Incisiv, in partnership with Toshiba, has released the 2025 state of the industry report on store innovation – the findings lay out physical retail’s next chapter.

With the right technology stack, retailers are now able to transform their physical stores into multi-purpose platforms for commerce, fulfilment, and customer engagement.

Digital-physical integration is accelerating, space utilisation is evolving, and stores are becoming media platforms. Retailers with monolithic systems that require heavy investment to make the simplest of changes, as everything is interconnected, are going to be locked out of this opportunity.

“Retailers who continue to operate monolithic and inflexible systems will lose pace with innovation due to their inability to keep pace and higher operational costs,” Kelly Duke, Toshiba ANZ sales manager, told Inside Retail.

“It also begins to impact the customer’s experience. Shoppers expect seamless digital-physical interactions, and retailers unable to integrate diverse data sources or iterate quickly will fall behind.”

The ‘2025 State of Industry: Store Innovation’ report uncovered four pillars of store innovation success: Store personalisation, rapid experimentation, operational excellence and sustainability beyond carbon.

Investing in a modular tech stack 

Toshiba is encouraging retailers to prioritise a technology foundation built on modularity, microservices, and API-first architecture to stay competitive.

“This modern foundation allows retailers to experiment with their technology at pace and agility, keeping them continuously at the forefront of innovation and a changing retail landscape,” stated Duke.

With a modular, microservice approach, retailers are able to make changes to a module and know it isn’t going to affect their entire operations, allowing changes to be deployed at speed to market and rapid testing.

According to Duke, modularity is foundational for continuous transformation, yet only 7 per cent of retailers have industry-leading modularity capabilities, creating a competitive gap for early adopters.

“Modular hardware provides retailers with flexibility in upgrades, extended technology life cycles, supports sustainability goals and assists in driving operational resilience,” he explained.

While upgrading technology can be expensive, modular hardware systems are a cost-efficient choice for retailers because components can be replaced or upgraded individually without overhauling entire systems or retaining existing enclosures can deliver significant cost benefits to retailers.

“A really good example is Self-Checkouts; the technology keeps advancing, but the enclosure of the SCO is still relevant,” Duke said.

“By implementing modular SCO designs, you can continue to upgrade the core technology whilst maintaining the outer shell,” he added.

Implementing a microservices architecture

Microservices-based architecture breaks down traditional monolithic retailer systems into small, independent services that can be developed, deployed, and updated independently.

Microservices are independently deployable, allowing retailers to incrementally modernise and evolve their tech stack gradually, including point-of-sale, loyalty, promotions, refunds and returns – avoiding costly rip and replace strategies.

“We had a customer in North America who had significant issues with their Refunds and Returns management system,” Duke shared.

“We were able to deploy a new Refund and Returns module with microservices for this customer at pace, allowing them to go to market quicker,” he continued.

Furthermore, the report on store innovation revealed that 53 per cent of retailers cite difficulty integrating diverse data sources as their top challenge.

“Stores are getting smarter with lots of data and access points through the Internet of Things (IoT), which includes but is not limited to sensors, cameras, smart shelving and customer interactions,” Duke said.

“This data is quite overwhelming and for most retailers, the struggle to transform this raw information into meaningful outcomes is difficult if they do not have a cohesive API-first infrastructure,” he added.

Microservices and an API-first design allow retailers to experiment fast and fail fast by making isolated changes, reducing system-wide risk. Instead, retailers can test new services in parallel without disrupting operations.

Creating a technology-driven culture

The right tech stack allows retailers to shorten decision and deployment cycles, reduce pilot costs and risks, support real-time customer feedback and allow for rapid iteration – all traits of tech companies.

“Retailers stated that the following three points are key challenges holding them back, 49 per cent stated high costs and risk, whilst 47 per cent cited difficulty integrating new tech, and 41 per cent noted long decision-making cycles as a key challenge,” Duke shared.

The right in-store tech stack will build on a modular microservices-based and API-first architecture – enabling retailers to execute targeted concept trials without major investment, integrate real-time customer feedback to inform decisions instantly and support rapid iteration by rolling out or adjusting learning seamlessly across the business.

“Retail success now hinges on digital agility, rapid integration, and data-driven decision making, hallmarks of a tech company,” Duke concluded.

• To learn more about Toshiba’s modular and AI‑powered solutions to bring physical retail stores into the future, head here.