The retail industry exemplifies the maxim, change is constant. Still, the approach of the industry towards emerging technology of cloud computing is somewhat baffling. Cloud computing, a paradigm shift after the client-server model break-through of the eighties, is starting to show up in every other business. Curious, retailing industry is clearly lagging behind. It happens when the practical applications of the technology can do wonders to the industry. The word ‘cloud’ in cloud computing is actually a metaphor used for internet. Using internet would have robbed the concept of its novelty.
Although everyone is familiar with information sharing through internet and worldwide web, performing all the operations of computing through the internet is not so familiar. Cloud computing exactly does the same. It shares information, software – applications and operating system – and infrastructure – hardware like servers and storage units – using internet. A revolutionary cloud computing model can avail high power computing to the customers who need to have only typical input/output infrastructure.
Software industry giants have already started providing their services on cloud. CRM of salesforce.com, office applications from Microsoft and Google and IBM enterprise solutions have already become popular. Sadly, retailing – one of the largest sectors of the economy – has not yet begun its experiences with cloud computing.
In the context of retail industry, cloud computing is particularly efficient in collection and analyses of huge volumes of sales data and in real time inventory management.
In retailing, points of sales generate large amounts of data each day. The sales data can be obtained through loyalty cards and discount coupons also. Most low and medium level retailers do not have the necessary resources to capture or utilize such enormous amounts of data. Cloud provider in retail can collect such data from sophisticated server networks connected to the supply chain to independent cash registers at family owned small stores and store it for the retailer. Such stored data may be accessed from anywhere, provided internet is accessible. A cloud computing provider can track performance of products in comparison to previous time periods. The cloud provider can identify the trend and seasonality component of each product, brand or category and identify and monitor the performance. Then it can provide analytical results to the retailers. The provider of the service can serve many retailers at the same time, without making each retailer do it individually for themselves.
The sales data collected from the point of sales is currently under-utilized. It is more due the incompatibility between volume of data and the processing power of the system. Such time consuming analyses fail to provide any useful insight in to customer behavior or trends in sales. The cloud provider can utilize high power computing resources and statistical models to analyse data in much shorter time. This is more so with to real-time analysis. Real-time analyses require huge capital expenditure and it incurs significant operating cost, often unaffordable to retailers.
A good cloud provider can easily help the retailer in understanding patterns and trends within large databases. It can be further utilized for creating analytical models, and to provide an edge to decision making. Thus retailers can increase their ability to forecast their customer’s behavior and plan accordingly. Retailers can then develop customer programs, marketing, merchandising and pricing strategies to attract more business. The cloud provider themselves design and provide such retailer specific plans.
Another important area of cloud application will be inventory management. Real time data and cloud architecture will largely reduce the problems like stock outs and overages. As well known, online retailers do not have inventory managed by themselves. Instead, it is done by the manufactures. Cloud computing can provide an efficient utilization of logistics, which will keep losses to the minimum in inventory management. What the online commerce does can be extended to whole of retail sector. Besides, as the cloud provider will be serving numerous retailers, they can very well manage difficult situations like stock unavailability. Cloud providers can provide valuable advises to retailers regarding product availability and back-up stock from forecasts. They can get realistic forecasts by analyzing huge amounts of data from numerous retailers. Thus retailers can develop a supply chain where the right product arrives at the right time.
Tier one retailers can save lot of expenditure in IT management, if they switch to cloud computing solutions. The complexity of keeping and managing individual systems can be avoided. Today large retailers struggle to keep tens of thousands of computers across hundreds of locations. The management of such a complex system causes enormous expenses for them. Such operations often cause poor decision making in their field of competency – retailing. Large expenses of management and administration of IT and networks can be reduced by simply switching over to a trusted cloud provider.
What is the difference between cloud computing and traditional model? Cloud computing has a number of advantages over the traditional software business in which retailers get licensed software installed in their systems. Here the retailers need not spend huge money on software licensing. They need not buy high end servers with high computing powers. There is no requirement of sophisticated storage units. The administration and networking of computers can be avoided. The pain of providing fire-wall and antivirus protection is avoided. Thus a there can be a significant reduction in investment as well as in operating costs.
One significant benefit for the cloud provider will be that of scale. Affordable solutions can be provided, considering the huge number of retailers in the industry. Most of the tasks to be performed by the provider will be of repetitive nature. Administration and management of databases can be easy due to centralization. The robustness of the whole system can also be ensured. Security and other reliability threats can be minimized due to the salient features of cloud architecture
The future of the cloud in retail starts with small retailers. Small retailers can effectively implement cloud solutions faster. Such solutions offer them significant cost reductions also. Any new venture in retail will also look for quick and easy implementation. An established cloud provider with a successful cloud model can provide quick and cheap solutions. The giants in retail industry may hesitate to adopt the cloud solution, considering the current maturity of the technology. With improvements in cloud applications as well as in internet technology, they will find it cost-effective to switch over. It is significant to note that innovations in most of the fields are taking place in the cloud computing model, not on traditional software business.
Retail cannot shy away from the emerging and powerful trend in the world of computing. With lots of cost-saving and time-saving measures, it will be inevitable that retail will adopt cloud computing once there evolve competent solutions.