July 2, 2019-
In Joe Ackerman, Global Strategic Client Executive at Vertiv-
The demand for more satisfying purchase experience is constantly evolving in response, customers in the retail sector are working more and more to improve their digital and operational capabilities.
The daily difficulties of retailers in addressing the explosive power of e-commerce is now a fact. The latter has in fact led to increased use of digital technologies aimed at improving the store experience, predict customer behavior and create a more fluid experience for those among the latter, moving between traditional stores and digital ones.
The world of sales points, in fact, is no longer commercial, but rather empirical. This is demonstrated by the wide range of technologies that are spreading to increase convenience, customer engagement and sales: from mobile applications that integrate in-store and digital shopping, to inventory management systems that allow traditional stores to act as collection points or hubs for returns of online purchases, to mobile POS systems.
Some forward-thinking brands are even adopting augmented reality to augment in-store business and offer a richer, more interactive experience. A cosmetics brand, for example, has created "magic mirrors" that detect the customer's face and then virtually "make up" them with company products. Another retailer thought of using "virtual dressing rooms" instead of classic shop windows, allowing passers-by, thanks to kinetic technology, to virtually wear the trendiest items in the store before even entering.
The retail distribution is going through a similar transformation and, in fact, has become the mainstay retail organization customer oriented. To provide an experience of fast and efficient multi-channel purchase, it is automating and you are basing on the data to reduce the time of order cycles. The customer experience is animated by a more intelligent use of data, more engaging and interactive and a tight integration between the physical store and online sales. In other words, it is the heart of digital transformation taking place in the retail sector.
Vertiv has recently collaborated with the global media company DataCenterDynamics to prepare a report entitled "In uncharted territory: the transformation of retail and its impact digital infrastructure", based on interviews with the leaders of 50 of the world's largest retail companies. What emerges is that without a doubt the transformation taking place in this sector is surprising in both its scope and intensity.
The perception of this transformation is more immediate in distribution centers that make the simplification of e-commerce possible and in stores that are committed to offering a more integrated shopping experience. The number of distribution centers and retail warehouses will increase by around 26% over the next two years, according to research, as companies reorganize their operations to meet the demand for online shopping. A similar trend should also manifest itself in data centers, where a 20% increase is expected for the space dedicated to online retail and a 10% increase for that dedicated to distribution and logistics. In contrast, data center resources dedicated to corporate retail operations are expected to decline by 27%.
Given the importance of customer experience, the need for a fast and responsive supply chain is fundamental. The so-called "Amazon effect" means that retailers can offer delivery in 1 or 2 days for any type of item purchased.
This situation offers extraordinary opportunities for retailers who have an IT infrastructure capable of responding to new needs, but at the same time it could put those who find themselves unprepared in serious difficulty. Given the growing number of data-hungry devices in logistics and customer-facing operations, the retail sector also represents the perfect environment for the growth and development of edge computing. In fact, as retailers evolve towards a more customer-oriented business model, the technologies they use become increasingly crucial to business objectives resulting in increased power densities in their IT spaces. In stores, more and more power will be needed to communicate with customers and promote sales. Our forecast is that over the next two years, for every dollar invested in the data center, two dollars more will be invested in edge computing and distribution.
Research conducted with DatacenterDynamics analyzed data centers that support the four crucial areas in retail: business operations, physical stores, online retail and distribution, warehouses and logistics. The research questions focused on the impact that industry transformation is having on the data infrastructure of these areas and how retailers are managing the ongoing digital transformation.
What is certain is that the focus on the customer's retail experience requires speed and agility in entire organizations, especially in the application of new technologies. The new key factors for purchasing physical infrastructure are cost, speed of implementation and future flexibility. Retailers will avoid infrastructures that are not easily integrated, scalable or modular.
All retailers, therefore, ask themselves if they are doing enough to face what awaits them, wanting the certainty that whatever solution is adopted can then be expanded in the future based on new needs.
The pace of the digital transformation of physical stores is so fast that large retailers are starting to ask their partners for so-called "white glove" services, i.e. the ability to supply, organize, integrate and install technologies, while managing the entire process in multiple locations. Major retailers therefore rely on Vertiv for complete solutions and some of them ask to manage their upgrade projects from concept to installation. In this way, we are asked not only to be product suppliers, but also real consultants.
Joe Ackerman
Joe Ackerman is the Global Strategic Client Executive at Vertiv and his work is primarily focused on the retail sector. Support customers' IT strategies for distribution centers, stores and data centers. Previously, he served as VP Supply Chain for Emerson, working with all customers to coordinate and improve deliveries from distribution centers to the store. Throughout his career, he has worked on technology initiatives collaborating with major retail companies such as Target, Home Depot and Lowe's.
