Home / Analysis / Ecommerce  /  Is Your Business Ready For A Retail Renaissance?

Share This Post

Analysis / Ecommerce

Is Your Business Ready For A Retail Renaissance?

Bookstore

Online shopping has severely challenged bricks and mortar retail business. The decline in the number of High Street bookstores since 2005 was the first clear sign. Then familiar names like Woolworths in the UK and RadioShack in the USA – once part of the scenery of any shopping precinct – simply vanished.

It is not just the retail industry that is shaking. Remember the famous 2015 observation that now the world’s most popular media company, Facebook, creates no content, the world’s largest taxi firm, Uber, owns no cars, the world’s most valuable retailer, Alibaba, carries no stock and the world’s largest accommodation provider, Airbnb, owns no property?

The disruptive impact of digital transformation has hit industry across many sectors, according to Zeus Kerravala, founder and principle analyst at ZK Research: “77% of businesses have seen new competitors emerge in past 5 years… while 52% of the Fortune 500 companies of 2000 are now gone”. As a result of this uncertainty, 51% of CxOs he questioned simply do not know what their industry will look like in 2020, while 48% fear that their company will be obsolete within five years. Of the sectors he was addressing, Hospitality was the most vulnerable, then the Finance industry, followed by Retail and Healthcare.

The demise of businesses is actually less about pricing and product strategies than customer experience. Changes in the retail sector have enormous social impact: our towns and cities have been shaped by shops and markets for thousands of years. In the 1960s and ‘70s, with the rise of the hypermarkets and green-field shopping malls, pundits were already declaring: “there is no doubt about it, the High Street is dead”. Forty years on, and High Streets have certainly changed but, if anything, they have become enlivened with the spread of pedestrian precincts, pavement cafes and street art.

The fact is that people love shopping as an experience and are not going to give it up in a hurry. On-line shopping does have significant advantages, both for the buyer and the industry, but brick and mortar retail offers an experience and an environment that is very different. Amazon, the company that spearheaded the move online, recently acquired Whole Foods in order to get a foothold on the streets, and a number of successful niche online businesses are also opening physical stores. It is worth asking why.

Could The Tide Be Turning?

If customer experience is such a vital factor, why has online shopping hit retail outlets so hard? What had Amazon to offer that was better than the enormous joy of browsing in a bookstore? One could argue some mundane benefits: it is convenient to order a book from the comfort of one’s home rather than go out on a cold wet day, and Amazon could often offer the same book at a lower price. But if the joy of shopping lies so much in the total experience then these benefits would never be enough to shake the whole industry.

So what better experience could Amazon offer? It sped up browsing: although bookshops do their best to classify books under subject and author, an earnest buyer can search and explore far quicker online. In a bookstore one can flip through a book, read cover notes etc. – but Amazon did its best to reproduce that experience with its pages of information and “Look Inside” feature. But then it went on to offer more: a single click takes you to an author page full of personal and bibliographic detail, you see figures for the book’s sales rank, a star rating and immediate access to quite thorough reviews and comments by other readers.

Those are the sorts of benefits that give online shopping the edge over physical shops. You lose the personal contact of a face-to-face shop assistant, and yet there is a sense of community in those reviews and comments – a service provided by the customers themselves – that few bookshops would match. From there online shopping has moved on to offering newsletters, recommendations based on past purchases and buying patterns and other services that add to a feeling of belonging.

Online stores are actually seeking ways to reduce the gap between them and physical shops. Although they cannot allow the customer to handle the object before purchase, they do their best to provide pictures, comparative data as well as customer feedback. The missing sense of community is patched over with product reviews and ratings, and larger stores even offer chat channels that respond to questions.

So far, not every online store does this as well as Amazon. The majority of lesser retailers now invite customer comments but few get much response. Site searches often end in frustration or dead ends. Product comparison is another brilliant feature of online shopping: to compare product descriptions side by side to chose which suits you best. Except that very often this leads to a page repeating all features in common, when what you want to know are the differences.

The Whole Foods/Amazon merger might be a glimpse of the future. Physical retail won’t go away, it remains an important channel for customer engagement. At a recent industry conference, Williams-Sonoma CEO Laura Alber said: “I do not believe that [we’re in the midst of a retail apocalypse] and I do not believe that Amazon is killing retailers. I believe retailers’ bad service is killing retailers.”

Transforming The Physical Shopping Experience

With that in mind, retailers are starting to focus on creating better experiences. Consumers’ positive experiences lead to better engagement with the brand, which leads to more revenue and brand loyalty. The bookshops that have held their own are the ones that emphasise community of interest: the shop staff are book lovers offering knowledgeable advice; the shop becomes a venue for poetry readings, discussions and book launches; and customers are encouraged to linger over coffee and cake.

So many of the benefits of online shopping – rapid search, customer feedback, further information – come from the cloud, that it raises the question: “why can’t the cloud be brought to the shop floor?” And retailers are starting to focus on creating better experiences through the introduction of cloud services and new technologies such as the Internet of Things (IoT), mobile, video and multi-channel interaction.

If most customers now carry smartphones, why not provide matrix barcodes on each shelf so customers can access the same sort of product detail, customer comments and comparisons that would be available at the best on-line stores? Organisations that embrace digitisation have quickly become leaders. According to Zeus Kerravala: “ZK Research studies discovered that digital organisations are 64% more profitable than companies that have not embraced this shift.”

The downside is that in-store bandwidth demand will explode once stores put tablets, video, digital signs and other technologies to work, as all of these advanced technologies rely on the network. Legacy Wide Area networks (WANs) have limitations that hamper such innovations. They lack the agility and flexibility that retail organisations need.

If the data a customer wants is unavailable, a potential sale is lost. If the inventory system is down, the customer must be asked to wait. Zeus Kerravala quotes a recent British study: 41% of shoppers have changed their mind about making a purchase due to a long checkout line, and 86% said they will avoid a store that they think has long lines—with 74% saying they’d rather shop at a competitor.

For the retailer, network failure can cause immediate loss of revenue and brand abandonment: If the point-of-sale system is down, revenue screeches to a halt. A recent Accenture survey showed that 66% of millennials changed their brand loyalties in the past 12 months because of a bad experience. In making a successful move to digital, it is vital that the network – particularly the WAN – evolves to keep pace with the demands of the business.

Overcoming The Limitations Of Legacy Networks

Upgrading a legacy WAN takes time and a lot of manual work on hardware dispersed across the network. When the average time to make a network-wide change is four months, it’s a sure bet that customers will abandon a brand rather than hang around. Legacy WANs are inflexible, while new applications are sucking up much of the available bandwidth at the expense of more business-critical applications. In-store WiFi is great for customers, but not for business if it consumes the bandwidth needed to process transactions.

Many retailers use a hybrid structure where in-store purchases and ordering out-of-stock items both happen online. This requires high bandwidth at each location to download images without having to backhaul to the primary data centre. A legacy system typically backhauls Internet over the WAN, so traffic traverses the WAN twice.

If you do decide to upgrade, the engineers seldom have enough visibility into the network to plan capacity effectively, while legacy WANs provide no ability to prioritise unified communications or video over other applications. Security is also a major concern with legacy WANs. Securing Internet links at each location is difficult because so many organisations use an inefficient “hub-and-spoke” architecture. A whole new approach is needed if retailers are to have a network able to support new applications and services that might compete with the best on-line retail experiences.

SD-WAN For Digital Transformation

SD-WAN (Software-Defined WAN) is a recent innovation that applies the principles of software-defined networking (SDN) to the WAN space. It separates the control plane and data transmission planes, allowing configuration to be centralised and automated right across the control plane instead of sending engineers into the field. Retailers can control devices in one or more locations with software hosted elsewhere, which leads to faster installation and provisioning.

To install SD-WAN at a store, you just plug it in and connect to the WiFi or Ethernet network without any need for networking skills. Once that is done, the central IT department can configure the box online and upgrades can be rolled out across the whole network from that central site.

SD-WAN brings a whole new level of agility. For example, it enables multiple network links, devices and services to coexist and interoperate with existing solutions. The simple setup allows far quicker response to the market and in-store demands. It includes APIs that integrate seamlessly with popular retail management and reporting systems instead of cobbling together disparate systems that require constant fiddling.

The SD-WAN architecture provides protection against blackouts and brownouts and can failover in less than a second. Retailers can easily set quality of service (QoS) policies for different applications and traffic types, so voice, video traffic or other customer-pleasing services can operate efficiently without holding up essential traffic.

SD-WAN offers a whole new approach: it is a child of the same cloud-based digital transformation that has been such a challenge to brick and mortar shopping. In fact, the best SD-WAN offerings are actually cloud-delivered rather than simply managed from the cloud. This makes it easy to link directly to cloud apps for all those potential services and social media opportunities discussed earlier, as well as apps for increasing branch and cloud security. It also enables easy network segmentation, keeping sensitive data off outward facing services and supporting PCI requirements on the processing, storage and transmission of credit card information.

The network visibility provided by SD-WAN is another major advantage. From a central console, engineers can easily monitor the network conditions 24/7, anticipating bottlenecks or overload conditions before any deterioration of service or breakdown in the store. Common issues can be addressed from the central office across any number of stores – a big saving in money as well as time.

Conclusion

People enjoy shopping in a pleasant environment. The triumph of online retail was not so much that it offered a better experience than a friendly, well managed physical store, but that it took advantage of the cloud’s ability to quickly add new services and experiences to keep ahead of the market. It also bypassed much of the frustration in a less-well managed store: waiting for service, good difficult to locate on the shelves, slow POS response and long queues.

In theory, all these benefits would be available to the enterprising retailer, who could boost network performance and use the in-store network to provide new services to match anything available on-line. The reason this has not happened on a big scale has been because of the limitations of retailers’ cumbersome and inflexible legacy networks.

But all this can change. SD-WAN can be installed easily and quickly, and it can bring the network, and the retail experience, right up to today’s consumer expectations. The irritations and delays of shopping in a crowded store will be eased, and new cloud-based services can be offered every bit as good as the online shopping experience. Network management will be simpler, money will be saved and customers will be happier.

In the words of industry analyst Zeus Kerravala: “Retail will need to embrace digital transformation and use technology not for technology’s sake, but to enhance the customer experience – which will be a defining characteristic of successful retailers in the next few years.” Whoever claimed that the High Street is dead?

Share This Post

Michael Wood is vice president of marketing for VeloCloud Networks, responsible for worldwide marketing, revenue generation, channel and sales enablement and communications. He has more than 20 years of leadership and management experience in the networking industry. Prior to VeloCloud, Wood served as vice president of product management and marketing for Akamai Technologies’ Cloud Networking Business Unit. He also was an executive in residence, and is currently an adviser, for Plug and Play Tech Center, a startup incubator and accelerator. Wood has a bachelor’s degree in industrial technology and a master’s degree in electrical engineering from San Jose State University.