In our coverage of the retail sector, diginomica frequently reports on the troubles of established retailers as they struggle to win back market share lost to Amazon and other online-only competitors.
The cloud-native newcomers are reaching consumers on their digital and mobile devices with propositions tailored to their interests. They then harness the latest payments and logistics technologies to rapidly close the sale and deliver the goods. Retail’s digital transformation has become an object lesson in how newcomers armed with disruptive technologies can completely overturn the established order of a mighty industry.
But many of the traditional bricks-and-mortar retailers are still powerful brands and they’re fighting back. As they do so, they are turning to the same technologies as their next-generation competitors. Investments are growing fast in mobile and e-commerce, in predictive analytics and in more agile cloud-native platforms to support an omni-channel strategy. According to a study just released by 451 Research, retail is boosting its spending on cloud storage faster than any other industry. Rather than succumbing to cloud-borne competitors, the industry is looking to cloud computing as its savior.
No easy transition
This isn’t an easy transition for organizations already heavily invested in technology that dates from a different era. Home shopping retailer Shop Direct is on a multi-year path to move its entire computing infrastructure to the cloud. “These things are never pain free,” says its CEO for financial services Neil Chandler.
Retail is no different to other industries, we all have legacy infrastructure that was architected to be fit for purpose at that point in time, when it was all about what went on within your own four walls.
Cloud computing is not nirvana, but it makes it easier to respond quicker to changing consumer behaviour.
Upmarket grocery chain Whole Foods Market, which has 431 stores and 91,000 employees in the US, Canada, and the UK, didn’t want to stay with “technology that hasn’t been updated in decades” says executive vice president and CIO Jason Buechel. Instead the retailer is teaming up with enterprise software vendor Infor to “co-create what we hope will be the next-generation retail merchandising solution.” Naturally it’s a cloud-based system:
We’re really excited about this plan to leverage modern architecture, open source and the cloud to support our business in a whole new way.
The focus of the new system is better data analytics, bolstered by Infor’s recent acquisition of retail data analytics specialist Predictix. This will have impact across category management and merchandising, pricing and inventory management, as well as adding new depth to the product detail Whole Foods provides to customers. The cloud is what makes this possible, says Buechel.
One of the key things is, the platform is really going to be focused on having one source of the truth for all product information artefacts. The cloud is going to bring that to fruition — the computing power and capacity for us to do that.
Talking up omni-channel
A new generation of born-in-the-cloud software vendors are eager to step in and help retailers make this transition. Cloud-native ERP vendor NetSuite talks up its omni-channel capabilities based on a long-standing fusion of e-commerce with back-office ERP, along with more recent acquisitions of retail specialists Venda and Bronto. According to NetSuite’s CEO Zach Nelson, the cloud offers a straightforward value proposition for established retailers:
All the large retailers platforms are ancient, giant hairballs. There’s no way they can respond to the new ways that customers want to interact.
The reason the retail market is so nervous is that it is being disrupted in the same way that every other cloud computing market has been — by the upstarts who come out of nowhere. It’s their old infrastructure that’s going to kill them.
Salesforce’s head of retail Shelley Bransten pushes a similar message, asserting that “Amazon has scared a lot of people.” But she adds that it’s not just about putting in new technology — retail organizations must change the way they operate, too.
It’s not just about investing in digital, ultimately you have got to have your inventory and supply chain organised in a way that is seamless, so that if someone wants to place an order online and pick up in store, it actually goes deep into some of the systems of record.
And so the more progressive retailers are not only investing in digital, but they are starting to put systems of engagement on top of those systems of record silos.
Certainly there are plenty of examples of retailers adding cloud infrastructure or SaaS applications alongside their existing on-premise IT. But as shown by the examples of Whole Foods Market, working with Infor to collaboratively create a cloud-based solution, or Shop Direct, which IBM is helping to move to the cloud, there are plenty of other examples where retailers are moving entirely to the cloud — in these examples aided by vendors with their own legacy history.
Indeed, every software vendor with a stake in the retail sector, whether that’s Epicor, IBM, Infor, Oracle, SAP or others, has the option of cloud migration built into their roadmap. Retailers have to assess how soon and how thoroughly they need to make that move. In terms of reach to mobile consumers, agility to change and the capacity to process very large volumes of data, cloud has the edge. It is becoming the platform of choice for retailers, but getting there is no walk in the park.
Image credit: Woman pushing shopping trolley at the supermarket © MinervaStudio – Fotolia.com.
Disclosure: At the time of writing, Infor, NetSuite, Oracle, Salesforce and SAP are diginomica premier partners.