Cloud computing offers retailers an unprecedented level of flexibility and agility, both of which are important assets in a business that experiences sharp seasonal swings in sales.
Just what is cloud computing?
It really depends on whom you ask, but for business-related purposes, cloud computing involves the use of the Internet to store vital business data and run a wide array of software applications.
Moving these functions out of on-site servers and onto the Internet opens the door to cutting-edge technologies most retailers haven’t been able or willing to invest in on their own.
Retailers’ IT Spending Lags
In a recent article in Wired magazine, Vish Ganapathy, director and chief technologist of IBM’s Global Retail Division, notes that traditional brick-and-mortar retailers have been unwilling to spend heavily for information technology, investing a mere 1.7 percent of their revenue on IT.
This unwillingness to fully embrace IT has put traditional retailers at a decided disadvantage in their ongoing competition with e-commerce retailers, whose very businesses exist because of advances in IT.
Traditional retailers, says Ganapathy, have tended to focus their investments on more substantive marketing tools, such as fancy showrooms and splashy advertising, and in the process to give IT relatively short shrift.
At the same time, their online competitors have invested heavily in market data analysis, which has helped them to steer more business their way.
Tide Is Turning
But the tide is beginning to turn, according to Ganapathy.
He reports that a growing number of traditional retailers realize they need to stem the alarming spread of “showrooming.” Show roomers are consumers who check out products in the showrooms of traditional retailers and then go online to find the cheapest possible price for those same products.
Among the many advantages that cloud computing offers traditional retailers, Ganapathy singles out two in particular.
Going to the cloud allows brick-and-mortar retailers to significantly and relatively inexpensively bolster and update their IT capabilities.
It also facilitates a broader use of big data analytics, which can lead to a better understanding of their customers’ needs and help the retailers to better compete with their rivals that operate primarily or exclusively in the e-commerce sector.
Redirecting IT Spending
Moving to the cloud allows retailers to redirect their IT budgets, however meager, to more forward-looking goals.
Rather than devote the bulk of their IT spending to the maintenance of on-site servers to hold their data, they can investigate ways in which IT can help capture a bigger market share.
The savings includes not just server maintenance, but also IT staffing and electricity and cooling costs tied directly to the data center. An added bonus is the savings in physical space once the servers are gone.
In making the move to the cloud, retailers can take advantage of cloud-based ERP (Enterprise Resource Planning) software that’s shared with multiple clients of the cloud service provider.
A comprehensive ERP application allows retailers to maintain tight control over accounting, inventory, human resources, e-commerce, and customer relationship management, all on a single platform. Cloud-based ERP software is updated frequently at no additional cost to the retailer.
Adaptability to New Technology
Another advantage of cloud computing is its adaptability to new technologies.
Moving to the cloud puts retailers in a better position to deal with the slowly evolving interface between merchants and their customers. No longer is that interaction limited to transactions at the checkout counter.
Customers are demanding — and some retailers are providing — more innovative ways of closing the deal. Mobile point-of-sale technology that allows sales personnel to cash out customers as soon as they’ve decided to make a purchase is already making its appearance in some high-end retail outlets. And it will undoubtedly spread to more.
And in time, yet more creative ways of doing business will appear. The cloud’s flexibility allows salespeople with electronic tablets or other handheld devices to finalize transactions anywhere on the sales floor.
Dealing with Seasonality
Retailers that entrust their data and ERP applications to the cloud are far better positioned to deal with the seasonal nature of their computing needs.
An on-site computer system must be large enough to handle the huge upsurge in business experienced between Thanksgiving and the first few weeks of the New Year.
However, for much of the year a big chunk of that computing power goes unused but still must be housed and maintained.
That money could be far better spent to increase market research and analysis, hopefully resulting in increased sales.
About the Author: Don Amerman is a freelance author who writes extensively about corporate strategy, online marketing, digital technology, and Internet reputation management services.
License: Creative Commons image source