Algorithmic Retail: Powering Intelligent Enterprises in a Post-Pandemic World

While pandemic-driven disruption across the retail industry has brought new opportunities, it also exposed significant gaps in capabilities to balance demand and availability, while ensuring safe and contactless shopping experiences. Several retailers struggled with the surge in online purchases, inventory shortages due to skewed demand patterns, and workforce imbalance to fulfill customer orders. While the immediate focus is on employee well-being, costs and capital optimization, retailers and CPG enterprises need to develop infrastructures that enable long-term resiliency and adaptability.

• Taking a unified enterprise approach towards building a robust organization and data foundation.
• Creating a unified value chain that cuts across organizational silos, coupled with an understanding of where and how to intercept the value chain for algorithmic interventions.
• Having a flexible operating model that can leverage ecosystems (e.g., Unified Ecosystem).

Unified Enterprise Beyond Channels for Algorithmic Retailing

To deliver on the customer promise, businesses need a comprehensive view of the customer, inventory, and value chain operations for which a sophisticated and integrated data source is pivotal. This requires transformation across the business operating model, data, architecture and technology, processes and tools, and, most importantly, talent and ways of working. If achieved, it can deliver the speed and agility required to enable business capability transformation at a pace that is in step with evolving customer expectations and business landscapes.

For example, at a time when customers prioritize safety above all else, having a machine-first foundation powered by a unified commerce will empower retailers to deliver frictionless and contactless shopping, drive best-in-class customer experiences with creative propositions, and remain profitable.

Unified Value Chain: Shifting From Silos to Value Chain Optimization

Artificial intelligence (AI) isn't new to retail; however, retailers have been underutilizing the technology by applying it to individual functions such as pricing or promotions. Big gains await those that can identity where and how to make algorithmic interventions in the retail value chain. With customers expecting a unified experience, siloed systems and optimization no longer make the cut. The power of algorithmic retailing can be realized only through concurrent, integrated optimization of business processes at scale. Retailers need to consider a multitude of factors and have a cross-channel view of pricing, assortment, promotions and last-mile delivery.

By adding an AI-powered optimization layer across enterprise systems, retailers can respond in real time by harnessing contextual insights, getting recommendations on next-best actions, and redefining customer experiences. For example, AI can autonomously execute customer-centric pricing strategies at scale across channels factoring competition, trends and wastage in real time.

Unified Ecosystem: Moving From Being Product-Led to Purpose-Led

Shifting consumer preferences and marketplace growth requires enterprises to reinvent customer experiences. Several retailers are shifting strategies from being product-led to becoming purpose-led. As a result, the relationship between retailers and customers is transforming from being merely  transactional to becoming a holistic provider of solutions. Forward-looking retailers are adopting an enterprisewide collaboration strategy and an operating model that enables them to explore working with new ecosystem partners to deliver on their purpose — and are becoming custodians of the customer experience.

With a plethora of flexible fulfillment options, supply chains are now key drivers of customer experience. Networks can no longer be restricted to static longstanding partners; a new generation of dynamic and short-term partners will also need to co-exist. Retailers also need to plan for "what ifs." For instance, smart network modelling powered by algorithms allows retailers to dynamically switch suppliers in case of supply chain delays or disruptions.

Conclusion

Delivering safe, connected retail without adversely impacting P&L calls for a new operating model powered by algorithmic retailing and a digital-first approach. Identifying how and where to intercept their value chain with algorithmic interventions is key to ensure alignment with organizational vision and realize business outcomes. Retailers that actualize unified omnichannel operations and design future stores with a convergence of digital technologies will reset the cost structure, realize operational efficiencies, obtain full visibility into their value chain, and transform into agile and resilient businesses.

Shankar Narayanan is president and global head, Retail, CPG, Travel and Hospitality at Tata Consultancy Services, a global leader in IT services, consulting and business solutions with a large network of innovation and delivery centers.