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For Retailers, the Future is Cloudy

By John Spiegel, Director of Strategy, Axis Security

The month of March 2020 was a watershed moment for retailers.  Traditionally, retailers are a laggard in terms of technology adoption.  Consider the "modern" retail store infrastructure solutions in use today.  Chances are the back office of the common retail store consists of technologies from the 90s.  MPLS, physical servers, firewalls and point of sales solutions which were born when grunge rock bands from Seattle sang about the smell of teen spirit and some kid called "Jeremy".  Two and a half years ago, retailers woke up to a typhoon blowing at their front door.  The winds shook their businesses to the foundation.  They quickly realized they needed to become nimble and quickly pivot.  If not, they were on a sure path to the dustbin like Sears, Blockbuster, and Toys-R-Us, to name a few. 

For instance, take something as simple as going to the store during the height of the pandemic.  In the prior decade, curbside pickup was an Applebee's thing, right?  Now, it was an imperative.  The customer demanded it.   Take a moment to consider the work, from an IT perspective, required to deliver curbside pickup. Concept, prioritization, budget, supply chain, piloting, IT, staffing, refining, approvals to mention a few. Normally a concept such as this would take 9-12 months to deliver.  Kroger's, a supermarket chain which operates in 35 of the 50 states, pivoted in this direction in a number of days.  They had to.  It was essential to their customers. To do it, they had to merge their physical locations with their online storefronts.  Order online, drive up a few hours later, touchless delivery.  And they were not alone.  Their competition did the same, as did a majority of retailers in the U.S.

Retail Business Leader Considerations for Success in the Decade of 2020

We are now two and half years into this decade.  What are the challenges retailers are seeing now?  The winds may be blowing from the north but can quickly change and blow from the east and that is why creating agility within an organization is crucial.  You need to move fast.  What if Kroger's slow-walked their decision on curbside pickup?  What if IT couldn't create the integration to make it successful?  What if the project team dropped the ball?  I am sure Wholefoods, backed by Amazon, would and was ready to exploit their inability to match the speed of the changing marketplace. 

Which leads to brand loyalty.  March 2020 also forced the customer to adapt.  According to a McKinsey study, they questioned their loyalty to brands they had long associations to.  77% tried out new shopping behaviors.  75% left brands they previously held in high regard.  Therefore the pivot for marketing to focus on brand loyalty will continue. 

How about the shopper?  They are looking for their experience to extend beyond the venue.  If they prefer online, they expect a seamless transition to the physical storefront.  The retailer must be aware of the customer online and offline.  Connect the two.  You see with the rise of loyalty apps.  Weekly, I shop at Safeway.  I use their digital app to clip coupons.  I even update it while I shop.  My favorite brand of ice cream is on sale?  Add the coupon.... Shopping must be seamless and personalized.

Last item, after more than a year at home.... I am, and hopefully you are, looking for an experience.  I want something new.  We are now entering summer.  I just purchased a new paddleboard.  I need to gear up to enjoy the lakes and rivers of Oregon.  I think we all desire to get out and experience the world again!

Retail IT Considerations for Success in the Decade of 2020

What is the impact for IT?  What are the elements the IT leaders need to be considering in the retail arena during this decade?  As someone with 20 years of experience in the retail IT space, here are my recommendations. 

  1. Agility: Our world is changing fast.  As we learned with the pandemic, the winds can shift suddenly and without warning.  Creating a platform which can adjust to changing use cases  is critical.
  2. Cloud: According to Gartner, in 2025, 95% of application development will be cloud based.  While legacy applications will play a role in retail for the remainder of this decade, the solutions which drive new revenue will be cloud-based. 
  3. Security: Retailers gather enormous amounts of personal information on shoppers today. This helps in many ways from merchandising to rewards and loyalty programs. It also paints a bullseye on retailers as a consistent target for attacker innovation. Credit card numbers are no longer enough. .  They are now after the deep pools of personal data.  Security must be built into the digital fabric of the enterprise.
  4. Innovation: For far too long, innovation in retail infrastructure has been driven by a depreciation schedule.  Hardware solutions are replaced every three to five years.  And what do you get?  A faster CPU and a few incremental features.  This simply cannot be tolerated any longer..  We need to adopt a software-based approach.  Move at the speed of continuous development.  We did that at my previous employer and reaped the rewards.
  5. Green:  As creating and maintaining customer loyalty is a high priority retailers, green initiatives capture the mind of the consumer.  Moving to a software based approach has a strong environmental message. Consider the environmental impacts for this cycle of hardware replacement.  According to a Dell study, each device produces around 450kg of CO2 when manufactured. This may not seem like much but consider the multiplier impact on devices purchased to run a retail organization. Add to that the carbon emissions, as well as the cost of power to running a rack or two of IT equipment.  It adds up quickly. 
  6. Cost: We must do all of the above at a lower price point. Both CapEx and OpEx.  Get more for less.  Make the CFO smile!

Where does this leave us?  What are the infrastructure technology imperatives for a retailer to be successful during this decade? 

The Lean Retail Store

  1. Build for the Cloud:  The applications which will create and preserve revenue will be built on cloud platforms. 
  2. Transform infrastructure at the retail store level:The future is about a concept called the lean retail store.  Remove the racks of physical gear, the servers, the sheet metal network and security appliances and replace them with a simple network solution which will operate as the super freeway to the cloud.  Eliminate the complex solutions of the past and embrace simplicity as well as lowering your carbon footprint and your power costs. 
  3. Reconsider your approach to Security: Security solutions are moving to the cloud.  Services of all types, from DDoS defense to email protection, to firewalling are migrating off premise.  Leveraging cloud security solutions improves the risk posture of the organization by enabling it to adopt what I like to call  adaptive trust principles.  This is simply zero trust principales combined with the operational ability to adapt to the ever changing circumstances. Adaptive trust helps to protect against devastating cyber security attacks like ransomware as well as costly breaches of precious customer data which can put customer loyalty at risk. 

In my previous role as an infrastructure leader at a global retailer, I implemented an early version of the lean retail store concept.  The results moved the company to a cloud first stance, reduced both CapEx and OpEx costs, lowered the carbon footprint of the retail chain (while saving almost $80K annually in reduced power costs), greatly improved time to value for store openings and importantly, provided the company the ability to pivot based on where the economic winds were blowing.  The company was ready for March 2020 and delivered record results.  Are you ready for what comes next in the decade of the 20s?  

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ABOUT THE AUTHOR

John Spiegel, Director of Strategy, Axis Security

John-Spiegel

John Spiegel has 25 years of experience running global networks and managing infrastructure. He is an industry pioneer in software defined networking (SDN) and software defined WANs (SD-WAN). John has spoken on the topic network transformation at industry conferences such as Gartner, InterOp, VMWorld, Palo Alto Networks Ignite as well as executive roundtable discussions. He has also been a customer advisor to companies like VMware, Palo Alto Networks and Cisco Systems. Disruptive startups have also leveraged John’s knowledge to bring products to market resulting in successful exits. When not helping companies on their journey to modernize and secure their networks, John can be found cycling on the backroads of Oregon.

Published Wednesday, June 29, 2022 7:32 AM by David Marshall
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