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Retail and the cloud – a match made in heaven?

Cloud-based solutions are being used by a growing number of retailers to support important business functions – including the mission-critical point of sale. While some concerns remain about data security and application uptime, there’s significant movement within the retail industry toward cloud-based, on-demand solutions, and it’s easy to see why.

Unlike many other technologies that retailers have had to adapt to meet their business needs, it’s as if cloud computing was designed specifically with the cost-conscious, data-deluged retail enterprise in mind. Retailers can achieve savings from lower initial capital expenditures, and the usage-based pricing model used by most cloud-based applications aligns well with the spiky, seasonal nature of the retail business. Cloud-based technologies also provide the flexibility to scale up quickly, supporting IT deployments for everything from pop-up stores to more permanent expansions, and to scale down just as quickly when business conditions change and a new approach is needed.

Retail business owners are always looking for projects that essentially fund themselves – providing them with hard benefits up front but then allowing the retailer to do things differently than before. The cloud is the typical example of a technology that pays for itself up front and then creates long-term strategic flexibility. For example, if a retailer starts putting all their store-based technology and traditional customer-facing touchpoints onto the cloud, why wouldn’t the retailer co-locate their systems driving eCommerce, and especially the mobile channel, into the cloud as well?

One of the historical struggles for retailers expanding globally is that they don’t know what they don’t know. So from the technology standpoint, they try to ‘forklift’ what they do know into these new territories. That has meant making huge, five-year projections about what their IT requirements are going to be.

But with the cloud, retailers can be more nimble and experimental. They can go into a new geography with only what they need for their initial foray, then start experimenting and learning about what’s going on there to make the changes that are needed. Retailers want to be in Beijing, Sao Paolo and Kuala Lumpur and fulfill their brand promise there, but inevitably the way they execute it in each of these places will be different. With the cloud they can make the changes that are required because they haven’t made the giant, multi-year, battleship-size IT commitments that formerly would have been required. It’s a big way to reduce the risks and barriers to globalisation. And in a perfect world, if the retailer has guessed right about what kind of IT is needed in these new geographies, they can expand more quickly, because they will already have empirical proof that the solutions will work there. They don’t have to hedge their bets.

The traditional barriers to this kind of omni-channel approach, of being able to serve customers wherever they come to you, have been the integration and interoperability of the physical systems driving store, web and mobile commerce. But retailers need to understand that migration to the cloud isn’t just a physical migration of technology; it’s a conceptual migration to a single source of truth about customers, products, promotions, etc. The cloud represents a natural evolution to this kind of truly omni-channel view of the consumer experience.

Unfortunately, traditional retail architectures have often acted as a set of handcuffs, because retailers have had to make these incredible huge forward bets. The business owner thinks ‘I made a decision three years ago, and I have to live with that decision, with very little variability, because I sank so much cost into it.’ But the cloud liberates them to make business decisions based on the merits, rather than the limitations of what they thought was going to be real three years ago.