The Route to Digital – Key Technologies to consider for a Retailer

Author

Gunnar Menzel

March 1, 2016

What are the key technology related trends & considerations for a Food Retailer with over 1000 stores / outlets / shops? Using a 24-36month time window, what are the technology related trends, principles and temples a Retailer should take into account? What are some of the technology related consideration for a Retailer to move towards Digital?

To answer this from an infrastructure perspective there are 3 areas to focus on : Enterprise wide, Headoffice & Store. Each will consider a set of technology trends that both can address current retail specific challenges, today and tomorrow’s objectives and technologies that can drive real value today. However, they should not be seen as a set of “readymade answers”, detailed solution nor complete shopping list (it’s my list of aspects) . Also, to devise a clear “solution” for a digital retailer a business, application and infrastructure view is needed : no application requirements = no infrastructure.

(Btw Afhaal means takeaway)

Enterprise wide:

Typically a retailer will host core business applications like POS (point of sales) Manager, Data Warehouse, Menu and Product Management and maybe Loyalty Card in their HeadOffice. As these are critical applications the business cannot function without them 3 key principles are applicable:

  1. Stability,
  2. Performance and
  3. Agility.

Stability, because these applications had to be available and stable to be “always on”. Performance, because transactions are time critical – any delay can risk losing a sale and most likely a loyal customer as well. Agile, because demand pattern can change fast and the Headoffice infrastructure has to be able to cater for any fluctuations without any impact. As technology advances so does the reliance on cloud based technology and central IT capabilities. As the Digital maturity increases so does the reliance on technology – IT is moving from a backoffice necessity to a key business differentiator.

Headoffice

By 2020 Server performance increase by factor 6, “access performance“ will be up by factor 20, memory size by factor 16 and network bandwidth up 15 times. Hardware related performance will continue to increase and so will access  to these vital resources. In summary the following Headoffice related technologies are relevant :

  1. Hybrid Cloud
    • Create infrastructure building blocks for compute, network and storage
    • Use private cloud capabilities to be able to auto scale, cluster and provision fast & fully unattended infrastructure building blocks
    • Connect to public cloud for hosting of non-critical and operational capabilities like backup and archiving
  2. 3rd Platform based
    • Orchestrate by using tools like vRealize automation, a cloud service broker to Open Stack to be able to move payload from private to public and back
    • Apply DevOps based automation tools
    • Use micro-segmentation to increase control and security
  3. Storage
    • Move from FC to SSD to NVM (non-volatile Memory) to software based
    • Use thin provisioning if SAN is in use 
  4. Compute
    • Utilise blades everywhere with 3D XPoint DIMM and >12 cores
    • Use PCI based storage for ultra-fast access (better than Tier 1 SSD storage)
  5. Network
    • Drive towards software based with NSX or Cisco ACI (Application Centric Infrastructure)
  6. Integration
    • Harmonise and define one overall standard
  7. Other aspects
    • Pay by the drink – no capex and pay per use per minute
    • Open source – like OpenStack, Docker etc
    • IT4IT – consider IT4IT blueprints to reduce costs and operate IT as a Business 

Store

Store operations are absolutely critical to a retailer (I am referring to a typical high-street retailer or food retailer). An inaccessible POS system will directly lead into lost sale and most likely lost customer. Customers want to be served fast (sales transactions as an example – not meant in a Michelin star context of course) and as some retailers have 1000 > stores, cost control is also important in order to control margins.

Therefore for a store setup the following key principles are relevant :

  • Always on,
  • Near real-time and
  • Cost control 

Of course it does depend on the actual retailer, however these 3 principles are  important when moving a large store operation in to the Digital era. Regarding Store setup there are typically two key decision a retailer has to make :

  • Fully independent Store setup where the Store can still function even if the global (WAN – wide area network) is not accessible, or
  • Connected where all Store related functions are fully dependant on either Headoffice or Cloud related features

Both setups come with a number of key advantages and disadvantages – being fully independent will mean little reliance on highly available WAN connections; but can lead to significant in-store IT systems; might result in delayed in-store sales reporting and might also increase information complexity. Being connected will increase reliance on highly available WAN connections; however can significantly reduce the need for in-store IT systems and can provide near real-time reporting sales reporting.

When considering technologies that are or should be applied in a store context, 4 main aspect areas are relevant : POS, Network, Backoffice and other aspects. From a technology perspective the point of sales has always been a IT solution that was build using proprietary hardware and specialised software. Today this is changing. With the advent of smart phones, PayPal, Apple pay etc POS systems are merging with other solutions such as web only, kiosk and handheld – retailers have to operate in an omni-channel context. 

Considering a 24-36month time window there are a number of key technology related subjects a retailer should consider (it is not possible to define clear technology solutions as the actual product choice will depend on a number of key criteria; instead the below should be seen as guidelines to finding the right answer)

  1. POS
    • Don’t consider a POS being only a dedicated and physical “electronic till” – today there are many ways for a customer to pay for a product. 
    • Have one customer facing POS strategy – whether online, mobile or in-store
    • Converge smart phones, web, kiosk and POS to offer one customer experience
  2. Network
    • Consider the use of intelligent WAN accelerators to reduce reliance on WAN bandwidth
    • Converge phone, CCTV and local LAN to reduce complexity
    • Deploy IoT based IT sensors to manage facilities as well as food quality
  3. Store Server / Backoffice
    • Reduce physical kit by combining features onto one dedicated “black box”
    • Manage complexity by converging POS and in store server (assuming fully independent setup)
  4. Other
    • See Sales, Product and Price lists as key assets and master them centrally
    • Consider “everything as a Service”
    • Use template and blueprint approach to reduce variances  

Becoming a “Digital Retailer” is more than just using aspects such as IoT or Open Source; it’s a new business model and retailers considering or continuing the move have to include business, applications as well as infrastructure related aspects.

See here a great deck that provides more detail : http://www.slideshare.net/victori98pt/digital-shopper-relevancy-by-capgemini as well as here in our annual retail research : https://www.uk.capgemini.com/resource-file-access/resource/pdf/dsr_2014_report_final_06oct2014_13.pdf

Thanks for Reading. 

About the Author: Gunnar Menzel has been an IT professional for over 25 years and is the VP and Chief Architect Officer for Capgemini’s Infrastructure Business. Gunnar is also currently the President for the Open Data Centre Alliance. His main focus is business- enabling technology innovation.

This article was written by Gunnar Menzel from CapGemini: Capping IT Off and was legally licensed through the NewsCred publisher network.


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