Retail Industry: Mega Trends Bring Huge Potential and Huge Risk

by Mark Harris Oct 18, 2017

In the retail industry, several mega-trends are creating complexity and big budget initiatives for IT departments and network teams.

• E-commerce – While e-commerce is growing by leaps and bounds every year (17% last year expected to reach $414B by 2018) brick and mortar stores still account for 94% of retail revenues in the US. Still, every retail store knows it needs to have an online presence in order to stay competitive because of another trend: webrooming, where shoppers research a product online before buying it in the store. Oftentimes shoppers are doing this on their mobile phones, while in the store checking out the product live (another trend referred to as showrooming) – and then possibly buying it online, perhaps even from another vendor. This year major retailers have already closed over 5000 stores across the US to counter losses due to competition from online sales.
• Mobile First – Most shoppers have used a mobile phone inside of a physical store to either look up product reviews, compare prices, or find alternative store locations. Unfortunately, 84% of online shoppers have experienced difficulty completing a mobile transaction. Retail websites are now taking a Mobile First approach by designing the online shopping experience with mobile devices as the primary interface. During the 2016 holiday season, mobile purchasing increased 59% year-over-year, showing growing adoption by consumers as websites continue to offer more robust mobile transactions.
• Omnichannel – 85% of online shoppers start a purchase on one platform and finish on another, or opt for an in-store pick up. In order to support these trends and deliver a seamless shopping experience to their customers, retailers are having to embrace an omnichannel approach. Challenges for CIOs include upgrading legacy systems to support cross-channel visibility across multiple supply chains, support networks, and inventory pools. 69% of retail executives say they plan to increase their investment in digital transformation over the next year.

Technology-Enabled Stores of The Future

Even in a world that demands an online presence, a report from brand intelligence firm L2 suggests 72% of online shoppers worldwide consider the brick-and-mortar experience most important when making a purchase.

Modern retailers are seeking to sharpen their competitive edge with technology-enabled immersive shopping experiences designed to increase customer engagement. In almost all stores, large-screen videos play content to inspire shoppers and Samsung’s flagship store in New York City even features live concerts.

Big brands like Neiman Marcus and Ralph Lauren are using touch-sensitive “memory” mirror technologies, enabled by RFID tags, to let customers try on outfits virtually, view themselves from all angles in different colors and lighting conditions, and compare different outfits.  iPads strategically placed in fitting rooms allow customers to ask for help, read reviews, and see what sizes are in stock.

Some stores, like Hunter, are experimenting with virtual reality experiences with custom soundscapes. The flagship Tokyo store is designed to look like a life-like forest with birch trunks: a shopper trying on a pair of rainboots is accompanied by the sound of rain and thunder and a changing lightbox “sky” mimicking a thunderstorm.

RFID technology is now widespread: in 2016, almost 73% of retailers had implemented it or were piloting it. Apart from its obvious use in inventory accuracy, it is also an enabling technology to support omnichannel initiatives like buy online, pick up in store (BOPUS) and ship-from-store, and shopper advantages like price checks and automated checkouts. Queuing up to checkout has long been a deterrent to sales, and stores are implementing mobile POS and other technologies that can help mitigate the amount of time a shopper spends waiting in line.

More Complexity Equates to More Risk

In terms of outages, retail applications, such as e-commerce and supply chain management, are the most costly class of business applications. According to the Ponemon Institute, the average reported recovery time for a data center outage is 119 minutes. Risk factors include cyber-attacks, data breaches, misconfigurations, network changes and upgrades. Time is money and every minute of downtime is lost revenue.

In 2013, Amazon.com, the leading e-tailer in the US that currently accounts for 14.7% of the entire e-commerce market, had a 49min outage resulting in estimated losses of $5M to the company.

Earlier this year, Amazon Web Services (AWS) experienced an outage that impacted hundreds of websites over a four hour period. A number of high-profile internet companies are hosted on AWS including Airbnb, Netflix, and Expedia, and dozens of prominent retailers use it as the web platform for their e-commerce servers. The reason for the outage was a simple typo that caused massive disruption: an authorized employee following a standardized playbook accidentally shut down a few extra servers in the S3 infrastructure.

DDOS attacks are another major cause of outages and they are on the rise. Retail faces more cyberattacks than any other industry. According to a 2017 Trustwave report on cybersecurity, 22% of data breaches targeted the retail industry and more than half of security incidents investigated involved payment card data, primarily from POS environments and e-commerce transactions. The costs of a data breach can be devastating. Several security compliance frameworks, such as the PCI and NIST frameworks, have been implemented to protect and guard against these kind of disasters.

Network automation is a hot topic for retailers experiencing growing supply chain, store, and infrastructure complexity. Automation helps the network team ensure PCI/NIST compliance, mitigate risk, reduce MTTR, and deliver more services, without having to increase headcount. To learn more about NetBrain’s Adaptive Network Automation solution for Enterprises, read our datasheet.