantial as you will:

• Gain a single view of customers and a real-time overview of stock.
• Have improved service and happier customers.
• Meet increasing regulatory needs around vital factors like sustainability reporting.
• Reduce security vulnerabilities.
• Be in a position of strength, ready to leverage new AI and data solutions effectively and quickly.

Discover how we helped Co-Op Funeralcare accelerate its digital roadmap