Vendor view: why new-look retail tech partnerships are emerging

Retail Connections gathers views from prominent figures in the retail technology industry to get the lowdown on a raft of new-look retail tech partnerships cropping up across the globe.

The Microsoft-Walmart technology deal announced on 17 July is one of a new breed of retail tech partnerships emerging across the industry.

Much of the five-year contract agreed by the US’s largest grocer and one of the country’s most prominent tech houses revolves around cloud-based services and artificial intelligence (AI) development, but the deal – like others announced recently – has a different flavour to retail tech partnerships of the past.

Like the recently-announced Microsoft contract with Marks & Spencer (M&S) in the UK, and French grocer Carrefour’s collaboration with Google Cloud, there is something much more strategic and over-arching than the traditional tech supplier partnerships the industry is used to.

Retail Connections sought the views of those operating in the industry, to understand what’s at play here. Is it the start of different retail tech partnerships between supplier and retailer? Are they only reserved to the retail giants due to cost and scale? And what’s fuelling it all?

In each recent case – M&S, Carrefour and, now, Walmart – there’s a lot of focus on the alliance of the tech company with the retailer’s in-house data scientists to drive innovation and what each party will hope becomes digital transformation within those businesses.

For example, the respective engineers at Walmart and Microsoft are set to team up to assess, develop, and support the moving of hundreds of the grocer’s existing applications to cloud native architectures. Much of Walmart.com and Samsclub.com will migrate to Azure, in a move that is expected to have customer-facing benefits at the online checkout.

Lee Gill, global head of retail strategy at JDA Software, says this is an example of one of three clear retail technology models emerging today. It is an example of a pattern where companies like Microsoft and Google offer “cloud native, truly software-as-a-service” products which provide little disruption to an organisation when implemented.

He argues there are traditional industry specific tech vendors, like JDA, which are looking to invest in companies that bring with them AI and machine learning capability, and there are the new-wave tech platforms such as Alibaba, Amazon, JD.com and Ocado that are retailers by trade but with advanced technology they can sell to others in the space.

“We’ve got a real mix going on,” he notes. “In the next five years, the top retailers in the world will be technology companies.”

Retail tech partnerships trump labs

Gill also explains that old-school retail innovation labs, designed to keep an ear to the ground of what is emerging in the technology world, can no longer keep up with the pace of innovation.

“If you’re a believer in the impact tech can have, what could be better than to partner with someone who has enormous resource and dollars to do stuff, as well as the skillset of data science and machine learning experts which can be brought to bear on solving business problems?”

And these traditional innovation labs are being replaced. At Carrefour, a retail lab is being set up in conjunction with Google to encourage knowledge share and product development, while M&S and Microsoft spoke of cross team collaboration between respective lab teams.

Much more than simply keeping an eye on innovation, though, these retail tech partnerships at each organisation in question seem to be in place to ensure technology is not developed for technology’s sake. The alliance should, in theory, allow new software and tech systems to be introduced directly in line with actual business case scenarios.

Dean Frew, chief technology officer and senior vice president of RFID solutions at SML Group, says new consumer buying patterns and major infrastructure changes in retail have created stress, “which in turn is causing retailers to look at partnerships in a fresh way to achieve new levels of operational excellence with new innovative customer experience”.

“This dramatic change is driving retailers to building partnerships with technology companies that are experts in cloud, RFID and automation,” he adds.

Rupal Karia, head of public & private sector for Fujitsu UK, agrees these new-style retail tech partnerships highlight the way the retail landscape is having to transform to meet the new demands of consumers.

He argues that retailers cannot think of online, in-store and mobile as separate silos; but instead view them as one unified entity. “To do so, they need the right technology capabilities behind them.

“Retailers inherently are not tech companies, and these partnerships are a clear demonstration of retailers recognising the need to co-create the best solution for today’s customers in order to survive and thrive.”

Amazon defence guards

Amazon is the elephant in the room for many organisations and increasingly it is the online titan’s innovation drive and new customer-facing propositions that are proving to be a catalyst for others in the retail industry to change their tactics.

Satya Nadella, CEO of Microsoft, even admitted to the Wall Street Journal that the battle to compete with Amazon “is absolutely core” to the formation of the five-year Walmart alliance announced this month.

Retail consultant Natalie Berg, who has recently co-written a book on Amazon alongside industry analyst and Eagle Eye Solutions head of insight Miya Knights, says: “This is a period of profound structural change, and retailers are recognising they simply can’t go it alone.

“Some are turning to Amazon for their technical prowess and fulfilment infrastructure, but the likes of Walmart, Tesco and Carrefour were never going to cosy up to a competitor that poses an existential threat to their business.”

Berg adds: “The Amazon-Whole Foods acquisition was the best thing that’s ever happened to some of these technology vendors.

“It not only solidified Amazon’s ambitions for the grocery sector, but more importantly, physical retail. Retailers are now scrambling to Amazon-proof their businesses and the likes of Microsoft and Google are welcoming them with open arms.”

The anti-Amazon alliances are coming thick and fast.

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