Caitlin Fitzsimmons Online editor

Caitlin covers social media, marketing and technology and is BRW's social media editor. She has worked as a journalist in Sydney, London and San Francisco, writing for titles including The Guardian and The Australian Financial Review.

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Shopping in the cloud: Heaven sent for retail

Published 21 March 2013 15:42, Updated 10 April 2013 07:32

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There are few industries where the challenge of seasonal spikes in trade is more pronounced than in retail.

The sector is also one that commonly has to deal with a diverse network of small branch offices – the stores – with local management or franchisees.

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These two factors make the cloud computing proposition even more compelling for retailers than just about any other business.

When Amazon Web Services launched in Australia in 2012, its senior vice-president Andy Jassy told BRW that cloud was tailor-made for retail.

He meant it literally since in the case of AWS, the company built its cloud capacity seven years ago specifically to support the computing needs of Amazon the retailer.

“You don’t have to guess how much capacity you need – the peaks of the holidays for a retail business is very difficult to deal with and trying to guess around September, October, what your peak is going to be is very hard and very error prone,” Jassy says. “You either guess too high and then you sit on all this wasted capital or you guess too low and then you provide a bad customer experience and/or run around like a chicken with its head cut off trying to get the capacity at the last second and you overpay. With the cloud you don’t have to guess, you provision what you need and if you need more you seamlessly scale up and if you don’t need it any more at the end of the peak you just give it back to us and stop paying for it. That elasticity is very valuable and cost effective.”

Retailers of all sizes are moving to the cloud. At the big end of town, cloud is part of David Jones’ major IT project to implement omni-channel retailing.

Its deal with IBM includes deployment of a public cloud offering to provide computing resources for application development and testing.

The deal also includes some software as a service, such as IBM Coremetrics Intelligent Offer, which provides real-time insights into how shoppers interact with the online store.

David Jones has indicated it is keen to expand its usage of cloud and is evaluating a number of hosted initiatives that could replace desktop applications. It’s understood this could include moving to a predictive cloud provisioning model.

The flexibility and speed of cloud computing underpins the ability of David Jones to experiment and test – essential in its effort to catch up in multi-channel retailing.

The speed of cloud computing as a driver of innovation is a point also emphasised by Amazon’s Jassy.

“Ask any retailer or any enterprise how long does it take to get servers to try an innovative idea and we get answers of between six and 20 weeks,” Jassy says. “That’s maddening – you just stop trying new things if it’s going to take so long but in the cloud you can spin up thousands of instances in minutes and then give them back if it doesn’t work. So retailers who use us actually find they’re able to get more done more quickly for less.”

In the midmarket, activewear retailer Lorna Jane makes extensive use of cloud-based software applications.

Lorna Jane digital strategist Sam Zivot says the company makes its software decisions on a case-by-case basis but cloud applications have frequently won out over other options.

“When purchasing any sort of software spend we take stock of the benefits to the business, the speed of implementation, the accessibility and the security: and those are the four main reasons we’d opt for a cloud solution,” Zivot says.

Examples include business intelligence tool Qlikview, customer relationship management application Salesforce.com, social media management software HearIs, leasing application LeaseEagle, asset management system Activa, and flexible hosting system Squixa.

The exercise clothing chain has a strong mix of bricks-and-mortar stores and online retailing and is currently expanding in the US, recently opening its 11th store in California.

Zivot says Lorna Jane, unusually for a retailer, has a fairly constant revenue stream as it has a loyal customer base and the stores get new stock every week. Mother’s Day rather than Christmas is the biggest trading day.

However, Zivot says the corporate strategy involves giving a lot of power to store managers, particularly on social media, and cloud helps support the distributed nature of the business.

For small retailers, cloud is a low-cost way to add an e-commerce offering and also improve the customer experience in store. For example, BigCommerce is a cloud solution that enables the rapid establishment of an online store, starting from $24.95 a month. Meanwhile, Vend offers an integrated solution for e-commerce and point-of-sale software for small retailers that starts free and goes up to $199 a month with no contracts.

Vend founder and CEO Vaughan Rowsell says the best thing independent retailers can do to compete with big stores is to focus on knowing their customers and delivering a great retail experience.

His software includes point of sale that lets any tablet or laptop computer become a cash register, so sales staff don’t need to stay behind a counter. This also creates great flexibility to deal with peaks and troughs of demand.

“Tablets are very interesting for retailers because it moves the technology out of the way. The tablet becomes a discreet terminal that they can carry around with them and you’re being assisted in store and you’re trying on garments and the sales assistant can literally bag them and check you out in the changing room,” Rowsell says.

“If you need to open a pop-up store over summer or you’re retailing at a conference or just having a busy patch and need to open a few more registers, with a few clicks of the mouse you can grab another iPad or laptop and you’ve instantly got another checkout. Then when things get quiet again they can just scale it back and they only pay for what they use.”

Rowsell says using a cloud-based platform is also better for inter-connectivity.

“As more and more business tools go onto the cloud it means it’s easier for you to connect your inventory or your point of sale to your accounting software or your e-commerce platform or your loyalty program,” he says. “It just becomes a matter of either picking a cloud-based system that has these integrations baked in or getting your web developer to connect the dots and join the platforms together. Cloud-based systems liberate your data ... where it’s a very closed system and hard to get your data out,they tend to be a lot more open.”

Vend also provides the option of benchmarking data so the small businesses can start to share some of the benefits of the ‘big data’ that bigger players enjoy.

Rowsell says the savings can be significant. He cites one customer that went from spending hundreds of thousands of dollars a year on managing its infrastructure to thousands of dollars of year after moving to a cloud-based platform.

This point is backed up by Jassy, who adds it’s not just about the cost saving itself but also the type of cost.

“If you can trade spending capital expense to lay it out for servers and data centres for variable expense like you get to in the cloud, that’s very attractive to companies because capital’s often scarce and particularly in retail because it’s a very low-margin business,” Jassy says.

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