How Cloud Will Help Retailers Rebound in 2021

(Image Credit – Photo by Heidi Fin on Unsplash)

Background

The Retail industry is in the midst of several exciting developments even discounting the Covid pandemic. McKinsey states flatly[1] that the power in this industry has shifted from the retailer to the consumer as consumers are able to browse extensive product reviews and perform comparisons even prior to setting foot in the store. They also expect Omni Channel functionality across various touchpoints – mobile, in-store, online, over the phone, etc. Added to all this is the competition from online storefronts who can deliver new fashions faster with customer-pleasing return policies etc. These online merchants use advanced analytics and AI to deliver pleasing experiences to their shoppers. From a backend logistics and merchandising standpoint, the ability to deliver relevant items and fashions faster based on individual consumer buying preferences has never been more key in achieving an agile experience.

The above leads to the following specific business challenges for legacy Retailers:

1. Low revenue growth per store leading to falling revenues
2. Inefficient inventory management and pricing management 
3. Underperforming loyalty programs
4. Inability to pivot internal systems to support “online ordering and store-based fulfillment” 
5. Huge IT expense 

Retailer IT challenges 

While the pivotal role of the public cloud is recognized in the industry, Retailers still struggle with the following challenges – 

1. Lack of centralized management and automation across thousands of locations
2. Long setup and provisioning cycles due to inefficient store-based systems and private datacenters
3. The slow speed of new application rollouts leading to poor developer productivity
4. Upgrades to store systems largely manual leading to a labor-intensive model
5. Lack of advanced analytic capabilities 

Public Cloud adoption in Retail still in its infancy 

With the COVID pandemic, it is becoming clear that legacy retailers who rely on an extensive store-based model and corresponding footfalls are at a distinct disadvantage compared with online entrants who are digital natives. It is clear that legacy retailers need to refresh their infrastructure by performing the following actions from a cloud standpoint – 

1. Migrate workloads to the cloud – both store-based systems as well as back end functions across the value chain
2.  Work on leveraging platforms as a business capability to be able to harness data across lines of business
3. Leveraging cloud-based frameworks in a way that improves the efficiencies in back end supply chains, as well as creating micro opportunities to influence every customer interaction. For example, online retailers leverage big data and advanced analytics to better understand customer behavior. For example, gaining insight into customers’ buying habits—with their consent, of course—can lead to improved customer experience and increased sales through more effective customer journey management.
4. The attached infographic below has some high-level recommendations.

References
[1] The Cloud as a Catalyst for Retail –
https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/the-cloud-as-catalyst-for-retail