The Future of Retail may be in the Cloud

The retail industry has transformed significantly over the past few decades, and retailers are starting to understand that they cannot simply rely on traditional brick-and-mortar strategies. McKinsey consultant Stefan Niemeier explains, “[Business technology] will be a major change for traditional store-based retail. Consider a big-box format with a 35 percent gross margin and 3 percent earnings before interest and tax […] Losing another 10 percent of traffic to online competitors would basically erase all profits.”[1] This year, e-commerce’s share of total retail sales reached nearly 10 percent,[2] and customers are increasingly empowered by their mobile devices, which give them instant access to competitors’ prices and product information.

With new competition from online and omni-channel competitors, retailers are exploring how they can use technology to improve their customer experiences, tailor their marketing, and streamline their supply chain. Some retailers have found their answers in cloud-based, Retail-as-a-Service solutions; nearly 40 percent of retailers are considering outsourced platforms for their brick-and-mortar stores.[3]

What makes cloud-based applications so attractive to the retail industry? Below are a few benefits that these applications can provide to retailers:

1. Manage inventory tracking

Retailers are seeing a wealth of customer data, from e-commerce transactions, in-store purchases, and in-app browsing. They can use this data to make smarter real-time business decisions, such as ordering or moving inventory or immediate discounts and promotions. Cloud computing can help with these decisions.

Greeting card giant Hallmark Cards is one of the first major retailers to switch to the cloud. In 2012, they partnered with cloud-based, Retail-as-a-Service solution Fujitsu to track inventory in real-time, including inventory availability, orders, and shipping details.[4] This move let Hallmark’s stores complete point-of-sale transactions and run merchandise management operations through a subscription service, resulting in faster processes and tools and reduced costs.

2. Take advantage of customer data

Today, there are numerous sources of data for retailers: customer transactions, website activity, mobile app activity, even their physical movement around stores. Similarly, there are many analytical and predictive platforms (like Jetlore) that help retailers use this data to make smart and real-time business decisions. However, having immediate access to all this data requires large storage capacities. Cloud platforms fix this problem, offering flexible storage capacities that relieve retailers of the need for physical servers and hardware. Instead, the cloud’s virtual servers adjust to the retailer’s demanded computer capacity.[5]

3. Experiment with retail strategies

In the past decades, if a retailer wanted to experiment with new technology, it had to expand its server capacity, hire additional IT staff, etc. Cloud platforms allow retailers to pay for just the services they need, when they need it – and often for less than if they set up their own physical infrastructure.[6] Cloud computing lets retailers quickly flex their IT capacity and storage up or down, depending on the retailers’ needs.

 

Cloud computing holds a lot of promise for the retail industry. Experts anticipate continued investment in this area: the retail cloud market is anticipated to grow from $11 billion in 2016 to $28 billion in 2021.[7] As retailers continue to experiment with new ways to engage customers, such as virtual and augmented reality (e.g. smart dressing rooms[8]) or big data, the cloud will help them consolidate this data and provide a “cohesive experience across all channels while layering in a high level of personalization.”[9]

 

Sources:

[1] https://www.mckinsey.com/~/media/mckinsey/dotcom/client_service/bto/pdf/mobt32_10-13_niemeierinterview_r5.ashx

[2] https://fred.stlouisfed.org/series/ECOMPCTSA?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=categories

[3] https://www.forbes.com/sites/haniyarae/2017/03/11/will-retail-as-a-service-take-off-in-2017/#256d92d74696

[4] https://consumergoods.com/hallmark-leverages-cloud-pos-solution

[5] https://www.wired.com/insights/2013/05/sunnier-days-ahead-for-retailers-that-use-cloud-computing/

[6] http://www.brandquarterly.com/importance-cloud-future-retail

[7] https://www.marketsandmarkets.com/Market-Reports/retail-cloud-market-27978752.html

[8] https://www.bloomberg.com/news/articles/2017-02-16/-smart-mirrors-come-to-the-fitting-room

[9] https://www.netformation.com/our-pov/is-the-future-of-retail-in-the-cloud/