The combination of Sainsbury’s and Argos is just the beginning; mergers in retail will come thick and fast over the next few years on both sides of the Atlantic. But in many cases merging does not equal converging – especially when it comes to technology systems.
Retail is synonymous with complex technology ecosystems which have been built up over many years and are linked by a multitude of connectivity approaches. The resultant tangle of systems and platforms leads to many issues, particularly when attempting to facilitate new types of customer journeys. And when two retailers become one, the tangle becomes a seemingly impenetrable jungle.
The challenge is great enough when two similar companies merge. Men’s Wearhouse, which bought Jos. A. Bank (and renamed the duo Tailored Brands), and Dollar Tree, which acquired Family Dollar Stores in 2014 are both grappling with integration issues, according to the Wall Street Journal.
As more mergers take place, not all will be such similar businesses. When this is the case, an even bigger challenge could be on the cards. Managing and merging new types of merchandise, retail formats and brands is a big enough challenge as it is but the technology behind also needs a lot of work.
Combining two sets of technological “spaghetti” offers a unique challenge that requires new ways of thinking. For retail technologists this becomes a really exciting challenge. Technology needs to allow ongoing innovation and flexibility while ensuring the new combined business can benefit from technological as well as business synergies. In short this further drives the need to digitize the business.
Digitization is a big topic for all retailers right now, requiring specific capabilities from their overall technology strategy. However, those merging need to give particular consideration to their approach. In almost every case, retailers will face the huge challenge of integrating a vastly complex web of multiple versions of systems, supplied by many different vendors. If they don’t sort out this tangle, it could take years to achieve the benefits in efficiency, synergy and growth they were aiming for in the first place.
Over the past eighteen months, customer-facing teams across Software AG have had some very interesting conversations with companies considering mergers and acquisitions. It is clear that technological considerations are moving to the forefront of planning when considering such moves.
The reason for this is that as technology becomes more important to everyday operations the constraints of a merged structure can lead to serious issues. Issues such as visibility, consistency and communication which can lead to errors and inefficiencies across the business – eroding margin and the shareholder value of the merger.
Consequently, the ability to seamlessly link together multiple systems across merged operations, while simultaneously providing a platform for digital innovation, is a theme that ranks very highly in these conversations.
So as retailers merge, they must ensure that they also converge. Because the customer is waiting.